Insurance cos accused of showing reluctance to grant liquidated damages

LAHORE: Some insurance companies are found reluctant in granting liquidated damages against contract of insurance to claimants, said sources from the insurance practitioners. They said that it is a settled law that on completion of all formalities, if the claim is not cleared within 90 days without any fault of the claimant when it is due, then the liquidated damages must be granted under the implied term of every contract of insurance.

In general, liquidated damages provisions specify a predetermined amount of money that must be paid as damages if one party fails to meet certain contractual requirements. Liquidated damages are typically calculated on a daily or weekly basis. Liquidated damages, also referred to as Liquidated and Ascertained Damages (LADs), are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach (e.g., late performance). Sources said the issue of liquidated damages arises in cases where the policyholders opt for group insurance on behalf of their department and pay the premium amount in the shape of deduction from their monthly salaries until their retirements.

According to sources from among the insurance practitioners, section 118 of the Insurance Ordinance, 2000 stipulates that payment of liquidated damages on late settlement of claims shall be an implied term of every contract of insurance. However, the insurance companies deny liquidated damages to the heirs of a policyholder in case of death. They maintain that the family of the deceased assured person is not entitled to receive liquidated damages under the said provision of the Ordinance. This contention is agitated with full force where a policyholder dies before maturity of the policy, as the insurance companies repudiate to entertain the family members on the subject.

According to sources, such repudiation is not taken as lawful, as it reflects malfeasance, misfeasance and nonfeasance of insurance companies, as they cannot leave the legal heirs of the deceased assured person in the lurch.

The only way out available to the insurance companies is to prove that it had failed to pay the claim within stipulated time due to circumstances beyond its control, they added.

Copyright Business Recorder, 2023