Banking Board of Ecuador

RESOLUTION No. JB-2015-3394

THE BANKING BOARD

CONSIDERING:

THAT this appeal is resolved in accordance with the First Transitional Provision of the Organic Monetary and Financial Code, published in the Official Register Second Supplement No. 332, on September 12, 2014, whose text states that resolutions contained in the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, and the norms issued by the control bodies, will remain in force insofar as they do not oppose what is established in the Organic Monetary and Financial Code, until the Monetary and Financial Policy and Regulation Board resolves what corresponds, according to the case; and, with the second paragraph of the Third Transitional Provision, which states that the Banking Board will continue to act until it resolves all complaints, appeals, and other administrative procedures that it was hearing as of the date of entry into force of the same, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

THAT on March 15, 2012, the late Mr. Jonathan Joel Martínez Guerrón contracted with Coopseguros del Ecuador S.A., Insurance and Reinsurance Company, life and personal accident policy No. 8930011-1, valid from March 13, 2012, to March 13, 2013, with an insured amount of USD$ 20,000.00, establishing as beneficiary in case of death Mr. Juan Máximo Martínez Garófalo;

THAT on February 11, 2013, due to a traffic accident, the insured Mr. Jonathan Joel Martínez Guerrón passed away; and on February 18, 2013, Mr. Juan Máximo Martínez Garófalo, father of the insured, requested the Head of the Civil Registry of the Canton of Milagro to register the death of the insured; death certificate which was registered with No. D-420-000006-27;

THAT on March 15, 2013, Mr. Juan Máximo Martínez Garófalo communicated to the insurance company the occurrence of the claim. Through letter No. REG-024-2013, of March 25, 2013, the lawyer Cynthia Núñez Albuja, special attorney for Coopseguros del Ecuador S.A., replied to the claim presented by Mr. Juan Máximo Martínez Garófalo, in the following terms:

"With the present, we communicate to you that once part of the documentation provided to support the claim in reference has been analyzed; it has been determined that the claim is objected to, due to the Non-compliance with the Twelfth Condition (sic) stipulated in the General Conditions of the policy, which indicates:

(...). When it is a case of DEATH, the notice must be within THREE (3) days following the date on which they had

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knowledge of it. The company will consider the respective notice received even after the previously indicated deadlines, when it is proven convincingly the impossibility of having made said notice within such deadlines (...).

In the case at hand, the event occurs on February 12, 2013, and the notification to this insurer is made on March 15, 2013, with 31 calendar days having passed since the date of the event.

Therefore, we proceed to object to the payment and consequently to close the claim without consequence.

(...);

THAT through communication entered in this Superintendence on May 2, 2013, Mr. Juan Máximo Martínez Garófalo, filed a formal complaint against the company Coopseguros del Ecuador S.A. Insurance and Reinsurance Company, rejecting the arguments supporting the objection to the payment of life and personal accident policy No. 8930011-1, for which he requested that this Superintendence of Banks declare the refusal of payment of the claim as untimely and consequently order the payment of USD$20,000.00 to the beneficiary;

THAT with letter No. IRG-DAYEU-SSP-REQ-2013-185, of May 14, 2013, the Directorate of Attention and User Education of the Regional Intendancy of Guayaquil, requested Coopseguros del Ecuador S.A., Insurance and Reinsurance Company to send information regarding the claim presented. Through writing entered in the Superintendence of Banks on June 6, 2013, Mr. Francisco Morales Mena, Legal Representative of Coopseguros del Ecuador S.A. Insurance and Reinsurance Company, in relation to what was requested, pointed out the following:

"(...)

The death of Mr. Jonathan Joel Martínez Guerrón occurred on February 11, 2013, and the notification to Coopseguros del Ecuador S.A. was made on March 15, 2013, with more than 30 calendar days having passed. As a consequence of the above and supported by what is provided in the General Conditions of the Personal Accident Policy subscribed, Coopseguros del Ecuador S.A. proceeded to object to the payment;

In that sense, and complying with what was requested in your letter No. IRG-DAYEU-SSP-REQ-2013-185, we are attaching the following information (...);"

THAT through resolution No. SBS-IRG-DAYEU-SSP-2014-046, of March 10, 2014, the Regional Intendancy of Guayaquil, after analyzing the documentation regarding the case, resolved to reject the claim presented by Mr. Juan Máximo Martínez Garófalo, in view of the fact that Coopseguros del

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Ecuador S.A., Insurance and Reinsurance Company, objectively objected to the payment of the indemnification, according to the deadlines stipulated in the first paragraph of article 42 of the Codification of the General Insurance Law;

