THE CONCEPT OF “CONSENTED LOSS”: ANALYSIS AND REFLECTIONS ON ITS SCOPE IN LIGHT OF PERUVIAN LEGISLATION
Lucero Celeste Ramírez Izaguirre*[1]
The insurance sector faces a perpetual challenge: effectively assessing and managing risks. In this context, the concept of "consented loss" emerges as a key element, as its configuration carries significant legal implications for both the insured and the insurer. Understanding its scope and reflecting on its application is essential in the insurance industry to anticipate, mitigate risks, and identify the legal consequences attributed by the legislator in the event of a claim.
When an event occurs, the insured must notify the insurance company of its occurrence so that it can analyze whether, according to the insurance policy and current regulations, coverage is warranted or not.
If the event - by its nature - does not require the involvement of an adjuster, the insurer, from the date all required documentation for the analysis of the loss has been completed, has a period of 30 days to make a decision, either (i) expressly accepting that the loss is covered under the Policy, (ii) rejecting the claim for coverage of the loss, as it falls outside the scope of the Policy, exclusionary clauses, loss of indemnity rights, or others, or (iii) tacitly accepting coverage through silence, thus constituting what is known as "consented loss."
On the other hand, certain events require the involvement of an independent adjuster, who is a person with specialized technical knowledge investigating the circumstances of the occurrence of the loss, determining if it corresponds to the contracted risk, whether or not it is covered, and the amount of estimated losses (Article 55 of the Regulation for the Supervision and Control of Insurance Brokers and Auxiliaries, SBS Resolution No. 809-2019). In this scenario, after the insured notifies the occurrence of the event, the appointment of an adjuster is made, and with the agreement and choice of the adjuster, the "claims settlement procedure" begins.
During this stage, as the insured provides information about the loss, the adjuster may issue preliminary, partial, or even individualized damage reports, and when they have obtained complete information about the loss (comprehensive analysis), they must notify the insurer within 24 hours, after which the adjuster has a period of 20 days to submit their opinion through a Final Report (non-binding) in which they will develop whether they consider that the loss is covered according to the Policy (Article 8 of the Regulation for the Management and Payment of Claims, Resolution No. 3202-2013) and, if they estimate that indemnification should be paid, they must establish the indemnity payment with the respective final adjustment agreement. Once this period has elapsed, the insurer has a period of 10 days to make a decision on the loss, at which time, according to the evaluation of the loss, it may: (i) approve the adjustment agreement and its respective Final Report on the loss, (ii) reject the loss (in which case, the adjustment agreement and its respective Final Report on the loss) or (iii) tacitly accept the loss due to lack of response within the legal period, resulting - as in point (i) - in the "consented loss."
It is important to clarify that the insurer's decision that generates the configuration of the "consented loss" by express approval of the Adjustment Agreement or tacit approval due to lack of response within the legal period is not generated by the expiration of the 10-day period from notification with the initial, preliminary, or damage reports, since the only action that generates the counting of deadlines according to the legislator is in the following order: (i) having complete information about the loss, (ii) the notice from the Adjuster regarding having complete information about the loss, and then (iii) the issuance of the Adjuster's Final Report that includes the comprehensive analysis of the damages, their quantification, and the adjustment (final) agreement within the aforementioned 20-day period.
To explain in greater detail the concept of "consented loss" in Peruvian legislation, it is important to note that the Insurance Contract Law, Law No. 29946, does not contain a legal definition thereof; however, its content can be inferred from its terminology and the interpretation of Peruvian insurance regulations. Thus, when we refer to the loss, it is not equated with the mere occurrence of an event; on the contrary, it constitutes the "concrete manifestation of the insured risk, which produces guaranteed damages in the policy up to a certain amount" (APESEG, n.d), so we must discard any definition that seeks to equate the term "loss" with the event itself or with "the insured's claim." Now, the term "consent" has its basis in civil law and can be defined as the express or tacit expression of will regarding something, in this case, regarding the "loss."
Through the "consented loss," the insurer expressly or tacitly accepts that the loss is covered. A different matter will be how much the damages amount to, since in Insurance Law, the principle of indemnification applies, which refers to the obligation of the insurance company to pay the insured for the loss, within the limits and conditions established in the insurance, not being able to pay higher monetary sums than those not contracted or, in general, grant indemnities that enrich the insured. In Peruvian legislation, this principle of indemnification is regulated in Article II, literal b) of the Insurance Contract Law and Article 325, numeral 4 of the General Law of the Financial System and the Insurance and Organic Law of the Superintendency of Banking and Insurance, Law No. 26702, which establishes that paying indemnities in excess of what is contracted constitutes a prohibited activity for insurance companies.
Consider, for example, that an insured has taken out a Mortgage Insurance Policy, and it happens that they are diagnosed with an oncological disease, so they claim to the insurance company for coverage so that the outstanding balance of their mortgage loan is paid, complying with providing the insurance company with all the information related to the event. More than 30 days pass, and the insurance company does not respond, and, therefore, the "consented loss" occurs; will it be legally possible to argue that as a result of the "consented loss" then the insurance company must provide coverage for the existence of "oncological disease" even though it is a non-contracted risk? The answer is negative.
The "consented loss" is not about the insurer's tacit acceptance regarding the insured's claim but about the loss understood as the realization of the risk contracted in the insurance, and, in the proposed case, the oncological disease is not contracted as a risk subject to coverage. If it were argued that the configuration of the consented loss makes it impossible to review the Policy, a legal consequence not established in Peruvian insurance regulations and the nature of insurance contracts, which is to indemnify according to the terms of the Policy and not to benefit the insured, would be granted. Not only that, but a different interpretation of the scope of the consented loss would imply a modification of the contractual terms, which is prohibited according to Article 62 of the Political Constitution of Peru, which states that "contractual terms cannot be modified by laws or other provisions of any kind," without considering economic impacts resting on the principle of mutuality, among other aspects that seriously distort Insurance Law.
Note that the lack of response within the legal period does not constitute an administrative offense since the legislator has chosen to attribute to the insurer's silence the legal consequence of tacit acceptance. Thus, the consented loss occurs when the insurer expressly pronounces in a positive sense (acceptance of the loss) or due to lack of response within the legal period. In either case, the insurance company must pay the corresponding indemnification according to the terms of the Policy within 30 days of the loss being consented. If after this period the insurance company does not comply with the respective indemnification payment (obligation to give a sum of money), we will be faced with the configuration of the insurer's default, this being the only legal consequence provided by the legislator according to the last paragraph of Article 74 of the Insurance Contract Law for sanctioning the insurance company for the delay in complying with the indemnity obligation towards the insured.
Now, when the insurance company rejects the loss by considering that the event has not occurred or is immersed in exclusionary causes, loss of indemnity rights because the risk is not contracted, or even due to fraud, Article 15 of SBS Resolution No. 3202-2013 must be observed, which establishes that the rejection must be properly substantiated; otherwise, a serious offense could be incurred, according to Annex 3 "Specific infractions of the insurance system" of the Regulation of Infractions and Sanctions of the SBS, SBS Resolution No. 2755-2018, consisting of rejecting requests for coverage without a basis. In this sense, the non-compliance with the formalities of a rejection letter may lead to an administrative sanction, but it also does not imply that the loss is consented, as the legislator has not established such a legal consequence nor does it even imply that the insurer's will to reject the loss through a communication is considered not made, as it would lack logic to attribute the consequence of non-existence and, on the other hand, to sanction it for sending a rejection letter that does not conform to the parameters contained in the norm. Consequently, the insured must assert their rights through the corresponding channels, particularly if it is a complex legal relationship where the insured does not have the status of a consumer, they may resort to the judicial or arbitral route to request as a claim that it be declared that the loss is covered and later request that the quantification of the damages to be paid by the insurance company be determined.
As the reader may notice, analyzing and reflecting on the scope of the consented loss is fundamental so that the insured can exercise their corresponding rights and the insurance company complies with and acts in accordance with Peruvian insurance regulations.
REFERENCES
Peruvian Association of Insurance Companies-APESEG, Insurance Principles. Available at: https://www.apeseg.org.pe/2020/11/principios-de-los-seguros/
Peruvian Association of Insurance Companies-APESEG, Loss. Available at: https://www.apeseg.org.pe/glosario-de-terminos/
Constitution of Peru.
Insurance Contract Law, Law No. 29946.
General Law of the Financial System and the Insurance and Organic Law of the Superintendence of Banking and Insurance, Law No. 26702.
Regulation of Infractions and Sanctions of the SBS, Resolution No. 2755-2018.
Regulation for the Supervision and Control of Insurance Brokers and Auxiliaries, SBS
Resolution No. 809-2019.
Regulation for the Management and Payment of Claims, Resolution No. 3202-2013.
[1] Abogada y Magíster en Derecho con mención en Derecho Civil y Comercial por la Universidad Nacional Mayor de San Marcos. Asociada Senior en Rodríguez Angobaldo Abogados. Lima, Perú. Correo electrónico: [email protected]. Créditos: https://er.com.pe/lucero-celeste-ramirez-izaguirre/