Tribunal III of the Civil and Commercial Court of Appeals of Mar del Plata awarded punitive damages against an insurer. The Court held that the insurer violated the law and the contract when it failed to pay a loss, even though the amount of the damage was still disputed between the insurer and the insured.

In the case of “Amaya, María A. c/ BBVA Consolidar Seguros S.A. s/Daños y Perjuicios” the plaintiff commenced proceedings against BBVA Consolidar Seguros S.A. (the “Insurer”) to seek compensation for damages resulting from a fire that affected her home, under a homeowners’ insurance contract. The first instance judge admitted the claim and ordered the Insurer to pay compensation for certain items.

This decision was appealed by the plaintiff, who argued that: (i) the compensation awarded at first instance was insufficient; and (ii) punitive damages should also be imposed on the Insurer.

The Court of Appeals admitted the plaintiff’s appeal and raised the amount of the compensation for the different items claimed by the insured. The Court also awarded punitive damages against the Insurer in the amount of AR$ 40,000.

The ruling sustained that when an insured takes out an insurance contract he expects the Insurer to pay in a timely manner if a loss occurs (in this case a fire that affected the insured’s home). None of this had happened. The plaintiff had still not received any compensation five years and two months after the loss.

According to the Court of Appeals, if the discussion between the Insurer and the insured was confined to the amount of the compensation, the Insurer should have made a judicial deposit of the sum it thought was due (Sections 756, 757 subsection 1, 758, and 761 cc. of the Civil Code, and Sections 49 and 51 of Law No. 17,418).

The Court considered that the behavior of the Insurer justified punitive damages since it showed serious disregard for the rights of the consumer. Not only did the Insurer fail to comply with contractual terms but it also violated the law, since the insured had not been given neither the attention due nor a dignified treatment (Section 8 bis Law No. 24,240, Section 42 of the Constitution, Section 38 of the Constitution of the Province of Buenos Aires, Sections 4 and 18 of the Law No. 13,133 and its amendments). The Court stressed that Insurers have social responsibility with respect to consumers.

This ruling sets an important and worrisome precedent for the insurance industry. The Court awarded punitive damages because it held that if there is a dispute between the insured and the Insurer on the amount of damages to be paid, the Insurer must make a court deposit of the sum it understands is due.