Question & AnswerQ&A (Act No. 3802)
The main purpose of Act No. 3802 is to amend Chapter One of the Insurance Act by fixing the time within which insurance claims must be paid and to provide for the payment of interest in case there is an unjustified delay in the settlement of a claim.
The proceeds of a life insurance policy must be paid immediately upon maturity of the policy, unless the proceeds are payable in instalments or as an annuity, in which case payments are made as they become due.
In the case of a life insurance policy maturing by the death of the insured, the proceeds must be paid within sixty days after the presentation of the claim and filing of proof of the death of the insured.
If the insurer refuses or fails to pay within the prescribed time, the beneficiary is entitled to collect interest on the proceeds at the rate of six percent per annum for the duration of the delay, unless the claim is fraudulent.
If the court finds that the insurer had no justification for contesting the claim, the beneficiary is entitled to collect the interest on the proceeds in addition to the full payment of the policy proceeds.
Loss or damage must be paid within thirty days after proof of loss is received and loss is ascertained either by agreement or arbitration. If ascertainment is not made within sixty days, payment must be made within ninety days after proof of loss is received.
An interest rate of eight percent per annum applies to the delayed payment of claims under insurance policies other than life insurance.
The insurer can avoid paying interest if the refusal or failure to pay is based on the ground that the claim is fraudulent.
The court must determine whether the insurer was justified in contesting the claim. If unjustified, the court awards interest on the proceeds to the insured or beneficiary in addition to payment.
Act No. 3802 took effect upon its approval on December 4, 1930.