Banking Board of Ecuador

RESOLUTION No. JB-2015-3521

THE BANKING BOARD

CONSIDERING:

THAT the second paragraph of the Third Transitory Provision of the Organic Code of Monetary and Financial Affairs, published in the Second Supplement of the Official Register No. 332 of September 12, 2014, determines that the Banking Board will continue to act until it resolves all claims, appeals, and other administrative procedures it was handling as of the date this Code entered into force, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board; this period was extended via Resolution No. 054-2015-F of March 5, 2015;

THAT through vehicle insurance policy No. 13240 signed by Mr. Geovanny Fernando Costales Reyes with the aforementioned insurer, with validity from October 7, 2013, to October 7, 2014, the Mitsubishi vehicle, model Lancer 1.6 L/TA, license plate GMF0790, was insured. The policy lists the insured value as US$ 10,500 for own damages and US$ 2,100 for accessories;

THAT through a claim notice received by the insurance company on December 17, 2013, Mr. Geovanny Costales Reyes notified the company of the accident involving the insured vehicle that occurred on December 15, 2013, on the streets Jacinto Rodríguez and Berta Valverde de Duarte, in the city of Guayaquil;

THAT through communication No. SGQ-009-2014 of January 29, 2014, the insurer denied the claim, basing its decision on the following:

"(...)
Once the adjustment report was prepared by the firm AJUSCO ECUADOR S.A., it was concluded that there has been no faithful narration of the facts surrounding the manner and circumstances of the occurrence of the accident, especially regarding the Theft of Accessories of the motor vehicle, for which you, as the insured, have committed the offense indicated in Article 24, second paragraph of Supreme Decree 1147, which entails the loss of insurance coverage.
(...)";

THAT on February 28, 2014, Mr. Geovanny Fernando Costales Reyes filed an administrative claim before this regulatory body against the insurer for the denial of payment of the claim, and requested that the insurer be ordered to pay the corresponding indemnity;

THAT through Resolution No. IRG-DAYEU-SSP-2014-103 of June 26, 2014, the Regional Intendant of Guayaquil ordered Constitución C.A. Insurance and Reinsurance Company to pay Mr. Geovanny Fernando Costales Reyes the amount of US$ 3,735.00, corresponding to the indemnity of vehicle policy No. 13240, for the accident that occurred to the

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insured vehicle, brand Mitsubishi, model Lancer, license plate GMF790, on December 15, 2013, in the city of Guayaquil;

THAT Mr. Geovanny Fernando Costales Reyes, as the insured claimant, through a document filed with the Regional Intendancy of Guayaquil on July 16, 2014, filed a motion for reconsideration against Resolution No. IRG-DAYEU-SSP-2014-103 of June 26, 2014, since he disagreed with it regarding the value of the ordered payment. (Emphasis added);

THAT the Regional Intendant of Guayaquil accepted the motion for reconsideration filed by the insured and issued Resolution No. IRG-DAYEU-SSP-2014-111 of August 13, 2014, in which he rectified the resolution cited in the preceding paragraph regarding the value to be paid by the insurer, a value he redefined at US$ 2,126.84, since the claimant did not request payment for the accessories of the insured vehicle;

THAT on July 18, 2014, the General Manager of Constitución C.A. Insurance and Reinsurance Company filed an appeal against the administrative act contained in Resolution No. IRG-DAYEU-SSP-2014-103 of June 26, 2014, with this Superintendence of Banks; this appeal was granted by the Regional Intendant of Guayaquil through Resolution No. SBS-IRG-DASSP5-2014-025 of August 26, 2014;

THAT on September 1, 2014, the General Manager of Constitución C.A. Insurance and Reinsurance Company filed an appeal against the administrative act contained in Resolution No. IRG-DAYEU-SSP-2014-111 of August 13, 2014, which was granted by the Regional Intendant of Guayaquil through Resolution No. SB-IRG-DASSP5-2014-029 of September 29, 2014;

THAT the appellant, principally and in both appeals, based his arguments as follows:

• That the insured, when reporting the accident, manifested the loss of accessories of the vehicle and that when asked for the details of the accessories, he only said that they are the additional accessories and that they cover whatever they wish to cover. Subsequently, the insured changed his mind and requested the claim only for own damages caused to the vehicle by the accident suffered;

• That by the insured withdrawing the request for payment of the accessories, he is ratifying that he initially claimed such payment, but then retracted, attempting to disguise his serious error of improperly reporting and, therefore, losing the right to be indemnified in full for having given false testimony regarding the facts; and,

• That according to legal and contractual regulations, the false declaration of facts entails the loss of the right to indemnification;

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THAT the first five paragraphs of Article 42 of the General Insurance Law, in force at the time of the claim, provide as follows:

"Every insurance company is obligated to pay the contracted insurance or the corresponding part of the duly proven loss, as the case may be, within forty-five days following the day on which the insured or beneficiary presents the corresponding claim in writing, attached with 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 agrees to the objections, the insurance entity will immediately pay the agreed indemnity.

