Banking Board Resolution JB-2015-3512

Banking Board of Ecuador

RESOLUTION No. JB-2015-3512

THE BANKING BOARD

CONSIDERING:

WHEREAS the present appeal is resolved in accordance with the First Transitional Provision of the Organic Monetary and Financial Code, published in Official Register Second Supplement No. 332, on September 12, 2014, whose text states that resolutions recorded in the Codification of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, and norms issued by control bodies, will remain in force to the extent they do not conflict with the Organic Monetary and Financial Code, until the Monetary and Financial Policy Board resolves as appropriate; and with the second paragraph of the Third Transitional Provision, which states that the Banking Board will continue to act until it resolves all claims, appeals, and other administrative procedures pending as of the effective date of said Code, within a period of one hundred eighty days, extendable at the discretion of the Monetary and Financial Policy Board;

WHEREAS by Resolution No. 054-2015-F, published in the Official Register Supplement No. 467 on March 26, 2015, the Monetary and Financial Policy Board extended by one hundred eighty (180) additional days the period for the Banking Board to continue acting and resolve all claims, appeals, and other administrative procedures within its jurisdiction;

WHEREAS the National Storage Unit UNA EP, under the Ministry of Agriculture, Livestock, Aquaculture and Fisheries, contracted with Rocafuerte Seguros S.A. insurance policy against theft and/or robbery No. G-50-1773, valid from June 15, 2011, to June 14, 2012, which covered the inventory of the Storage Unit up to USD $700,000.00 (maximum USD $100,000.00 per location) for units located in the cities of Ventanas, Quevedo, Babahoyo, Guayaquil, Quito, Portoviejo, Daule, and Buena Fe, as well as for the Aprocicosa and Agromaiz locations;

WHEREAS from the file under review, it emerges that on March 22, 2012, from the warehouses of the National Storage Unit located in the Marianitas sector of Quito city, six thousand two hundred quintals of grade 1 milled rice were stolen;

WHEREAS by letter No. MAGAP-UNA-2012-0093-OF, dated March 27, 2012, the engineer Freddy Haroll Aguilar Vera, General Manager of the National Storage Unit at that time, notified Rocafuerte Seguros S.A. of the loss event occurred in the UNA EP warehouses in Quito city; and requested payment of USD $192,200.00 as compensation and economic loss to the Ecuadorian state. By letter No. O-RS-G-SIN-13-063, dated February 19, 2013, Rocafuerte Seguros S.A. denied the claim filed by the insured based on the General Conditions of the contracted policy;

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WHEREAS by document filed with the control body on March 28, 2013, Mr. Mao Lam Palacios, General Manager of the National Storage Unit UNA EP, with professional sponsorship by attorneys Danilo Icaza Ortiz and Santiago Cabezas-Klaere, filed an administrative claim against Rocafuerte Seguros S.A. for non-payment of the contracted insurance policy and requested payment of USD $192,200.00. By letter No. DNAE-SAU-2013-002689, dated May 13, 2013, the National Directorate of Attention and User Education accepted the claim for processing; and through letter No. DNAE-SAU-2013-002690, dated May 13, 2013, the insurance company was requested to provide explanations regarding its objection to the claim. Such documentation was sent via letter No. O-RS-G-SIN-13-0189, dated May 23, 2013, and filed with the Superintendency of Banks on the 29th of the same month and year;

WHEREAS by Resolution No. SBS-DNAE-2013-883, dated November 28, 2013, the National Directorate of Attention and User Education partially accepted the claim filed by the National Storage Unit; and, in that line resolved:

"(...)

ARTICLE 1.- PARTIALLY ACCEPT the claim filed by the National Storage Unit UNA regarding insurance policy Theft and/or Robbery No. G-50-1773 executed with the company Rocafuerte Seguros S.A.

ARTICLE 2.- ORDER the Company Rocafuerte Seguros S.A. to pay in favor of the National Storage Unit UNA, the sum of US $5,000.00 less the deductions stipulated in the policy, without interest, on the grounds that the insurance company's objection was filed within the forty-five day period provided in article 42 of the General Insurance Law.

ARTICLE 3.- ORDER, according to the third paragraph of article 42 of the General Insurance Law, that the insurance company comply with the provisions of the preceding article within fifteen days, under legal precautions. Failure to do so will place it under the provisions of letter a) of article 55 of the General Insurance Law.

