Norm for the Attention, Processing and Compensation of Losses Foreseen in Insurance Contracts

Page 1 of 11 Resolution No. CD-SIBOIF-1250-1-MAY28-2021 Dated May 28, 2021

NORM FOR THE ATTENTION, PROCESSING AND COMPENSATION OF LOSSES FORESEEN IN INSURANCE CONTRACTS

The Board of Directors of the Superintendence of Banks and Other Financial Institutions,

CONSIDERING

I

That Article 105, paragraph 5, of the Political Constitution, in its pertinent part, establishes that: "The State shall guarantee the promotion and protection of the rights of consumers and users through the relevant Law." In this context, Article 53, paragraph 2, numeral 1), of Law No. 842, "Law for the Protection of the Rights of Consumer Persons and Users" and its reforms (Law No. 842), states in part as follows: "In matters concerning the protection of the rights of users of financial services, it shall be the responsibility of the Superintendence of Banks and Other Financial Institutions to apply this Law in matters of financial services provided by banks, financial societies, and other entities subject to its regulation, supervision, and oversight, in accordance with what is stipulated in Law No. 316, Law of the Superintendence of Banks and Other Financial Institutions, and other applicable financial laws."

II

That Article 81 of Law No. 733, "General Law of Insurance, Reinsurance, and Surety Bonds," contained in Law No. 974, "Law of the Nicaraguan Legal Digest of the Banking and Finance Matter" and its updates (Legal Digest Law), indicates in part as follows: "The Board of Directors may issue general norms that, among other aspects, include: 1) The maximum deadlines for paying indemnities directly to insured persons, beneficiaries, and/or assignees after the loss has been accepted by the company; 2) What is understood as acceptance of the loss; 3) The maximum deadline the insurance company has to accept or reject the loss and determine the amount of the indemnity; as well as the deadline the insured has to accept or reject the indemnity amount; and also the deadline both parties have to resort to the arbitration clause in case of any controversy; 4) The maximum deadline the insurance company has to submit a duly justified request to the Superintendent when the company requires a longer period to carry out additional investigations or obtain sufficient evidence regarding the validity of the loss or for the adequate determination of its amount."

III

That in accordance with the considerations expressed above and supported by Articles 4 and 5, numeral 1), of Law No. 733, "General Law of Insurance, Reinsurance, and Surety Bonds," and Article 3, numeral 13), and Article 10, numeral 1), of Law No. 316, "Law of the Superintendence of Banks and Other Financial Institutions"; both laws contained in the Legal Digest, related to the attributions that the Board of Directors has to issue norms linked to the regulation of the insurance activity.

In exercise of its powers,

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HAS ISSUED

The following,

CD-SIBOIF-1250-1-MAY28-2021

NORM FOR THE ATTENTION, PROCESSING AND COMPENSATION OF LOSSES FORESEEN IN INSURANCE CONTRACTS

TITLE I GENERAL PROVISIONS

CHAPTER I CONCEPTS, OBJECT AND SCOPE

Article 1. Concepts.- For the purposes of applying the provisions contained in this norm, the concepts indicated in this article, both in uppercase and lowercase, singular or plural, shall have the following meanings:

a) Adjusters or claims liquidators: In accordance with what is established in the regulations governing the authorization and functioning of insurance auxiliaries.

b) Insured: In accordance with what is established in Article 3 of Law No. 733, General Law of Insurance, Reinsurance, and Surety Bonds.

c) Insurer or insurance company: Insurance company subject to the supervision of the Superintendence of Banks and Other Financial Institutions.

d) Insurance auxiliary: In accordance with what is established in the regulations governing the authorization and functioning of insurance auxiliaries.

e) Loss notice: The action of informing the insurer of the materialization of the risk covered in the insurance policy.

f) Beneficiary: In accordance with what is established in Article 3 of Law No. 733, General Law of Insurance, Reinsurance, and Surety Bonds.

g) Special conditions: In accordance with what is established in Article 3 of Law No. 733, General Law of Insurance, Reinsurance, and Surety Bonds.

h) General conditions: As established in Article 3 of Law No. 733, General Law of Insurance, Reinsurance, and Surety Bonds.

i) Particular conditions: In accordance with what is established in Article 3 of Law No. 733, General Law of Insurance, Reinsurance, and Surety Bonds.

j) Business day: A day included between Monday and Friday, both inclusive, except for holidays established by law in this matter and days of leave declared by the Executive Power.