If in this case or if 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, along with interest calculated from the forty-five days previously indicated, at the maximum conventional rate fixed by law. If payment is not made within the granted period, he 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 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, once the forty-five days following the day on which the insured or beneficiary presents the corresponding claim in writing, 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 may 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 denial of said payment, it will analyze them to determine their validity. Therefore, in light of this legal provision, it is established that the Superintendence of Banks is competent to hear and resolve the present administrative claim; additionally, from the documentation reviewed in the file, it is determined that the insurer presented its objection to the payment of the claimed accident within the legal period;

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THAT the insurer, through Official Letter No. SGQ-009-2014 of January 29, 2014, denied the payment of the indemnity claimed for the accident that occurred, in the following terms:

"(...)
Once the adjustment report was prepared by the firm AJUSCO ECUADOR S.A., it was concluded that there has been no faithful narration of the facts surrounding the manner and circumstances of the occurrence of the accident, especially regarding the Theft of Accessories of the motor vehicle, for which you, as the insured, have committed the offense indicated in Article 24, second paragraph of Supreme Decree 1147, which entails the loss of insurance coverage.

For better reference, the text of the aforementioned article 24 is transcribed below:

"SUPREME DECREE 1147"
SECTION IV
OF THE RIGHTS AND OBLIGATIONS OF THE PARTIES

Art. 24.- The insured or the beneficiary lose their rights to collect the insurance, due to non-compliance with the obligations that correspond to them in case of accident, according to articles 20 and 21, if this is expressly stipulated in the policy.

But the bad faith of the insured in the claim or verification of the right to payment of a certain accident, or of its amount, causes the sanction established in the first paragraph, even in the absence of contractual stipulation". (Boldface is my own).

(...)";

THAT this communication of denial by the insurer does not contain duly justified objections as determined by the regulations, aimed at convincingly demonstrating the facts or circumstances excluding its responsibility to indemnify the accident, since the facts of the accident manifested both in the accident notice and in the Complaint filed with the Guayas Traffic Prosecutor's Office are not contradictory. That the claimant subsequently requested the insurer only the payment of own damages to the insured vehicle does not entail bad faith in the declaration of the accident; bad faith must be proven by the one who alleges it;

THAT it is also 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 on the insured to prove the occurrence of the accident, which is presumed to have been produced by fortuitous event, unless proof to the contrary is provided. Likewise, it is incumbent on the insured to prove the amount of the indemnity

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due from the insurer. In both cases, it is incumbent on the insurer to demonstrate the facts or circumstances excluding its responsibility";

THAT in the present case, the insured proved the occurrence of the accident both with the notification of the same to the insurance company and with the Complaint filed with the Provincial Prosecutor's Office of Guayas; regarding the amount, the file only contains two proformas or quotes that were presented within the administrative claim, in which the personal data or characteristics of the damaged vehicle are specified, (folios 5 and 6), which have the numbers 5795 and 093-13, issued by Mr. Diego Bastidas Aguirre and Motor Tech, respectively, for a total value of US$ 2,126.84; unlike the remaining three that are also in the file, in which the client is detailed only as CONSTITUCION C.A. INSURANCE COMPANY, but no further information is provided that allows proving that the parts are for the damaged vehicle. Additionally, there is no record that said proformas and quotes were presented to the insurance company;

THAT regarding the "motion for reconsideration" filed by Mr. Geovanny Fernando Costales Reyes against Resolution No. IRG-DAYEU-SSP-2014-103 of June 26, 2014, filed with the Regional Intendancy of Guayaquil on July 16, 2014, its granting by the Regional Intendant of Guayaquil on that date, and the consequent issuance of Resolution No. IRG-DAYEU-SSP-2014-111 of August 13, 2014, with which he resolved to rectify Article One of Resolution No. IRG-DAYEU-SSP-2014-103 of June 26, 2014, transgressed the regulations detailed below:

Articles 70 of the General Insurance Law, in force at that time, and Article 13 of Section III, Chapter II, of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, which state verbatim:

"Art. 70.- Against the resolutions issued by the Superintendent of Banks and Insurance or his delegate, an appeal may be filed before the Banking Board, within a term of eight days... (Emphasis added).

Art. 13.- Against the resolutions or official letters that the Superintendent of Banks and Insurance or his delegates issue in matters of private insurance, an appeal may be filed before the Banking Board...". (Emphasis added);

THAT as a consequence of the foregoing, Resolution No. IRG-DAYEU-SSP-2014-111 of August 13, 2014, issued outside the framework of the cited regulations, becomes non-existent and with it all its consequences. In virtue of this, it is appropriate for this collegiate body to resolve the appeal against Resolution No. IRG-DAYEU-SSP-2014-103 of June 26, 2014;

THAT this resolution is based on the report of the National Legal Intendancy contained in Memorandum No. INJ-DNJ-SAL-2015-0526 of July 22, 2015, and recommended to the Banking Board to reject the claim

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contained in the appeal filed;

IN exercise of its legal attributes,

RESOLVES:

ARTICLE 1.- REJECT the claim contained in the appeal filed by the General Manager of Constitución C.A. Insurance and Reinsurance Company; and, consequently, PARTIALLY CONFIRM Resolution No. IRG-DAYEU-SSP-2014-103 of June 26, 2014, clarifying that the payment to be ordered to the insurer in favor of Mr. Geovanny Fernando Costales Reyes is US$ 2,126.84, without interest, since the insurance company objected to the claim within the legal period contemplated in Article 42 of the General Insurance Law, in force at that time.

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 what is provided in letter a) of Article 55 of the General Insurance Law.

NOTIFY.- Given at the Superintendence of Banks, in Quito, Metropolitan District, on the twenty-ninth of July of two thousand fifteen.

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

I CERTIFY.- Quito, Metropolitan District, on the twenty-ninth of July of two thousand fifteen.

Signature
Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD