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LOSS, NOTICE OF LOSS &

CLAIMS SETTLEMENT
Law 139 Insurance Law

ATTY. GILBERT R. HUFANA


Professor
Loss
• Transfer of the claim after the loss is against
public policy and therefore void because the
rights of the parties are fixed after the loss. (Sec.
85, ICP)
– Exceptions:
(1) In cases of life insurance
(2) Sec 175, ICP, w/c prohibits the transfer of a fire
insurance policy to any person/company who acts
as agent or otherwise represents the issuing
company & declares such transfer void insofar as it
may affect other creditors of the insured
Cause of Loss
• An insurer is liable for the loss if the peril insured
against was the proximate cause of the loss,
even though an uncontemplated peril was a
remote cause of the loss
– PROXIMATE CAUSE – a natural & continuous
sequence, unbroken by any efficient interveing cause,
produces an injury & without which the injury would
not have occurred.
– Example: X insured his warehouse against fire. An
explosion caused by fire damaged the warehouse.
The insurer is liable because the proximate cause of
the loss was fire, the peril insured against.
Proximate Cause extended to loss
incurred while saving thing insured
• Sec. 87, ICP
• Insurer is liable where while saving the property
from the peril insured against that would
otherwise caused a loss, the thing insured is
damaged.
• Example:
– Damage to property insured against fire caused by
water during an attempt to save it from fire is
generally regarded as resulting directly from the fire
itself and the insurer is liable.
Where excepted peril is the
proximate cause
• Where a peril is especially excepted in a contract of
insurance, a loss, which would not have occurred but
for such peril, is thereby excepted although the
immediate cause of the loss was a peril which was not
excepted. (Sec 88, ICP)
• Insurer is not liable if the proximate cause is an
excepted peril although the immediate peril is a peril not
excepted.
• Example: In a fire policy w/c excludes loss through
explosion, if an explosion occurs first and causes fire
w/c results in a loss, the insurer is NOT LIABLE.
• Fire is an immediate cause but not a proximate cause
Loss by the willful act or through
connivance of the insured
• An insurer is not liable for a loss caused by the
willful act or through the connivance of the insured;
but he is not exonerated by the negligence of the
insured, or of the insurance agents or others. (Sec
89, ICP)
• The insurer is exonerated from liability for a loss
caused by the willful act or through the connivance
of the insured.
– Insurer cannot be liable on a fire policy where it is proven
by preponderance of evidence that the insured had
intentionally caused the burning of the insured property.
Loss due to negligence of the
Insured
• Negligence of the insured or of others does not
exonerate the insurer from liability.
• Where the negligence is so gross as to a
sufficient evidence of fraudulent intent or his act
was so reckless as amounting to a willful act, the
insurer will be exonerated.
– Example: The insured could have extinguished the
fire but refused to do so.
Notice of Loss
• Apprises the insurer of the occurrence of the loss
• Purpose: to enable the insurer to make proper
investigation and take such action as may be
necessary to protect its interest
• No particular form of notice is required; May be oral
– EXCEPTION: in fire insurance, it is required that the
notice be written & such be given w/o delay (Sec 90,
ICP)
• Notice should be given without unnecessary delay
– “as soon as circumstances permitted the insured, in
the exercise of reasonable diligence to communicate”
Notice of Loss
(Sec 90, ICP)
• In case of loss upon an insurance against fire, an
insurer is exonerated, if written notice thereof be not
given to him by an insured, or some person entitled
to the benefit of the insurance, without unnecessary
delay.
• For other non-life insurance, the Commissioner may
specify the period for the submission of the notice of
loss.
Proof of Loss
(Sec 91, ICP)
• The evidence given to the insurer if the occurrence
of the loss, particulars thereof and data necessary to
enable the company to determine its liability & the
amount thereof.
• It is sufficient that the insured give the best evidence
which he has in his power at that time and not
evidence as necessary in a court of justice
• Failure to serve notice or proof of loss as required
by the policy may be excused when the
circumstances are as such to make strict
compliance with the requirement
Preliminary Proof of Loss
• If the policy requires, by way of preliminary proof of
loss, the certificate or testimony of a person other
than the insured, it is sufficient for the insured to use
reasonable diligence to procure it, and in case of the
refusal of such person to give it, then to furnish
reasonable evidence to the insurer that such refusal
was not induced by any just grounds of disbelief in
the facts necessary to be certified or testified. (Sec
94, ICP)
Fraudulent Claim of Loss
• To protect itself from fraudulent claims, the
policy usually contains a provision that it will be
rendered void should the insured file any
fraudulent claim of loss.
• An honest misstatement or mistake or mere
error of opinion or even a slight exaggeration by
the insured will not exonerate the insurer.
• There must be a positive proof of fraud, the
burden of proving it is on the insurer.
Waiver of Defects in Notice or
Proof of Loss
• When there are defects in the notice or
preliminary proof of loss which the insured might
remedy and which the insurer omits to specify to
him, without unnecessary delay, as grounds for
objection, said defects are waived by the insurer.
(Sec 92, ICP)
• Example: Where the policy requires an affidavit
of loss under oath and the insurer accepts the
unsubscribed affidavit without objecting thereto,
there is a waiver of the defect in the affidavit.
Waiver of Delay in giving
Notice or Proof of Loss