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k) Claim file: Set of documents collected by the insurer during the processing of the claim presented by the user, including the General, Particular, and Endorsement Conditions, as applicable.

l) Underwriting file: In accordance with what is established in the regulations governing the authorization of insurance policies.

m) Settlement: Document containing the agreement between the insurer and the user, where the satisfaction of the obligations and duties derived from the loss is established.

n) Indemnity: In accordance with what is established in Article 3 of Law No. 733, General Law of Insurance, Reinsurance, and Surety Bonds.

o) Inspection: Review carried out by the adjuster or insurance auxiliary on the goods affected by the loss.

p) Insurance intermediary: In accordance with what is established in the regulations governing the authorization and functioning of insurance intermediaries.

q) Loss investigation: The act carried out by the insurance auxiliary registered with the Superintendence of Banks and Other Financial Institutions, with the objective of verifying the known or presumed causes producing the loss, before the competent authorities in this matter or before any person related to the loss.

r) Law No. 431: Law for the Regime of Vehicular Circulation and Traffic Infractions, published in La Gaceta, Official Gazette No. 96, of May 27, 2014, and its reforms.

s) Law No. 733: General Law of Insurance, Reinsurance, and Surety Bonds, contained in Law No. 974, "Law of the Nicaraguan Legal Digest of the Banking and Finance Matter" and its updates.

t) Purchase order: Document with instructions to carry out the delivery of the parts necessary to effect the repair of the affected good.

u) Repair order: Document with instructions to carry out activities for the replacement of a thing in its state at the moment prior to the occurrence of the loss, through the recomposition of its own damaged elements.

v) Insurance policy: In accordance with what is established in the regulations governing the authorization of insurance policies.

w) Claim: The request made to the insurer regarding a loss that is considered covered by the insurance policy.

x) Loss: In accordance with what is established in Article 3 of Law No. 733, General Law of Insurance, Reinsurance, and Surety Bonds.

y) Superintendence: Superintendence of Banks and Other Financial Institutions.

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z) Superintendent: Superintendent of Banks and Other Financial Institutions.

aa) Damaged third party: For the purposes of the Mandatory Civil Liability Insurance, it shall be understood as the natural or legal person unrelated to the celebration of a contract, who is affected physically or patrimonially in a loss covered by an insurance policy, except the one declared civilly responsible by the traffic authority. For the purposes of General Civil Liability Insurance, the damaged third party shall be the one defined in the General Conditions of the Policy.

bb) User: Policyholder, insured, beneficiary, or damaged third party, as applicable.

Article 2. Object and scope.- The purpose of this norm is to establish the guiding principles, procedures, and deadlines that natural and legal persons subject to its scope must comply with in the notice, formalization, processing, acceptance, or rejection of a loss; as well as for the payment of indemnities when the claim has been accepted by the insurers.

The provisions of this norm are applicable to insurers, insurance auxiliaries, insurance intermediaries, policyholders of collective insurance, and to any user linked directly or indirectly with the policy.

CHAPTER II GUIDING PRINCIPLES

Article 3. Principles.- In the loss handling process, the insurer must ensure that the following principles are met:

a) Principle of celerity and procedural economy: Once the user has met in time and form the requirements established in the policy for the presentation of claims, it shall be the responsibility of the insurer to drive the processing of the claim and carry out the diligences that are conducive to its completion, within the shortest possible time, not incurring in dilatory procedures or superfluous requests for antecedents, such as requests that have already been presented by the user.

b) Principle of objectivity and technical nature: The insurer must maintain objectivity and ensure that the resolution is issued with strict adherence to technical and legal criteria.

c) Principle of transparency and access: The interested parties have the right at any time, during the processing of the claim, to have knowledge of its status and to request, at their own expense if applicable, the pertinent photocopies of the underwriting and/or claims file, without the insurer being able to invoke any reservation. In the processing of mandatory insurance claims, the damaged third party shall have access and may request a photocopy at their own expense, only of the claims file.

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TITLE II PROCEDURE FOR THE ATTENTION AND RESOLUTION OF CLAIMS

CHAPTER I LOSS NOTICE AND FORMALIZATION

Article 4. Loss notice.- The user, the insurance intermediary, or any person must give notice of the loss to the insurer, through the means established in the policy and within a deadline of three business days following the date of its occurrence or when it was known or should have been known, unless a longer deadline has been fixed in it. The failure to give notice within the deadline recorded in the policy, due to reasons of fortuitous event or force majeure, is not a cause to decline the claim.

