In Peru, as in other jurisdictions, "claims control clauses" or "claims co-operation clauses" are a common feature of facultative reinsurance contracts.
Under the terms of such clauses the reinsured usually undertakes to advise reinsurers of the occurrence of a loss that may impact the reinsurance within a specified period of time. In the case of control clauses, the reinsurers will in most cases have the right to appoint adjusters, experts and lawyers, and generally to manage the claim in the manner they deem appropriate. Under both claims cooperation and claims control clauses, there will also usually be a prohibition against the reinsured settling or compromising any claim without the written approval of the reinsurers.
Clearly, if a reinsured takes positive steps to settle a claim without reinsurer approval he will put himself in breach of the clause. In Peru, however, difficulties arise from the fact that policy liability may be deemed to be accepted (in Spanish a "Siniestro Consentido"), even where the reinsured has done nothing at all.
Under Article 74 of Peru's Ley de Contratos de Seguro ("LCS"), in those cases where there exists a formal adjustment agreement between the insured and insurer, the insurer will have only ten days following receipt of the adjuster's report to reject it, failing which the adjustment will be regarded as accepted. In those cases where there is no adjustment agreement, the claim will be treated as consented if the insurer has not communicated a rejection within 30 days following the insured's provision of the information requested by the adjuster to support the claim.
It follows that, in Peru, simply doing nothing is often not an option, leaving the reinsured in a difficult position in those cases where no timely instructions have been received from the reinsurers. The result may be that the reinsured finds itself obliged under local law to pay the claim, though may still be presented with a defence at the reinsurance level. The LCS makes no specific provision to cover this situation, and to date the Peruvian courts have not yet pronounced upon it. Much may depend upon whether the clause in question is a claims control clause or merely a claims co-operation clause. A reinsured that takes steps to protect its position under Article 74, in the absence of positive instructions from reinsurers, is unlikely to have put itself in breach of a claims co-operation clause. On the other hand, the terms of a claims control clause require the reinsured to cede to reinsurers the control of the claim, including (presumably) the right to fall foul of Article 74 if they wish. In those cases, however, it seems unlikely that the Peruvian court would be sympathetic to reinsurers if they subsequently sought to deny the claim under the reinsurance contract.
In practice, the most reliable approach might be for the reinsurance contract itself to stipulate which party should bear the consequences in these circumstances.
Written by Pedro Richter Valdivia, a partner at Torres Carpio Portocarrero & Richter Abogados and Sascha Stullenberg.