CLAIMS SETTLEMENT &

SUBROGATION
ANDREA JADE O. GERONGA
CHRISTINE JOY J. ESTROPIA
CLAIMS SETTLEMENT
SECTION 247. 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.
UNFAIR CLAIMS SETTLEMENT
PRACTICES
 (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;
 (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.
LIFE INSURANCE POLICY
WHEN SHALL THE PROCEEDS BE PAID?
 IMMEDIATELY
- Upon maturity of the policy.
 AS THE BECOME DUE
- When the policy provide that the proceeds are made
payable in installments or annuity.
 WITHIN 60 DAYS
- In the case of a policy maturing by the death of the
insured
- Proceeds include: discounted value of all premiums paid
in advance of their due dates, but are not due and payable
NON-LIFE INSURANCE POLICY
WHEN SHALL THE PROCEEDS BE PAID?

 WITHIN 30 DAYS
- After proof of loss is received by the insurer and
ascertainment of the loss or damage is made.

 WITHIN 90 DAYS
- If such ascertainment is not had or made within 60 days
after such receipt by the insurer of the proof of loss or
damage.
REFUSAL/FAILURE TO PAY
CLAIM
COMPENSATORY INTEREST
Entitles the beneficiary to collect interest on the
proceeds of the policy for the duration of the delay
at the rate 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.
UNREASONABLE DENIAL OR WITHHOLDING OF
CLAIM

INSURANCE COMPANY IS ADJUDGED TO PAY THE

FOLLOWING:
The amount of claim;
Attorney’s fees;
Other expenses incurred by the insured person
Interest of 12%
FRAUDULENT CLAIM
SECTION 251. 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. Any person who
violates this section shall be punished by a fine not
exceeding twice the amount claimed or imprisonment of two
(2) years, or both, at the discretion of the court.
PRESCRIPTIVE PERIOD
Insurance Code does not provide for a prescriptive
period for the filing of a complaint for the recovery of
the proceeds of the insurance. One exception is the
period provided for in the case of Compulsory Third
Party Liability Insurance under Section 397 of the
Insurance Code.
However, parties may stipulate a prescriptive period in
the policy subject to the limitation under Sec. 63 of the
Insurance Code.
EXAMPLE
 Condition 27. Action or Suit Clause
If a claim be made and rejected and an action or suit be not
commenced either in the Insurance Commission or in any Court of
competent jurisdiction within twelve (12) months from receipt of
notice of such rejection or in case of arbitration taking place as
provided herein, within twelve (12) months after due notice of the
award made by the arbitrator, then the claim shall be for all
purposes be deemed to have been abandoned and shall not
thereafter be recoverable.
ACCRUAL
Cause of Action
Insured’s cause of action or his right to file a
claim commences from the time of denial of
his claim by the insurer, either expressly or
impliedly.
IF NO STIPULATION

Prescriptive Period is 10 years from

the rejection of the claim by the
insurer.
SUBROGATION
ART. 2207, NCC. 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
REQUISITES
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; and
4. The indemnity is covered by the face
value of the policy.
 PROBLEM
SB Corp. delivered to BAE Corp. a shipment of 209 cartons
of veterinary biologicals for delivery to the consignee. The
cargoes were insured with American Home Assurance
Comp. (AHAC). BAE turned over the custody of the cargoes
to Federal Express (FE), which transported the same to
Manila. Upon examination, the vaccines were declared
below the positive reference serum. SB declared total loss
for the unusable shipment. The consignee filed with AHAC,
through its Representative in the Philippines, PHILAM that
recompensed SB. Thereafter PHILAM filed an action for
damages against FE, imputing negligence on the handling
of the cargo. Does PHILAM have a cause of action or
NO SUBROGATION
If the assured, by his own act, releases
the wrongdoer or third party liable for
the loss or damage, from liability;
Where the insurer paid in excess of the
amount of the loss;
When there is voluntary payment;
When life insurance is involved;
Where the insurer pays the assured
the value of the loss goods without
notifying the carrier who has in good
faith has settled the assured’s claim
for loss.
PROBLEM
From March 6, 1970 to March 6, 1971, petitioner insured his
car. On May 4, 1970, the insured vehicle was bumped and
damaged by a truck owned by SMC. For the damage caused,
the insurance company paid petitioner P 5,000. Petitioner
executed Release of Claim subrogating insurance company to
all its right of action against SMC.
On December 11, 1972, a demand for reimbursement
against SMC was made for the amount the insurance
company paid the petitioner. SMC refused on the ground that
it had already paid the petitioner P 4,500 for the damages, as
evidenced by a cash voucher and a Release of Claim
discharging SMC from all actions, claims and demands as a
consequence of the accident. Can insurer exercise its right of
PRESENTATION OF THE POLICY
General Rule: Any person who relies on
the policy as basis of his cause of action
must also attach the same to the
complaint as an actionable document.
EXCEPT: Where there is no dispute
regarding the existence and validity of the
policy and the terms and conditions
thereof.
LIMITATIONS
As to the amount recoverable:
only the amount that is
recoverable by the insured.
Insurer-subrogee is bound by the
same contractual stipulation as
the insured.
EFFECT OF PRESCRIPTION
If the claim of the insured is subject
to a prescriptive period, the claim of
the insurer is also subject to the
same prescriptive period.
Based on the time the cause of
action accrued.