THAT through writing entered in the Regional Intendancy of Guayaquil on March 18, 2014, Mr. Juan Máximo Martínez Garófalo with the sponsorship of lawyer Vinicio Aizaga H, filed an appeal against the administrative act contained in resolution No. SBS-IRG-DAYEU-SSP-2014-046, of March 10, 2014, under the protection of what is provided in article 70 of the General Insurance Law;

THAT through letter No. IRG-DASSP5-2014-087, of April 8, 2014, this control body, required the appellant to clarify the appeal filed, as determined by article 20 of Chapter II "Norms for the application of the resources of repossession and review in topics related to the financial system and the social security system; and, of appeal in matters of private insurance, regarding administrative acts of the Superintendence of Banks and Insurance", Title XVI "Of the sanctions and of the resources in the Administrative Seat", of Book I "General norms for the application of the Law of Institutions of the Financial System", of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board. With writing entered in this Superintendence on April 14, 2014, the appellant complied with what was requested;

THAT the appellant bases the appeal on the following arguments:

That insurance contracts by their nature are contracts of adhesion; therefore, the challenged resolution violates what is established in Arts. 41 and 43 numbers 3 and 9 of the Organic Law for the Defense of the Consumer, where it is established that in contracts of adhesion there cannot be a clause or stipulation that causes defenselessness to the consumer or that they are contrary to public order and good customs; as well as clauses that invert the burden of proof against the consumer;

That the Twelfth Clause of the General Conditions of the life and personal accident policy No. AP-8930011-1, states: "When it is a case of DEATH, the notice must be within THREE (3) days following the date on which he had knowledge of it." This condition is contrary to good customs, since at a moment of pain no beneficiary will be in conditions within three days to present a claim as a beneficiary of a life policy, as is my case;

That circular No. IG-INSP-DCTS-2013-102, of December 16, 2013, issued by the control body, textually says: "(...). NOTICE OF CLAIM. In case of death of the Insured, the beneficiary will give notice of the claim to the Company, within (2) years, counted from the occurrence of the claim.";

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That number e) of resolution No. SBS-IRG-DAYEU-SSP-2014-046, of March 10, 2014, affects the beneficiary since it limits the right to be compensated; in addition to the fact that the beneficiary was not the one who signed the insurance contract subject of the present appeal;

THAT through resolution No. SBS-IRG-DASSP5-2014-011, of April 25, 2014, the Regional Intendancy of Guayaquil, accepted the appeal for processing and ordered the sending of the respective file;

THAT article 1 of Supreme Decree No. 1147, containing the Legislation of the Insurance Contract in force at the date of the claim, provides that insurance is a contract by which one of the parties, the insurer, obliges itself in exchange for the payment of a premium, to indemnify the other party within the agreed limits, of a loss or damage produced by an uncertain event; to pay a capital or an annuity, if the eventuality provided for in the contract occurs, for which, in application of what is provided in article 1561 of the Civil Code, the contract constitutes law for the contractors and cannot be invalidated except by their mutual consent;

THAT article 42 of the General Insurance Law, in concordance with article 86 of the Regulation of the Law Ibidem, indicate that once the forty-five days following that in which the insured or beneficiary presents in writing the corresponding claim attached with the documents that according to the policy are necessary have passed, without the insurance company having made the payment of the claimed insurance, or in its defect, formulated objections to such claim, the insured can go to the Superintendence of Banks to ask it to order the insurance company to pay the claim, and if there are grounds for the refusal of said payment, it will analyze and resolve it within the corresponding legal framework;

THAT article 86 of the Regulation to the General Insurance Law establishes that the insured or beneficiary for the purpose of requiring the payment of an indemnification under the protection of the insurance contract, must observe the procedure provided in article 46 of the General Insurance Law;

THAT with the purpose of having a better criterion regarding the arguments pointed out by the appellant, the National Legal Intendancy through memorandums Nos. INJ-DNJ-SAL-2014-0463, of June 24, 2014, SAL-2014-00259, of August 12, 2014, DNJ-SAL-2014-910, of November 7, 2014, and INJ-DNJ-SAL-2014-1034, December 17, 2014, requested the National Intendancy of the Private Insurance System to clarify what is the scope and relevance of circular No. IG-INSP-DCTS-2013-102, of December 16, 2013; however, despite the aforementioned, to the present date they have not been attended to;

THAT regarding the argument that the policy by its nature constitutes a contract of adhesion, which cannot contain abusive clauses that go against the rights of the insured, it is necessary to indicate

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that in the event that the rights that do not arise from the insurance contract, but from the protection and defense of consumer rights, established in the Constitution of the Republic and in the Organic Law for the Defense of the Consumer, are violated, the insured are covered by the aforementioned Organic Law;