• Delay in the presentation to an insurer of notice
or proof of loss is waived if caused by any act of
him, or if he omits to take objection promptly and
specifically upon that ground. (Sec 93, ICP)
• Where notice or proof of loss was given but not
within the time provided for by law or the policy,
such delay is considered waived:
– If caused by any act of the insurer; or
– If he fails to object promptly to the delay.
Rule on Claims Settlement
(Sec 247 par (a), ICP)
• No insurance company doing business in the
Philippines shall refuse, without just cause, to
pay or settle claims arising under coverages
provided by its policies, nor shall any such
company engage in unfair claim settlement
practices.
• Insurance companies are enjoined from:
– Refusing without just cause, to pay or settle
claims arising under their policies; or
– Engaging in unfair claim settlement practices.
Unfair Claims Settlement
Practices
1. Knowingly misrepresenting to claimants
pertinent facts or policy provisions relating to
coverage ender its policies;
2. Failing to acknowledge with reasonable
promptness pertinent communications with
respect to claims arising under its policies;
3. Failing to adopt and implement reasonable
standards for the prompt investigation of claims
arising under its policies;
Unfair Claims Settlement
Practices
4. Not attempting in good faith to effectuate
prompt, fair and equitable settlement of claims
submitted in which liability has become
reasonably clear;
5. Compelling policyholders to institute suits to
recover amounts due under its policies by
offering without justifiable reason substantially
less than the amount ultimately recovered in
suits brought by them
Payment of Proceeds of Life
Insurance
• The proceeds in life insurance shall be paid
immediately upon maturity unless such shall be paid
in installments or annuities. (Sec 248, ICP)
• In case of policy maturing by death of the insured,
the proceeds shall be paid within 60 days after
presentation of claim and filing of proof of death.
(Sec 248, ICP)
– After said date, the beneficiary shall be entitled to
interests unless the refusal to pay is based on the
ground that the claim is fraudulent.
– Fernandez v. National Life Ins. Co. 105 Phil 59
Payment of Proceeds in Non-
Life Insurance
• The payment of proceeds in a non-life insurance
policy shall be paid within 30 days after proof of loss
is received by the insurer and after ascertainment of
the loss or damage is made either by agreement
between the insured and insurer or by arbitration.
(Sec 249, ICP)
– Bay View Hotel Inc v. Ker & Co. Ltd. 116 SCRA 327
• if such ascertainment is not had or made within sixty
(60) days after such receipt by the insurer of the
proof of loss, then the loss or damage shall be paid
within ninety (90) days after such receipt. (Sec 249,
ICP)
Effect of Refusal to Pay
Proceeds
• Refusal or failure to pay the loss or damage
within the time prescribed herein will entitle the
assured to collect interest on the proceeds of the
policy for the duration of the delay at the rate of
twice the ceiling prescribed by the Monetary
Board. (Secs 248 & 249, ICP)
• EXCEPTION: failure or refusal to pay is based
on the ground that the claim is fraudulent
Liability of Insurer
for Refusal to Pay
• It shall be the duty of the Commissioner or the Court, as
the case may be, to make a finding as to whether the
payment of the claim of the insured has been
unreasonably denied or withheld.
• If found liable, the insurer will be adjudged to pay
damages (Sec 250, ICP)
– Damages = attorney’s fees + expenses incurred by the insured
person by reason of such unreasonable denial or withholding of
payment + interest of twice the ceiling prescribed by the
Monetary Board of the amount of the claim due the insured
• There is prima facie evidence of unreasonable delay if the
insurer fails to pay any claim within the time prescribed in
Section 248 & 249.
Prohibited Acts
(Sec 251, ICP)
• It is unlawful to:
“(a) Present or cause to be presented any
fraudulent claim for the payment of a loss under
a contract of insurance; and
“(b) Fraudulently prepare, make or subscribe
any writing with intent to present or use the
same, or to allow it to be presented in support of
any such claim.
Advancement or Loan of
money by Insurer after Loss
• A written agreement between the insured and
the insurer whereby after the loss the insurer will
advance or loan the amount representing the
loss repayable only out of money collected by
the insured on account of the loss is valid.
• Such loan is not a payment of insurance and the
insurer is not subrogated to the insured's rights.
– Galutera v. Maersk Line 11 SCRA 251
Right of Subrogation
• After payment of loss by the insurance company, it is
subrogated to the rights of the insured against third
persons whose negligence or wrongful acts caused
the loss.
– Compania Maritima v. Insurance Co. of North America
12 SCRA 213
– Fireman’s Fund Ins. Co. v. Jamilla & Co. Inc. 70 SCRA
323
– F.F. Cruz & Co. v. CA 164 SCRA 731
• The subrogated insurer cannot recover more than
what the insured can recover from third persons
causing the loss.
Right of Subrogation
• The insurer is subrogated to whatever rights the
insured has against his solidary debtor under
Art. 1217 of the NCC which gives to a solidary
debtor who has paid the entire obligation the
right to be reimbursed by his co-debtors for the
share which corresponds to each.
– Malayan Insurance Co. v. CA 165 SCRA 536
– Pan Malayan Insurance Corp. v. CA 184 SCRA 54
Right of Subrogation
• If the insured property is destroyed or damaged
through the negligence of a party other than the
assured, the insurer, upon payment to the
assured will be subrogated tit he rights of the
assured to recover from the wrongdoer to the
extent that the insurer has been obligated to
pay.
– Coastwise Lighterage Corporation v. CA 245 SCRA
796
– Cebu Shipyard & Engineering Works Inc. v. William
Lines Inc. 306 SCRA 762
END OF LECTURE

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