(...).";

WHEREAS by document filed with the Superintendency of Banks on December 13, 2013, Mr. Mao Lam Palacios, General Manager of the National Storage Unit UNA EP, with professional sponsorship by attorneys Danilo Icaza Ortiz and Santiago Cabezas Klaere, filed before the Banking Board an appeal against Resolution No. SBS-DNAE-2013-883, dated November 28, 2013, under the provisions of article 70 of the General Insurance Law;

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WHEREAS by Resolution No. SBS-INSP-2014-078, dated April 11, 2014, the National Intendancy of the Private Insurance System granted the appeal filed by the General Manager of the National Storage Unit UNA EP; and, ordered the forwarding of the respective file;

WHEREAS Mr. Mao Lam Palacios, General Manager of the National Storage Unit UNA EP, based his appeal on the following:

• That the National Storage Unit contracted with the insurance company a "All Risks" property insurance policy at replacement value to new, including damages that occur in insured goods contained in furniture or buildings or installations of the Insured, due to theft, robbery, or attempt thereof;

• That the insurer required documentation of the claim, demanding the submission of five documents that were indispensable, according to the insurer, to analyze and resolve the claim presented, so that the National Storage Unit EP accepted all requirements of the insurer, attaching the requested documentation and demonstrating compliance with the policy, despite that the presented documentation was inappropriate and could not be demanded; additionally, the delivery of a report with the results of the investigation conducted by members of the National Police was demanded; and upon the demand of Seguros Rocafuerte S.A., the requested documents and report were sent;

• That the UNA EP complied with all requirements demanded by the insurance company, emphasizing that the demanded documentation was inappropriate and violated current legal norms, and that upon the insurer's demand, what was requested was delivered, considering that documents outside those established in the contracted policy cannot be demanded since otherwise the compensation procedure would be endless and the claim would never be fully documented;

• That the insurance company contradicts itself, as it relies on a police report indicating negligence without said report determining its existence; therefore, the insurer based its denial of the claim on inappropriate documents;

WHEREAS article 1 of Supreme Decree No. 1147, containing the Insurance Contract Legislation, in force at the time of the claim, provides that insurance is a contract by which one party, the insurer, obligates itself in exchange for the payment of a premium to compensate the other party within agreed limits, for a loss or damage caused by an uncertain event; to pay a capital or annuity if the eventualty provided in the contract occurs, so that, in application of article 1561 of the Civil Code, the contract constitutes law for the contracting parties and cannot be invalidated except by mutual consent;

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WHEREAS on July 18, 2011, insurance policy against theft and/or robbery No. G-50-1773 was executed, valid from July 15, 2011 to July 14, 2012, between Rocafuerte Seguros S.A. and the National Storage Unit U.N.A. EP, for an insured amount of US$ 700,000.00 (maximum per location USD$ 100,000.00). With this document, movable goods located in the buildings and installations indicated in said instrument were insured, which are specified in item "Good 00001 General Merchandise.";

WHEREAS as provided by article 22 of Supreme Decree 1147, it is incumbent upon the insured to prove the occurrence of the loss event, which is presumed caused by fortuitous event, unless proven otherwise. Likewise, it is incumbent upon the insured to prove the amount of compensation due from the insurer. The latter, in turn, is responsible for demonstrating the facts or circumstances excluding its liability;

WHEREAS by letter No. MAGAP-UNA-2012-0093-OF dated March 27, 2012, the National Storage Unit UNA EP notified the company Rocafuerte Seguros S.A. of the loss event occurred on March 22, 2012, in the Marianitas warehouses consisting of the theft of 6,200 quintals of grade 1 milled rice, which generated an economic loss of USD 192,200.00;

WHEREAS a review of the file shows that the insured has proven the occurrence of the loss event with the submission of the police report regarding the theft of 6,200 quintals of grade 1 milled rice, belonging to the National Storage Unit. Likewise, in response to requests made by the insurer through letters Nos. O-RS-G-SIN-12-332 of April 13, 2012, RS-G-SIN-12-485 of October 23, 2012 and RS-G-SIN-12-564 of December 26, 2012, the General Manager of the National Storage Unit UNA.EP, through letters Nos. MAGAP-UNA-2012-0250-OF of September 28, 2012, MAGAP-UNA-2012-0305-OF of November 28, 2012 and MAGAP-UNA-2013-0028 of January 31, 2013, indicated that he sent to the company Rocafuerte Seguros S.A. the following documentation:

• Claim filed with competent authorities.
• Valued detail of the loss.
• Report or Logbook of entry and exit of custodians on the day of the loss event.
• Report issued by the Security Company on the day of the loss event.
• Contract with the Security Company.
• Inventory with cutoff before and after the date of the loss event.
• Document proving ownership of the merchandise.
• Invoices or documents proving the cost of each sack of rice.
• Copies of the results of the National Police investigation.
• The result of the preliminary inquiry.