THAT from the review of the file, it is determined that Mr. Juan Máximo Martínez Garófalo presented to the Regional Intendancy of Guayaquil an administrative complaint against the company Coopseguros del Ecuador S.A., Insurance and Reinsurance Company, to order the payment of USD$20,000.00, corresponding to the indemnification as beneficiary of the life and personal accident insurance policy No. 8930011-1. The insurer objected to the payment of the claimed indemnification through letter No. REG-024-2013, of March 25, 2013, under the argument that the claimant failed to comply with the Twelfth Condition stipulated in the General Conditions of the aforementioned Policy;

THAT the "Twelfth Condition of the General Conditions of the Personal Accident Policy No. 930011-1, subscribed between Mr. Jonathan Joel Martínez Guerrón (+) and the company Coopseguros del Ecuador S.A. Insurance and Reinsurance Company, was approved by the Superintendence of Banks and Insurance, through resolution No. SBB-INS-2003-236, of August 13, 2003, and in the pertinent part states the following:

"(...) When it is a case of DEATH, the notice must be within THREE (3) days following the date on which they had knowledge of it, the company will consider the respective notice received even after the deadlines indicated above, when it is proven convincingly the impossibility of having made said notice within such deadlines.(...);"

THAT on its part, Circular No. IG-INSP-DCTS-2013-102, of December 16, 2013, to which the appellant refers, which ratifies circular No. INSP-2008-032, of March 17, 2008, through which the control body ordered the legal representatives of insurers that in the general conditions of life and personal accident insurance policies, an additional paragraph be added that says the following:

PRESCRIPTION:

"For the third-party beneficiary of the policy, the term is computed from when he knows of the existence of the benefit, but with the maximum limit of two years from the occurrence of the claim.";

THAT from the review and analysis carried out on the life and personal accident insurance policy No. 8930011-1, valid from March 13, 2012, to March 13, 2013, it is appreciated that Coopseguros del Ecuador S.A. Insurance and Reinsurance Company, currently in liquidation, did not comply with the provision issued by this Superintendence, since it did not add the additional

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paragraph regarding the computation of the term in the Twelfth Condition of the General Conditions, in the aforementioned policy;

Likewise, the provision contained in circular No. INSP-2008-032, of March 17, 2008, established a general term of three days to give notice of the claim, but regarding life and personal accident insurance against death risk, the term to notify the claim to the insurer was extended, which must be counted from the date on which the benefit was known, but a maximum limit of two years from the occurrence of the claim was established. The aforementioned does not modify what is provided by article 20 of Supreme Decree No. 1147, since the spirit of the aforementioned circular was to clarify the term that the beneficiary of a policy has to exercise his right;

THAT regarding the fact that number e) of resolution No. SBS-IRG-DAYEU-SSP-2014-046, of March 10, 2014, affects the right that the beneficiary has to be indemnified, it must be indicated that it corresponds to this control body to verify that the objection to the payment by the insurer was made in accordance with the current legal and regulatory provisions;

THAT for the aforementioned, the National Legal Intendancy considers that Coopseguros del Ecuador S.A. Insurance and Reinsurance Company, currently in liquidation, when objecting to the payment of the indemnification claimed by Mr. Juan Máximo Martínez Garófalo, was based on the Twelfth Condition of the General Conditions of Policy No. 8930011-1, in which, as indicated in this report, the additional paragraph with the following text was not added: "For the third-party beneficiary of the policy, the term is computed from when he knows of the existence of the benefit, but with the maximum limit of two years from the occurrence of the claim.", failing to comply with what is provided in the circular issued by this control body;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0230 of March 17, 2015, recommended to the Banking Board to accept the claim contained in the appeal filed;

IN exercise of its legal attributes,

RESOLVES:

ARTICLE 1.- ACCEPT the claim contained in the appeal filed by Mr. Juan Máximo Martínez Garófalo; DECLARE WITHOUT EFFECT resolution No. SBS-IRG-DAYEU-SSP-2014-046, of March 10, 2014; and, consequently order Coopseguros del Ecuador Insurance and Reinsurance Company S.A., currently in liquidation, to pay in favor of Mr. Juan Máximo Martínez Garófalo the insured amount corresponding to USD$ 20,000.00.

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

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date on which it is notified with the present resolution, under legal warnings. If it does not do so, it will incur in what is provided in letter a) of article 55 of the General Insurance Law.

COMMUNICATE.- Given in the Superintendence of Banks, in Quito, Metropolitan District, on the thirtieth of April of two thousand fifteen.

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

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

Lcdo. Pablo Cobo Luna SECRETARY OF THE BANKING BOARD