December 16, 2018


The legislature of Puerto Rico recently passed a number of important insurance laws, effectively reforming its insurance code. These measures passed both houses of the legislature with overwhelming support and were signed into law by the Governor. Some of the laws address what terms may be included in insurance policies written in Puerto Rico while other laws reform the insurance market as a whole. Additionally, several pro-consumer laws were enacted to curb bad insurance claim practices that have unfortunately become more prevalent in Puerto Rico following Hurricanes Irma and Maria.

Mostyn Law successfully lobbied to ensure that these changes to the insurance code were put in place immediately in order to help our clients and the thousands of other citizens of Puerto Rico who are being victimized by insurance companies’ bad faith. We are eager to put these laws into action for anyone who needs help resolving their claim.

Some highlights of the new pro-consumer laws include:

  1. Undue Delay: insurance companies must promptly investigate claims and several provisions make it unlawful to unreasonably delay payment. Claims must be investigated, adjusted and resolved within the shortest reasonable time period or within the first 90 days.
  2. Undisputed Payments Required: The insurance companies must pay what it owes on a claim within 10 days for all undisputed portions of a claim.  Partial payment shall not be interpreted as a full payment or waiver of other portions fo the claim still in dispute.
  3. Unilateral Releases: the new laws prohibit insurance companies from demanding that an insured sign a full release in order to receive payment.  And it is unlawful for an insurance company to force an insured to compromise claims by delaying or threatening to withhold undisputed amounts owed.
  4. Inadequate Claim Investigations: the new laws impose on insurance companies the duty to create an adequate claims handling system and to reasonably and expeditiously investigate claims.
  5. Private right of action: although the Insurance Code of Puerto Rico has for many years prohibited unfair claims settlement practices, the lack of enforcement by the Insurance Commissioner has rendered these prohibitions meaningless. Perhaps, the most significant change was the granting of an individual right to sue the insurance carrier for unfair claims handling practice.
  6. Legal Notice Requirement: prior to filing suit, an insured must provide a detailed legal notice to the insurance company and to the Commissioner of Insurance, citing the relevant statutory provisions, the relevant policy language and other particulars. If the matter is not resolved within 60 days, the insured can sue for damages, which are not limited to policy benefits and can recover attorney fees as well.

The following is a “laundry list” of prohibited practices now effective in Puerto Rico:

• Not attempting in to resolve the claim fairly, honestly, and in good faith; [Art. 27.164(b)(i)]

• Issuing payments on claims without a written explanation of the coverage under which the payments are being made; [Art. 27.164(b)(ii)]

• Not resolving claims promptly when it is clear the insurer is liable under the terms of the insurance policy; [Art. 27.164(b)(iii)]

• Failing to investigate, adjust and resolve the claim in the shortest reasonable period of time or within the first ninety (90) days after the claim was submitted; [Art. . 2716(b)(1)]

• Misrepresenting the facts or the terms of a policy relative to a coverage in dispute; [Art. 2716(a)(1)]

• Failing to acknowledge receipt of a claim and failing to act reasonably prompt within ninety (90) days after a claim has been filed; [Art. 2716(a)(2)]

• Failing to implement reasonable methods for the expeditious investigation of claims; [Art. 2716(a)(3)]

• Refusing to pay a claim without carrying out a reasonable investigation; [Art. 2716(a)(4)]

• Refusing to confirm or deny coverage of a claim within a reasonable term after the loss statement is completed; [Art. 2716(a)(5)]

• Not attempting in good faith to make a rapid, fair and equitable adjustment of a claim when responsibility is clearly present; [Art. 2716(a)(6)]

• Forcing the insureds to institute litigation to recover amounts due, by offering the insured substantially less than the amount ultimately recovered in actions brought or by wrongfully denying coverage under the terms of the policy; [Art. 2716(a)(7)]

• Attempting to settle a claim for less than the amount to which the insured is entitled; [Art. 2716(a)(8)]

• Attempting to settle a claim based on an altered application without the consent or knowledge of the insured; [Art. 2716(a)(9)]

• Making payments of claim to the insured which are not accompanied by a statement showing the coverage under which payment is made. [Art. 2716(a)(10)]

• Making the policyholder believe in the practice of appealing from an arbitration award in favor of the policyholder with the intention of forcing them to accept a transaction or adjustment for less than the amount awarded by the arbitrator; [Art. 2716(a)(11)]

• Refusing to settle rapidly a claim when the responsibility is clearly and reasonably established under a part of the coverage for the purpose of inducing him to a transaction under another part of the coverage of the policy. [Art. 2716(a)(12)]

• Refusing to offer a reasonable explanation of the terms of a policy with regard to the facts; [Art. 2716(a)(13)]

• Delaying an investigation or the payment of a claim by requiring from the insured,  submit a preliminary report of the claim and then require a formal statement of loss which substantially contains the same information of the preliminary report; [Art. 2716(a)(14)]

• Denying the existence of the policy coverage when the insured turned down the payment offer of a claim for such coverage; [Art. 2716(a)(15)]

• Denying the payment for a valid claim solely due to a mere suspicion of fraud or misrepresentation of the facts. [Art. 2716(a)(16)]

• Denying the payment for a claim on the pretext of insufficient information when the same could have been acquired through regular investigation methods; [Art. 2716(a)(17)]

• Forcing the insured to sign a waiver which releases the insurance company of contractual obligations that were not part of the transaction; and/or [Art. 2716(a)(19)]

• Requiring unreasonable conditions to the insured in order to delay the claim. [Art. 2716(a)(20)]

If you or someone you know has been victimized by unlawful insurance practices in Puerto Rico, contact the Mostyn Law for a free claim evaluation.

Mostyn Law
1509 Calle Lopez Landron, Piso 12
American Airlines Building
San Juan, Puerto Rico 00911
(787) 88-MARIA