Resolution No. JB-2015-3380 of the Banking Board of Ecuador

Banking Board of Ecuador

RESOLUTION No. JB-2015-3380

THE BANKING BOARD

CONSIDERING:

THAT according to the last paragraph of the Second Transitional Provision of the Organic Code of Monetary and Financial Law, published in the Official Register Second Supplement No. 332, of September 12, 2014, the Banking Board will continue to act until it resolves all appeals it was hearing on the date this Code entered into force, for a period of one hundred and eighty days;

THAT on March 28, 2012, the Company Interoceánica C.A. and Mr. Carlos Fernando Villota Cadena, in the capacity of insured, and the company EQMINSA S.A., in the capacity of surety or contractor, signed the Advance Good Use Insurance Policy No. GYE-3653, valid from March 23, 2012, to September 19, 2012, with an insured sum of USD $20,000.00;

THAT through the aforementioned policy, the good use of the advance is guaranteed for the acquisition of a digital ultrasound system with Color Doppler console, 3D/4D volumetric software, brand SONO SCAPE, model SSI-6000, of Chinese origin, for the clinic of Dr. Carlos Villota Cadena (insured), located in the city of Quito;

THAT through communication entered on September 19, 2012, to the insurer, Mr. Carlos Villota Cadena reported the loss consisting of the total non-compliance of the contract by the Contractor company, as it did not deliver the medical equipment subject to both the sales contract and the Advance Good Use Policy No. GYE-3653;

THAT with Official Letter No. QGG-0615-2012 of October 17, 2012, Mr. Francisco Rivadeneira Serrano, General Manager of Interoceánica C.A., states that he objects to the payment of the corresponding indemnity, basing this on Article 3 of the general conditions of the Advance Good Use Surety Policy, stating that:

"(...)

Under the title of Definitions, the general conditions of the Advance Good Use Surety Policy indicate the following:

• In Article 3, it is defined, "Contractor: Natural or Legal Person who requests the issuance of the corresponding policy in favor of the insured or beneficiary; and who receives the advance delivered by the Insured, to carry out a work or provide a good or render a service"

It is evident that the company EQMINSA, which holds the R.U.C. 0992670177001, never received the advance as demonstrated by the deposit slip and therefore, by not receiving the amount determined as an advance, this company was never obligated to provide the good subject of contract ECOEQ-178-12-EC, as indicated by the policy condition stated in the previous paragraph.

(...)" (sic);

THAT through the "Free Complaint Form from Users of Entities Controlled by the Superintendence of Banks and Insurance," on February 4, 2014, Mr. Carlos Fernando Villota Cadena filed an administrative complaint against Interoceánica C.A., in which he requests that the control body order the insurance company to pay US$ 20,000.00 for the loss consisting of the non-compliance of the contract for the acquisition of an echosonogram with the company EQMINSA S.A., as he considers that the objection to the payment is not duly founded;

THAT the main arguments of the administrative complaint presented by Mr. Carlos Villota Cadena against the insurer are as follows:

• THE PROOF OF THE DEPOSIT IS IN THE CONTRACT (CLAUSE 5TH) AND RECEIPT.
• THAT MRS. MERCY MORAN VEAS DEPOSITED IT IN HER PERSONAL ACCOUNT IS THE MISUSE OF THE ADVANCE." (sic);

THAT through Official Letter No. DNAE-SAU-2014-01502 of March 7, 2014, the Subdirector of User Attention, at that time, requested explanations and corresponding documentation from Interoceánica C.A. de Seguros y Reaseguros regarding the complaint presented by Mr. Carlos Fernando Villota Cadena;

THAT with communication No. QGG-0151-2014 of March 17, 2014, entered in the Superintendence of Banks on the 20th of the same month and year, Mr. Francisco Rivadeneira Serrano, General Manager of Interoceánica C.A., responded to the aforementioned request and mainly indicates the following:

"(...)

Dr. Carlos Villota, in his illegitimate desire to justify what was stated above, on October 31, 2012, approached our Main Office and delivered (without official letter) the document "ADEMDUN TO CONTRACT ECOEQ-178-12-EC PAYMENT RECEIPT" "ISSUED BY EQUIMSA", a document signed ONLY BY MRS. MERCY MORAN, the same person, who, although she holds the position of Manager, is the one who deposited the advance in her personal account and not in the account of EQMINSA...

A unilateral act of one of the parties cannot modify a bilateral act, nor can the advance deposited in the Manager's personal account be considered deposited in the company's account, which is the legal person that, having received that advance, would be obligated to fulfill the contract....

...the above, instead of being an argument in favor of Dr. Villota, CONFIRMS THE CERTAIN FACT THAT EQMINSA NEVER RECEIVED THE ADVANCE and by not doing so, one cannot speak of breach of contract by said company, "mora purges mora" and in virtue thereof, ratifies our position of refusal to pay the claimed guarantee.

(...)" (sic);

THAT through Resolution No. SBS-DNAE-2014-686 of August 11, 2014, the National Director of User Attention and Education, ordered Interoceánica C.A. de Seguros y Reaseguros to pay in favor of Mr. Carlos Fernando Villota Cadena the

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sum of US$ 20,000.00, less the deductions stipulated in the policy, without interest, by virtue of the fact that the insurance company's objection was presented within the forty-five-day period provided for in Article 42 of the General Insurance Law;

THAT through Official Letter No. QGG-0585-2014 of August 25, 2014, entered in the Superintendence of Banks on the same day, Mr. Francisco Rivadeneira Serrano, General Manager of Interoceánica C.A., with the professional sponsorship of Dr. Luis Larrea Benalcázar, filed an appeal against Resolution No. SBS-DNAE-2014-686 of August 11, 2014, before the Banking Board, under the provisions of Article 70 of the General Insurance Law;

THAT through Resolution No. SB-INSP-2014-203 of September 29, 2014, the National Intendant of the Private Insurance System, granted the aforementioned appeal;

THAT the first five paragraphs of Article 42 of the General Insurance Law, applicable to the present case, provide as follows:

"Any insurance company is obligated to pay the contracted insurance or the corresponding part of the loss duly proven, as the case may be, 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 and Insurance.

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

If in this case or in the case where 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 the payment within a period not exceeding fifteen days, along with interest calculated from the aforementioned forty-five days, at the maximum conventional rate fixed according to law. If payment is not made within the 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 Superintendence of Banks will verify the existence of the grounds for such objections and, if none are found, will order the payment; otherwise, it will reject it.

The insured or beneficiary may resort to summary verbal trial before competent judges or submit to commercial arbitration or mediation, as the case may be.

(...)"

THAT according to the cited norm, it is established that the Superintendence of Banks is competent to hear and resolve this administrative complaint. The present case was formalized on September 19, 2012, that is, on that date the insured

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accompanied the documents required in the policy to present the claim; and the objection by the insurance company was on October 17, 2012, that is, within the legal period established in Article 42 ibidem;

THAT it is important to mention Article 22 of Supreme Decree No. 1147, published in Official Register No. 123 of December 7, 1963, which states as follows:

"Art. 22.- It is incumbent upon the insured to prove the occurrence of the loss, which is presumed to have been produced by fortuitous event, unless proof to the contrary is provided. Likewise, it is incumbent upon the insured to prove the amount of the indemnity due from the insurer. In both cases, it is incumbent upon him to demonstrate the facts or circumstances excluding his responsibility";

THAT in the present case, the insured has given notice of the loss in a legal and timely manner, and the amount of the indemnity corresponds to the insured sum contracted in the Policy, subject of this case. On the other hand, Interoceánica C.A. has not demonstrated the facts or circumstances excluding its responsibility, as the information in the file determines that the objection has not been duly founded;

THAT in concordance with the foregoing, it is appropriate to mention that in the "Mapfre Insurance Dictionary," regarding Surety Insurance (sureties), it indicates the following:

"Surety insurance is that by which the insurer undertakes, in case of non-compliance by the policyholder of its legal or contractual obligations, to indemnify the insured as compensation or penalty for patrimonial damages suffered within the limits established by law or in the contract. Any payment made by the insurer must be reimbursed by the policyholder.

Through this contract, the policyholder guarantees the insured the fulfillment of certain obligations entered into with the latter.";

THAT the treatise writer Eduardo Peña Triviño, in the "Manual of Insurance Law," regarding surety insurance, insofar as pertinent, states the following:

"(...)

surety insurance requires for its existence another prior contract that gives it origin and without which the surety, the accessory, cannot be born.

(...)"

THAT in the present case, for the Advance Good Use Policy No. GYE-3653 to have originated, the sales contract No. ECOEQ-178-12-EC was previously signed for the acquisition of a Digital Ultrasound System with Color Doppler Console, between Dr. Carlos Fernando Villota Cadena, in the capacity of buyer, and Mrs. Mercy Lucila Morán Veas, in the capacity of seller and legal representative of Equipos Médicos y de Uso Industrial EQMINSA S.A.;

THAT from the foregoing, the following points of analysis arise:

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• From the information entered into this control body by the claimant, the Unique Registry of Taxpayers of Companies of the Internal Revenue Service is on file, which certifies that Mrs. Mercy Lucila Moran Veas is the legal representative of the company EQMINSA S.A. Likewise, the file shows the communication of May 16, 2011, through which the board of shareholders of EQMINSA S.A. appointed the aforementioned lady as legal, judicial, and extrajudicial representative of the company for a period of five years.

• The "FIFTH.- PAYMENT METHOD" clause of the sales contract No. ECOEQ-178-12-EC stipulates:

"Advance for the value of 20,000.00 USD (Twenty thousand US dollars) on the date of signing the sales contract.".

• Within the process, there is the deposit receipt for the payment of the advance for the value of USD$ 20,000.00, made on March 30, 2012, in the account in the name of Mrs. Mercy Morán Veas, in the capacity of seller and legal representative of the company EQMINSA S.A.

• Therefore, the insurer's assertion that the company EQMINSA S.A. never received the advance lacks foundation;

THAT Article 45 of the General Insurance Law provides:

"Art. 45.- The responsibility of the insurance company ends:

a) By the signing of the act that declares the obligations of the surety or contractor extinguished; or by the expiration of the period provided in the main contract;

b) By the return of the original of the policy and its annexes;

c) By the payment of the surety;

d) By the extinction of the secured obligation;

e) By the failure to request the renewal of the policy or the execution of the sureties, within its validity; and,

f) By the causes indicated in the law.";

THAT as stated above, Interoceánica C.A. de Seguros y Reaseguros has the obligation to honor the guarantee of the Advance Good Use Policy contracted by the selling company, all the more so if the insured Mr. Carlos Villota Cadena has demonstrated with the delivery of the documentation requested by the insurer that EQMINSA S.A. breached the sales contract No. ECOEQ-178-12-EC, as it never delivered to the buyer the digital ultrasound equipment, subject of said contract;

THAT furthermore, it must be mentioned that the responsibility of Interoceánica C.A. ends if any of the causes provided for in the aforementioned Article 45 ibidem occurs,

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none of which has occurred in the present case; therefore, the insurer has responsibility for indemnification within the complaint presented;

THAT Article 1562 of the Civil Code, and Article 1 of Supreme Decree No. 1147, published in Official Register No. 123 of December 7, 1963, state:

Civil Code:

"Art. 1562.- Contracts must be executed in good faith, and consequently bind, not only to what is expressed in them, but to all things that emanate precisely from the nature of the obligation, or that, by law or custom, belong to it."

Supreme Decree No. 1147:

"Art. 1.- Insurance is a contract by which one of the parties, the insurer, undertakes, in exchange for the payment of a premium, to indemnify the other party, within the agreed limits, for a loss or damage produced by an uncertain event; or to pay a capital or an annuity, if the eventuality provided for in the contract occurs.";

THAT the above is confirmed with the principle "uberrimae bonae fidei," which according to the MAPFRE Insurance Dictionary explains is a "Latin expression meaning 'of utmost good faith,' which is one of the fundamental principles of the insurance contract; the contrary, bad faith, must be proven convincingly by the one who alleges it;"

THAT according to the legal norm regarding the obligations governing insurance contracts, these must be fulfilled by the contracting parties, in which case Interoceánica C.A. must comply with what is established in the general and particular conditions of the Advance Good Use insurance policy contracted by EQMINSA S.A., since the insured Mr. Carlos Fernando Villota Cadena presented all the pertinent documentation for the analysis of the loss;

THAT Article 10 of Supreme Decree No. 1147 establishes:

"Art. 10.- With the legal restrictions, the insurer may assume all or some of the risks to which the insured thing or the patrimony or the insured person are exposed, but they must be specified in such a way that there is no doubt regarding the covered risks and the excluded ones.";

THAT from the cited article, it is derived that the insurance company assumed the risk by issuing the Advance Good Use Policy subscribed by the parties: Insured: Mr. Carlos Fernando Villota Cadena; Surety: EQMINSA S.A., through its legal representative, Mrs. Mercy Lucila Moran Veas, and Insurer: Interoceánica C.A. de Seguros y Reaseguros;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0053 of January 22, 2015, recommended to the Banking Board to reject the claim contained in the appeal filed by the General Manager of Interoceánica C.A. de Seguros y Reaseguros; and,

IN exercise of its legal attributions,

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RESOLVES:

ARTICLE 1.- REJECT the claim contained in the appeal filed by Mr. Francisco Rivadeneira Serrano, General Manager of Interoceánica C.A. de Seguros y Reaseguros; and, consequently, CONFIRM Resolution No. SBS-DNAE-2014-686 of August 11, 2014, through which the National Director of User Attention and Education ordered Interoceánica C.A. de Seguros y Reaseguros to pay in favor of Mr. Carlos Fernando Villota Cadena the sum of US$ 20,000.00, less the deductions stipulated in the policy, without interest, by virtue of the fact that the insurance company's objection was presented within the forty-five-day period provided for in Article 42 of the General Insurance Law.

ARTICLE 2.- ORDER that the insurance company comply with what is established in the previous article within a period of fifteen days, counted from the date it is notified with this resolution, under legal warnings. If it does not do so, it will incur in what is provided for in letter a) of Article 55 of the General Insurance Law.

NOTIFY.- Given at the Superintendence of Banks and Insurance, in Quito, Metropolitan District, on the twenty-second of April of the two thousand fifteen.

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

I CERTIFY.- Quito, Metropolitan District, on the twenty-second of April of the two thousand fifteen.

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

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Banking Board of Ecuador