Claims Settlement and
Subrogation
Claims Settlement
The liability of the insurer attaches the
moment the risk insured against
causes lost to the insured.
Sec 241 of the Insurance code:
Sec. 241. (1) 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. Any of the
following acts by an insurance
company, if committed without
just cause and performed with
such frequency as to indicate a
general business practice, shall
constitute unfair claim settlement
practices:
Adjusting- term used to denote the
function of loss payment. Adjuster is
the person employed by the insurer in
property and casualty insurance to
settle in behalf of the insurer the claim
of the insured. The adjuster evaluates
the insurance claim and makes the
proper recommendation to the insurer.
An adjuster may be an Independent
Adjuster or a Public Adjuster.
Sec. 324. An adjuster may be an
independent adjuster or a public
adjuster.
The term "independent adjuster"
means any person, partnership,
association or corporation which, for
money, commission or any other thing
of value, acts for or on behalf of an
insurer in the adjusting of claims
arising under insurance contracts or
policies issued by such insurer.
The term "public adjuster" means
any person, partnership, association or
corporation which, for money,
commission or any other thing of
value, acts on behalf of an insured
in negotiating for, or effecting, the
settlement of a claim or claims of the
said insured arising under insurance
contracts or policies, or which
advertises for or solicits employment
as an adjuster of such claims.
The adjuster’s function is merely to
settle and adjust claims in behalf of
the principal. He does not assume
personal responsibility.
Article 241 states the following acts of
an insurance company, that if
committed without just cause and
performed with such frequency as to
indicate a general business practice
shall constitute unfair claim
settlement practices which may result
in the suspension or revocation of the
certificate of authority of the insurer
by the Insurance Commission.
Thus:
(a) knowingly misrepresenting to
claimants pertinent facts or policy
provisions relating to coverage at
issue;
(b) failing to acknowledge with
reasonable promptness pertinent
communications with respect to claims
arising under its policies;
(c) failing to adopt and implement
reasonable standards for the prompt
investigation of claims arising under
its policies;
(d) not attempting in good faith to
effectuate prompt, fair and equitable
settlement of claims submitted in
which liability has become reasonably
clear; or
(e) compelling policyholders to
institute suits to recover amounts due
under its policies by offering without
justifiable reason substantially less
than the amounts ultimately
recovered in suits brought by them.
(2) Evidence as to numbers and types
of valid and justifiable complaints to
the Commissioner against an
insurance company, and the
Commissioner's complaint experience
with other insurance companies
writing similar lines of insurance shall
be admissible in evidence in an
administrative or judicial proceeding
brought under this section.
Life Insurance Policy
The proceeds of a Life Insurance Policy
shall be paid immediately upon
maturity of the policy. However the
policy may provide that the proceeds
are made payable in installments or as
an annuity, in which case the
installments, or annuities shall be paid
as they become due.
Sec. 242. The proceeds of a life
insurance policy shall be paid
immediately upon maturity of the
policy, unless such proceeds are made
payable in installments or as an
annuity, in which case the
installments, or annuities shall be paid
as they become due: Provided,
however, That in the case of a policy
maturing by the death of the insured,
the proceeds thereof shall be paid
within sixty days after presentation of
the claim and filing of the proof of the
death of the insured.
Refusal or failure to pay the claim
within the time prescribed herein will
entitle the beneficiary 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, unless such
failure or refusal to pay is based on
the ground that the claim is
fraudulent.
The proceeds of the policy maturing
by the death of the insured payable to
the beneficiary shall include the
discounted value of all premiums paid
in advance of their due dates, but are
not due and payable at maturity.
Non-Life Insurance Policy
Shall be paid after 30 days after proof
of loss is received by the insurer and
ascertainment of the loss or damage is
made either by agreement between
the insured and the insurer or by
arbitration.
Sec. 243. The amount of any loss or
damage for which an insurer may be
liable, under any policy other than life
insurance policy, shall be paid within
thirty days after proof loss is received
by the insurer and ascertainment of
the loss or damage is made either by
agreement between the insured and
the insurer or by arbitration; but if
such ascertainment is not had or
made within sixty days after such
receipt by the insurer of the proof of
loss, then the loss or damage shall be
paid within ninety days after such
receipt. 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, unless such failure or refusal to
pay is based on the ground that the
claim is fraudulent.
The double interest referred to in
Section 243 means 24% or twice the
12% prescribed by the monetary
board.
The insurer must settle the claim even
without the participation of an
adjuster. There is nothing in the
Insurance Code that makes the
participation of an adjuster in the
assessment of the loss imperative or
indispensable.
Section 325 .,..
Sec. 325. For every line of insurance
claim adjustment, adjusters shall be
licensed either as independent
adjusters or as public adjusters. No
adjuster shall act on behalf of an
insurer unless said adjuster is licensed
as an independent adjuster; and no
adjuster shall act on behalf of an
insured unless said adjuster is licensed
as a public adjuster: Provided,
however, That when a firm or person
has been licensed as public adjuster,
he shall not be granted another
license as independent adjuster and
vice versa.
… speaks of licensing adjusters but
this does not require as a prerequisite
the assessment of adjusters in the
settlement of the insurance claim.
UNREASONABLE DENIAL OR
WITHHOLDING OF CLAIM.
Sec. 244. In case of any litigation for
the enforcement of any policy or
contract of insurance, 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; and
in the affirmative case, the insurance
company shall be adjudged to pay
damages which shall consist of
attorney's fees and other expenses
incurred by the insured person by
reason of such unreasonable denial or
withholding of payment plus interest
of twice the ceiling prescribed by the
Monetary Board of the amount of the
claim due the insured, from the date
following the time prescribed in
section two hundred forty-two or in
section two hundred forty-three, as
the case may be, until the claim is
fully satisfied; Provided, That the
failure to pay any such claim within
the time prescribed in said sections
shall be considered prima facie
evidence of unreasonable delay in
payment.
Failure to pay any such claim
within the time prescribed in
Sections 242 and 243 of the
Insurance Code shall be
considered prima facie evidence
of unreasonable delay in
payment.
Interest and damages. If the claim
is unreasonably delayed then, the
insured is entitled to:
1. Attorney’s fees
2. Other expenses incurred by the
insured person by reason of
such unreasonable denial
3. 24% interest (that twice
prescribed by the monetary
board)
4. The amount of calim.
Delay must be wanton, oppressive or
malevolent. Such refusal must be
willful and without reasonable cause.
IF there was problem in settling as to
whom the policy accrues, then there is
no unjust delay.
If there is no unreasonable delay, then
the insured is given 6% since it is not
a loan or forbearance of money,.
However after litigation, allowed 12%
because there is forbearance in
accordance with EASTERN SHIPPING
LINES vs. CA.
If insurance co. is acting in good faith,
there is no right to claim for damages.
Fraudulent Claim. The insurer may
reject a claim that is fraudulent, i.e.
fraudulent policy papers, etc.
Prescriptive Period. Insurance
Code does not provide for a
prescriptive period for the filing
of a complaint. Exception is the CTPL
insurance, which must be made within
one year under section 384 of the
Insurance code.
Stipulation. A stipulation may
however be made by the parties
stipulating the period in the policy
subject to the limitation under Section
63 of the IC.
Sec. 63. A condition, stipulation, or
agreement in any policy of insurance,
limiting the time for commencing an
action thereunder to a period of less
than one year from the time when the
cause of action accrues, is void.
If there is such stipulation, the
stipulation prevails. It is not a mere
procedural requirement.
Accrual. The right of the insured to
the payment of his loss accrues from
the happening of the loss.
The cause of action agains the insurer
does not accrue until the insured’s
claim is rejected by the insurer.
Rejection may be express or implied.
Rejection contemplated is rejection in
the first instance. Not the one under
reconsideration.
A stipulation may be made by the
parties with regards to a period within
which to file for such cause of action.
IF THERE IS NO STIPULATION. Or
no prescriptive period given in the
policy, then the prescriptive period is
10 years for being a written contract
under article 1144 of the CIVIL CODE.
SUBROGATION.
Applies according to Article 2207 of
NCC.
Art. 2207. If the plaintiff's property has
been insured, and he has received
indemnity from the insurance
company for the injury or loss arising
out of the wrong or breach of contract
complained of, the insurance company
shall be subrogated to the rights of the
insured against the wrongdoer or the
person who has violated the contract.
If the amount paid by the insurance
company does not fully cover the
injury or loss, the aggrieved party
shall be entitled to recover the
deficiency from the person causing the
loss or injury
The right of subrogation does not
arise out of a contract but out of
law.
It has its roots on equity. And is
designed to promote and to
accomplish justice and is the mode
which equity adopts to compel the
ultimate payment of a debt by one
who in justice, equity and good
conscience ought to pay.
Payment by the insurer to the assured
operates as an equitable assignment
to the former of all remedies which the
latter may have against the third party
whose negligence or wrongful act
caused the loss.
Requisites of Subrogation
1. The insurance involved is
property insurance.
2. There is a loss arising from the
risk insured against.
3. The insured received indemnity
from the insurer for the loss.
 4. The indemnity is covered by the
face value of the policy.
THERE IS NO SUBROGATION
WHEN:
1. The assured by his own act
releases the wrongdoer or third
party liable for the loss or
damage from liability, the
insurers right of subrogation is
defeated.
2. Where the insurer pays the
assured the value od the lost
goods without notifying the
carrier whjo has in good faith
settled the assured’s claim for
loss, the settlement is binding
on both the assured and the
insurer, and the latter cannot
bring an action against the
carrier on his right of
subrogation.
3. Where the insurer pays the
assured for a loss which is not a
risk covered by the policy,
thereby effecting “voluntary
payment” the former has no
right of subrogation against the
third party liable for the loss.
4. When life insurance is involved
(ofcourse for there is no
contract of indemnity in life
insurance)
LIMITATIONS
When the rights of the insured is
limited, the rights of the insurer are
also limited, since it is only
subrogation.
EG. If insurance company gets the
whole value of the amount loss from
the negligent party, then the insured
may claim the balance from the
insurance company, if the insurance
company only pays for the value of
the indemnity stipulated.
The insurance company is also bound
by the laws wherein the insured is also
bound by, such as the COGSA, in
international carriage. In terms of
prescriptive periods, etc.
DISCRETION TO USE THE RIGHT OF
SUBROGATION. –It lies with the
insurer who may opt not to use the
said right.
DOUBLE INSURANCE
DEFINITION
Sec. 93. A double insurance exists
where the same person is insured by
several insurers separately in respect
to the same subject and interest.
Requisites
(P2-SIP)
1. The same person is insured
2. There are two or more insurers
that insured the person
separately
3. The insurance is over the same
subject
4. The same interest is involved
5. The same peril is insured
against
OTHER INSURANCE CLAUSE
The implication of the rules on double-
insurance under the insurance code is
that double-insurance is NOT
PROHIBITED. However, it may be
prohibited by a stipulation known as
the “other insurance clause”
FORMS OF THE OTHER INSURANCE
CLAUSE.
1. A condition that states that
procurement of additional
insurance without the consent
 of the insurer renders the policy
void ipso facto
2. A provision that required the
insured to disclose the
existence of any other
insurance on the property,
otherwise the contract may be
avoided for material
concealment
3. A warranty that there is no
other existing insurance over
the same property
A standard fire policy used by the
insurance companies usually contains
a condition that the insured shall give
notice to the insurer of any insurance
or insurances already effected, or
which may subsequently be effected
covering any property or properties
and unless such notice is given and
the particulars of such insurance or
insurances is stated, all the benefits
under the policy shall be forfeited.
RATIO
The purpose is to avoid over insurance
and thus avert the perpetration of
fraud, or from the insured to make
profit. ( SUNOG BAHAY)
VALIDITY. IF clearly prohibited by the
stipulation, additional insurance may
be a ground to hold the insurance
contract void.
Santa ana v. Commercial union
assurance co.
Additional insurance – Gonzalez La’O
v. Yek Tong Lin Fire and Marine
Insurance CO. => must be deemed
abandoned if there are new
circumstances because subject was
not separated, and the same subject is
insured with the same peril insured
against.
OVERINSURANCE as a result of
DOUBLE INSURANCE.
If the insured takes out an insurance
over the property insured in an
amount which is in excess of the value
of his insurable interest.
House worth 500K insured with ABC
for 700K.
Over-insurance may also exist if there
is double insurance: thus house worth
500K insured with ABC Ins Co. for
400K and YXZ Co. for 300K.
It does not however follow that just
because there is double insurance that
there is over insurance. EG. If ABC
insures house worth 1M for 300k and
with GHI co 200K.
RULES IN OVER-INSURANCE BY
DOUBLE INSURANCE
Contract of insurance – Contract of
Indemnity, thus the insured cannot
recover more than what he lost.
Section 94.
Sec. 94. Where the insured is
overinsured by double insurance:
(a) The insured, unless the policy
otherwise provides, may claim
payment from the insurers in such
order as he may select, up to the
amount for which the insurers are
severally liable under their respective
contracts;
(b) Where the policy under which
the insured claims is a valued policy,
the insured must give credit as against
the valuation for any sum received by
him under any other policy without
regard to the actual value of the
subject matter insured;
(c) Where the policy under which
the insured claims is an unvalued
policy he must give credit, as against
the full insurable value, for any sum
received by him under any policy;

(d) Where the insured receives any

sum in excess of the valuation in the
case of valued policies, or of the
insurable value in the case of
unvalued policies, he must hold such
sum in trust for the insurers, according
to their right of contribution among
themselves;

(e) Each insurer is bound, as

between himself and the other
insurers, to contribute ratably to the
loss in proportion to the amount for
which he is liable under his contract.

Sundiang notes:
Value of house 20 M

Insurer Amt of Premium

Policy
A 10M 10K
B 20M 20K
C 10M 10K
Total 40M

Sum Total of Policy – Value of

thing insured
Ratio =

Sum Total of Policy

(Ratio) * (Amount of premium) = proportionate

amt.
Thus: 40M -20M = 20M

= 20M/40M

= 1/2

= ½ (10K) = 5K from A

= ½ (20K) = 10K from B

= ½ (10K) = 5K from C