WHEREAS by letter No. O-RS-G-SIN-13-063 dated February 19, 2013, the insurer objected to the payment of the claimed compensation, indicating:

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"Through this letter we address you, to inform you that once the information provided regarding the case in reference has been analyzed, we find ourselves unable to attend to the claim, since; according to National Police Investigation Reports there was negligence on the part of the six Warehousemen who were providing their services in the UNA Warehouses (Marianitas) located in the Calderón sector, and indications of responsibility of Mr. Jacinto Alejandro Miranda Móran (sic), Guard of PROTEGUARVA CIA. LTDA., Security Company with which he maintained a contractual relationship at the time of the loss event, for this reason, we rely on the general conditions of the Policy (...).

GENERAL CONDITIONS OF THE POLICY

Article 2.- EXCLUDED RISK
a) No loss or damage of which the principal author, cooperator or accomplice is any employee or servant of the insured, or that results from acts executed by any person who is lawfully within said establishment;

For the above, and since no obligation falls on this particular claim, Rocafuerte Seguros S.A. formally declines its liability and proceeds to close the case (...).";

WHEREAS the first five paragraphs of article 42 of the General Insurance Law provide:

ARTICLE 42.- "Every insurance company is obligated to pay the contracted insurance or the corresponding part of the duly proven loss, as appropriate, within forty-five days following the day on which the insured or beneficiary presents in writing the corresponding claim accompanied by the documents that, according to the policy, are necessary, unless the insurance company formulates justified objections to such claim, which must be immediately brought to the knowledge of the Superintendent of Banks.

If the insured or beneficiary accepts the objections, the insurance entity will immediately pay the agreed compensation.

If in this case or when the forty-five day period established in the first paragraph expires, the insurance company does not make the payment, the insured or beneficiary will bring this fact to the knowledge of the Superintendent of Banks, who, upon verifying this situation, will order payment within a period not exceeding fifteen days, together with interest calculated from the indicated forty-five days at the maximum conventional rate fixed by law. If not paid within the

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granted period, it will order the forced liquidation of the insurance company.

If the insurance company formulates objections to the claim and no agreement is reached with the insured or beneficiary, the Superintendency of Banks will verify the existence of the grounds for such objections and, if none are found, will order payment; otherwise, it will reject them.

The insured or beneficiary may resort to summary verbal proceedings before competent judges or submit to commercial arbitration or mediation, as appropriate.";

WHEREAS according to the cited norm, once forty-five days have elapsed following the day on which the insured or beneficiary presents in writing the corresponding claim accompanied by documents that, according to the policy, are necessary, without the insurance company having made payment of the claimed insurance or, failing that, formulated objections to such claim, the insured may go to the Superintendency of Banks to request that it order the insurance company to pay the loss event, and if there are grounds for denying said payment, it will analyze them to determine their legal pertinence;

WHEREAS the objection formulated by the insurer is based on article 2 of the General Conditions of Insurance Policy against theft and/or robbery No. G-50-1773, which is transcribed below, since according to the police report or opinion, the loss event occurred due to the negligence of warehousemen who were providing services in the warehouse of the National Storage Unit UNA EP. Regarding this, it must be indicated that Guillermo Cabanellas de Torres, in the Elementary Legal Dictionary, Eleventh Edition, defines negligence as the "Omission of diligence or care that must be exercised in business, in relations with persons and in the handling or custody of things. Carelessness. Abandonment. Indolence. Lack of application. Lack of attention. Forgetting orders or precautions."

"GENERAL CONDITIONS
(...)

Art. 2.- EXCLUDED RISKS
This policy does not cover:
a) No loss or damage of which the principal author, cooperator or accomplice is any employee or servant of the insured, or that results from acts executed by any person who is lawfully within said establishment; (...)

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i) The risk of theft, that is the removal of insured objects from the premises described in this policy, without the use of violence against persons or force against things.
(...).";

WHEREAS numeral 2 of article 76 of the Constitution of the Republic establishes that in any process determining rights and obligations of any order, the right to due process will be ensured, which includes the presumption of innocence of every person, and they shall be treated as such, until their liability is declared through a final resolution or enforceable judgment. From the above, Rocafuerte Seguros S.A. objected to the payment of the loss event based on a National Police report within the preliminary inquiry initiated by the General Prosecutor's Office regarding the alleged theft of 6,200 quintals of rice from the warehouse of the National Storage Unit. Regarding this, it should be mentioned that the preliminary inquiry does not constitute a procedural stage, as it is a prior investigation phase, in which the Prosecutor gathers elements of conviction regarding a presumed criminal act; consequently, only a judge or tribunal can declare the guilt of a defendant;

WHEREAS on January 8, 2015, the Fifth Criminal Guarantee Tribunal of Pichincha notified the content of the judgment issued within case No. 0368-2013, brought against Jacinto Alejandro Miranda Moran, for the theft of 6,200 quintals of rice from the warehouse of the National Storage Unit, which opinion in the pertinent part resolved: "(...) However, from the analysis performed, in this case the Tribunal concluded that the theft of 6,200 quintals of rice from the warehouse of the Ministry of Agriculture located in the northern zone of Marianitas, north of Quito city, is proven, a conclusion reached after jointly analyzing the evidence produced during the trial hearing and of which it considers first the testimony of Franklin Patricio Vásquez Chicaiza, (...) VII RESOLUTION.- For the considerations stated above, this Fifth Criminal Guarantee Tribunal of Pichincha, based on what is provided in Arts. 304-A, 309 and 311 of the Code of Criminal Procedure, ADMINISTERING JUSTICE, IN THE NAME OF THE SOVEREIGN PEOPLE OF ECUADOR AND BY AUTHORITY OF THE CONSTITUTION AND LAWS OF THE REPUBLIC, issues a ratifying sentence of INNOCENCE for Mr. JACINTO ALEJANDRO MIRANDA MORÁN (...).";

WHEREAS it has not been proven according to law that the negligence alleged by the insurer exists. Nevertheless, in accordance with article 22 of Supreme Decree No. 1147, this control body determines that the insurance company Rocafuerte Seguros S.A., for the reasons stated, is not responsible for paying the total amount of the loss event occurred in the warehouse of the National Storage Unit UNA EP; however, given what is agreed in the particular conditions of Policy against Theft and/or Robbery No. G-50-1773, which is transcribed below, the insurer covers theft up to the total value of US$ 5,000.

3. "COVERAGE
   A "First Risk Absolute":
   Theft up to the sum of US$ 5,000
   (...).";

WHEREAS regarding the period in which the objection to the payment of the loss event was made by the insurer, this control body observes that the general conditions of Policy Theft and/or Robbery No. G-50-1773, valid from July 15, 2011 to July 14, 2012, approved by the Superintendency of Banks and Insurance with Resolution No. 6759-S on November 30, 1967, contains ambiguous clauses when indicating that "(...). The company has the right to request from the Insured and the latter is obligated to procure at its own cost and deliver to the Company, all details, books, copies, or duplicates of invoices, supporting documents and other evidence and reports that the Company or its representatives need to clarify the origin or cause of the loss event, circumstances related to losses, with the Company's liability, or with the compensation claimed from it (...).";

WHEREAS by circular No. INS-2000-070 of September 20, 2000, the control body ordered Rocafuerte Seguros S.A. to include a list of necessary documentation for claim processing, as well as the update of insurance policy texts together with premium rates, which the insurer did not comply with. Therefore, it is in breach of letter f) of article 25 of the General Insurance Law, which provides:

Article 25.- "(...)

Policies must comply with at least the following conditions:
(...) f) Include the list of basic documents necessary for claim processing; (...)." (Emphasis added)

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WHEREAS the National Legal Intendancy, through memorandum No. INJ-DNJ-SAL-2015-0478, dated June 25, 2015, recommended to the Banking Board reject the claim contained in the appeal filed by the General Manager of the National Storage Unit U.N.A. EP;

WHEREAS the National Legal Intendancy, through INJ-DNJ-SAL-2015-0478 of June 25, 2015, recommended to the Banking Board reject the claim contained in the appeal filed; and,

IN exercise of its legal powers,

RESOLVES:

SOLE ARTICLE.- REJECT the claim contained in the appeal filed by Mr. Mao Segundo Lam Palacios, General Manager of the National Storage Unit U.N.A. EP; and, consequently CONFIRM Resolution No. SBS-DNAE-2013-883 of November 28, 2013, through which the National Director of Attention and User Education ordered the Company Rocafuerte Seguros S.A. to pay in favor of the National Storage Unit U.N.A., the sum of US$ 5,000, less the deductions stipulated in the policy.

BE IT NOTIFIED.- Given at the Superintendency of Banks, in Quito, Metropolitan District, on July nine, two thousand fifteen.

(Signature)
Econ. Rodrigo Landeta Parra
GENERAL INTENDANT, S
PRESIDENT OF THE BANKING BOARD, E

I CERTIFY.- Quito, Metropolitan District, on July nine, two thousand fifteen.

(Signature)
Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD