Wednesday, April 12, 2017

Pre-Trial Proceedings Swirling in Latin America: Claim Resolution Facilitation or Additional Pre-Suit Condition

Pre-suit proceedings have become increasingly popular in Latin American jurisdictions. These proceedings economize on cost, time and resources making it a more attractive venue for resolving disputes. As a result, knowledge of these pre-filing mechanisms becomes important for insurers in the region as they may be invited to participate in a pre-suit initiative prior to the commencement of a formalized lawsuit. In some countries, pre-suit proceedings reserved for specific areas, such as insurance disputes, are operated by the insurance commissioner (which lays outside the realm of the judiciary) who will receive and process complaints. The level or authority to impose and enforce its decisions are dependent on the country.
For instance, in Argentina, the insurance regulatory authority Superintendencia de Seguros de la Nacion (National Insurance Superintendent) receives complaints from insureds and holds conciliatory hearings presided by the “Departamento de Orientacion y Asistencia al Asegurado” (Department of Orientation and Assistance to the Insured). In Ecuador, the insureds can involve the local regulator Superintendencia de Bancos (Superintendent of Banks) to examine a claim and render a determination as to whether the insurer is required to pay.
Again, the objective is to resolve the claim. While such an agency may apply sanctions if the insurer is non-compliant with local rules and regulations, the system is not intended to be an alternative to the insurer’s right to have its obligations determined by the judiciary. The insurer’s day in court is not waived.  For instance, in Ecuador, payment of the claim becomes a pre-requisite for insurers wishing to exercise their right to file a lawsuit contesting the agency decision. If the insurer defies the Superintendencia’s decision and refuses to pay the claim, the insurer can be forced into liquidation.
In other jurisdictions like Mexico, a specialized consumer protection bureau called the CONDUSEF (Spanish acronym which stands for the “National Commission for the Protection and Defense of Financial Services Users”) can be asked to intervene. In Chile, the local regulatory authority Superintendencia de Valores y Bancos (Superintendent of Securities and Banks) and the Servicio Nacional del Consumidor (National Consumer Service) will accept and process claims. In some instances, even the office of the “Defensor del Asegurado” (Insured Ombudsman), a private entity created by the initiative of local insurers, has become involved deciding claims of up to UF500 (amount expressed in Chilean “Unidades de Fomento” equivalent to approximately USD20,000). The decisions of the Defensor del Asegurado are binding upon insurers that are members of the Chilean Insurance Association.
In summary, insurers need to be aware of pre-suit proceedings in the jurisdictions where their insureds are located.  While some of these proceedings lack the gavel power of a judicial order, these administrative decisions may exceed the scope of traditional judicial parameters, such as the instance where a forced liquidation becomes the insurer’s fate. While these pre-suit proceedings are not a new concept, the increase in their use may create tidal waves of claims difficult to navigate.  Insurers would be wise to avoid getting caught in the undertow by consulting with knowledgeable counsel.
Published by Daniel Baron*

*Not licensed to practice law in Florida