The loss of the right to indemnity will only occur in the case where the loss was produced by fraud or gross negligence.

Article 5. Formalization of the claim.- The insurance intermediary, user, or any person legally authorized by them before the insurer, according to the established deadline, may give validity and course to the processing of the claim, if applicable, by filling out the forms established in the policy for the presentation of the claim; regarding this management, the insurer must deliver evidence to the user. The deadline indicated in the policy to formalize the claim shall not be counted when the user cannot appear before the insurer to formalize it due to health reasons, fortuitous event, or force majeure, duly justified.

Article 6. Proof of the loss and duty of collaboration.- The user must provide the insurer with information about the circumstances and consequences of the loss, required according to the conditions of the policy. The non-compliance by the user with the obligations contained in the insurance policy will release the insurer from making the corresponding indemnity, which must be duly supported in the claim file. The insurer must demonstrate the existence of facts or circumstances that free it from its responsibility or reduce the amount of the loss claimed by the user.

It shall not be the obligation of the user to present documentation that the insurer requires outside of the requirements established in the policy, unless the insurer evidences that such request is related to new or subsequent facts.

Article 7. Complete documentation.- Once the user has presented all the documentation required by the insurer for the processing of the claim according to the preceding articles, the latter must evidence in the claim file the date on which the documentation was completed, which must be known to the user.

Article 8. Intervention of the insurance intermediary.- Once the loss notice or formalization of the claim from the user has been received, if applicable, the insurer must inform the insurance intermediary of the policy subject to the claim no later than the next business day, so that this person assists the user with due diligence by following up on it until its conclusion, advising them, without the need for the presentation of a power of attorney before the insurer that justifies their representation. This action by the insurer must be carried out by any verifiable means, leaving a record in the claims file. The foregoing, by its nature, does not apply to claims for Mandatory Civil Liability Insurance.

When the insurance intermediary is notified by the insurer, as provided above, they must comply with the obligations established in Article 119 of Law No. 733, and what is recorded in Article 21 of the regulations governing the authorization and functioning of insurance intermediaries. It is the obligation of insurers to provide due attention to insurance intermediaries so that they can fulfill their functions in the management of claims filed by the users they represent; otherwise, they may file a complaint with the Superintendence regarding the conduct of the insurer.

CHAPTER II CLAIMS FOR MATERIAL DAMAGES

Article 9. Material damages.- The indemnity for material damages must adhere to the cost to repair the damage to the insured good, with the purpose of leaving the good in the state or functioning it had at the immediate moment prior to the occurrence of the loss. The indemnity may be carried out through the repair or replacement of the good or through cash payment, in accordance with what is established in Law No. 733 and Law No. 431.

Article 10. Inspection or verification of damages.- In the case where the insurer requires inspection of material damages, it must do so through an insurance auxiliary registered with the Superintendence, who must carry out the inspection personally. The insurance auxiliary must in turn inform the user of the inspection findings through a photocopy of the document containing them. The claim file must contain the support for the delivery of said document.

In the event that the inspection cannot be carried out due to causes directly attributable to the user, the insurer will not be responsible for indemnification; from the above, there must be evidence in the claims file.

Article 11. Repair of the damaged good.- It shall be the responsibility of the insurer to guarantee the functioning of the good in the state it was in at the immediate moment prior to the occurrence of the loss. In the loss notice, the insurer must warn that no repair should be carried out on the good subject to the loss until it has been inspected by the insurance auxiliary and the repair has been authorized by the insurer; otherwise, the repair will not be assumed by the latter. The insurer must evidence this warning by any verifiable means.

No amount will be deducted for the increase in the value of the damaged good derived from its repair.

Article 12. Delivery of estimates.- Insurers must guarantee that workshop service providers deliver estimates to the user physically or electronically, without prejudice to the same also being sent by said workshops to the insurers.

The issuance and delivery of the estimate shall have no cost for the user. The agreement or contract that the insurer signs with the workshop service provider must establish that the issuance and delivery of estimates to the user shall have no cost for him; and the estimate document must include the legend "free or no-cost estimate."

Article 13. Supply of spare parts.- In the event that the distributor, authorized by the insurer, has issued a quote and does not have the required spare part within a deadline of 20 business days counted from the date the quote was issued, to proceed to repair the good subject to the loss, the user or the insurer may quote the spare part with another distributor within a deadline of 15 business days counted from the expiration of the aforementioned deadline. In the event that the spare parts cannot be obtained as per the above, the insurer must proceed within a deadline of 5 business days to indemnify through cash payment, taking as reference the average value the spare part had according to the aforementioned quotes.

What is stipulated in this article is not applicable to spare parts not existing in the national market; for these cases, the insurer, once the validity of the indemnity is accepted, will have a deadline of 20 business days to send the report and pertinent evidence to the Superintendence, indicating the deadline they estimate for the spare part to be obtained.

Article 14. Repair orders in commercial establishments.- In the case of motor vehicles that are within the warranty period established by the authorized dealer or distributor, the repair and purchase orders must be sent to said dealer or distributor. For motor vehicles outside the dealer's warranty period, the repair order and purchase order may be carried out in the workshop or dealer deemed convenient by the insurer.

Article 15. Workshop service providers.- The insurer is responsible for ensuring that the workshops it chooses to effect the repair of losses carry out their work with quality and in a timely manner. In the event of user dissatisfaction regarding the service provided by the workshop, they may file a claim with the insurer during the repair of the good or within a maximum deadline of 5 business days after receiving the good. Of the latter, the insurer must provide a response within a maximum deadline of 10 business days once the claim has been filed.

Article 16. Used parts.- When the insurer opts to indemnify through the repair of the vehicle, it must guarantee that the same is left in the conditions it was in at the immediate moment prior to the occurrence of the loss; therefore, it cannot use used parts as degrees of obsolescence cannot be determined. What is stipulated above does not apply to policies that contemplate the substitution of damaged parts by used parts, nor when the good to be indemnified has a useful life exceeding 20 years or due to the characteristic of the good, adhering to what is established in Article 9 of this norm.

Article 17. Replacement of goods.- When the insurer decides to indemnify through the replacement of the good, the user will have the right to present a replacement proposal. In all cases, the insurer and the user must reach an agreement regarding the good to be replaced within a deadline of 10 business days once the claim has been accepted; otherwise, they will proceed to indemnify in cash taking as reference the average value of the good to be replaced between the quote presented by the insurer and the one presented by the user.

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Article 18. Cash payment.- When the insurer decides to indemnify through the cash payment modality, it must adhere to the repair cost, minus the co-insurance or deductible as established in the policy.

CHAPTER III PERSONS INSURANCE CLAIMS

Article 19. Indemnity for death.- Life insurance will be indemnified in case of death from any cause that is not expressly excluded in the General, Particular, and Endorsement Conditions, as applicable. The insurer cannot decline due to pre-existing diseases declared by the insured if this was accepted in the policy, or for facts unknown to them at the time of the application; otherwise, the insurer will proceed according to what is established in its incontestability or contestability clause.

Article 20. Disability.- The insurer will indemnify the insured sum for the disability covered by the policy when it is originated within the validity of the same, provided that the event has been notified to the insurer as provided in Article 4 of this norm.

Article 21. Medical expenses.- In the case of reimbursement of medical expenses, the insurer will make the payment according to the presented supports. The costs must bear a relationship to what is prescribed by the attending physician, whether medications, auxiliary means, or any good or service necessary for the recovery of the user, without exceeding the limits established in the policy. In all other respects, it will be governed by the terms of the policy.

Article 22. Medical expenses prior to service.- The previous provision is excepted when the user requests the insurer to pay medical expenses in advance, for which they must present a proforma of the service to be received, for subsequent direct payment to the provider of the goods or services by the insurer. These expenses must be equal to the existing average market costs.

CHAPTER IV ADDITIONAL LOSS INVESTIGATION PROCESS FOR CLAIMS OF MATERIAL DAMAGES AND PERSONS

Article 23. Additional investigation.- The insurer, through insurance auxiliaries, may carry out a more detailed investigative process of the loss, provided that it notifies the user in writing of the start of this process, indicating the instance or authority before which the investigative diligence will be carried out and the legal basis on which it is supported; likewise, the reasons that justify the investigation and the time it will entail, leaving evidence of the notification in the claims file. From the above, the insurer must inform the Superintendence with the pertinent supports, within a maximum deadline of 5 business days after the notification made.

Article 24. Deadlines.- The deadline to carry out the investigative diligences will be up to 30 business days counted from the notification of the start of the investigative process; this deadline may be extended by up to 30 additional business days for duly motivated and justified causes, prior notification to the Superintendent and the user, indicating the motives and reasons.

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