Unholy alliance

The Insurance Code of the Philippines prohibits insurance companies from refusing, without just cause, to pay or settle insurance claims and considers as unfair claims settlement the practice of not attempting, in good faith, to promptly, fairly, and equitably settle claims.

In fact, in case of property insurance, the law requires the amount of loss or damage for which an insurer may be liable to be paid within 30 days after proof of loss is received by the insurer and the extent of loss or damage has been ascertained.

The Insurance Commission (IC) has the power to adjudicate claims and complaints involving any loss, damage, or liability for which an insurer may be answerable. But what if the IC itself is being accused of failure, if not refusal, to act on complaints filed by aggrieved parties against insurance companies?

This is basically what Steel Corporation of the Philippines (SCP), the country’s only operational steel mill, is alleging when it filed a petition for mandamus with the Court of Appeals recently, asking the appellate court to direct and command the IC to resolve a case filed by the company with the commission against a number of insurance companies.

SCP had insured its assets against material damage and business interruption losses resulting from fire with UCPB General Insurance Corp. (40 percent), Oriental Assurance Corp. (40 percent), PNB General Insurers Co., Inc. (15 percent), and Equitable Insurers Co., Inc. (5 percent).

Following the 2008 fire, SCP filed claims with the four firms but they refused to pay.

After SCP’s sorry experience with its first group of insurers, SCP decided to insure its assets with another consortium of insurers under an industrial all risks insurance policy in the following proportion: Philippine Charter Insurance Corp. (29.5 percent); Mapfre Insular Insurance Corp. (26 percent), Standard Insurance Co. Inc. (12 percent). Asia Insurance Phils. Corp. (8.5 percent), and New India Assurance Co., Ltd. (14 percent). Another 10 percent was insured with Malayan Insurance Co.

Unfortunately, another fire broke out on Dec. 7, 2009. SCP alleged that despite meeting all the requirements of the insurers and notwithstanding demand for payment of the insurance proceeds, the insurers failed and refused to pay SCP’s claims.

Two separate case were filed by the SCP with the IC for violation of Section 247 of the Insurance Code. The first was docketed as I.C. Case No. RD-420 for the first batch of insurers and the other case was docketed as IC Case No. RD-515 for the second group of insurers.

Sec. 247 of Republic Act no. 10607 or the Insurance Code provides that “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: (1) Knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue; (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; (4) Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear; or (5) 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.”

Meanwhile, the IC’s Rules of Procedures specifically provides that unless a different period be fixed by special law, all contested cases or incidents shall be decided within 30 days from the date of submission for resolution.

In its petition before the CA, SCP said that approximately eight months from the date of IC’s order setting the case for resolution (first set of insurers), the IC has not ruled in any manner, which the company said is an unlawful neglect of the performance by it of an act which its own rules prescribes it to do within the period set out therein.

As for the second set of insurers, SCP said there was failure by the IC to settle certain confusion during the pre-trial conference and despite a motion for resolution asking that the IC resolve the pending incidents before it, the IC has not acted in any manner, prompting the company to file a case before the CA.

Parties enter into contracts of insurance with insurers so that in exchange for payment of premium and in case of loss, damage or liability arising from the peril insured against, such parties will be indemnified.

Whether or not the refusal by SCP’s insurers to pay for the loss or damages to the company’s assets as a result of fire is justified is up for the IC to determine. But for the IC to take this long to make such a determination when SCP badly needs the more than P1 billion insurance proceeds for its operations is inexcusable negligence on the part of a government agency that is tasked to make sure that insurance laws and regulations are faithfully complied with.

Industry observers are hinting of a possible unholy alliance between the IC and certain insurance companies and are asking Finance Secretary Carlos Dominguez to review the operation of the commission.

Just recently, Insurance Commissioner Emmanuel Dooc asked insurance companies to propose measures to make sure that fraudulent claims by policyholders are minimized. But how about fraudulent or unfair actions by insurance firms? Who is going to put them in check if the IC refuses to act?

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