Coronavirus: Exceptions to the Isolation in Insurance Matters

ARTICLE
Coronavirus: Exceptions to the Isolation in Insurance Matters

Administrative Decision 524/2020 issued by the President’s Chief of Staff Office exempted experts and loss adjusters from complying with the isolation decreed due to the  COVID-19 pandemic. This was complemented by Resolution 113/2020 issued by the City of Buenos Aires, among other measures.

May 5, 2020
Coronavirus: Exceptions to the Isolation in Insurance Matters

On April 18, 2020, the President’s Chief of Staff Office issued Administrative Decision 524/2020 (the “Administrative Decision”), which exempted personnel who provide services to certain activities –including experts and loss adjusters– from complying with the “social, preventive and mandatory isolation” and the prohibition of movement decreed as a consequence of the pandemic due to the outbreak of COVID-19. The Administrative Decision was issued within the framework of the powers granted by article 2 of Decree 355/2020 and affects the City of Buenos Aires and all the provinces, with the exception of Tucumán –that was later included by Administrative Decision 607/2020– and Santiago del Estero.

Article 2 of the Administrative Decision states that the exceptions are subject to complying with the health protocols that each jurisdiction affected by this rule will establish, which must be in accordance with the health and security recommendations and instructions given by the federal authorities. In addition, Article 3 of the Administrative Decision orders local jurisdictions to issue the regulations required for conducting the exempted activities and services.   

In this context, on April 20, 2020 the Economic Development and Production Ministry of the City of Buenos Aires issued Resolution 109/2020, which approved a first protocol named “Protocol for the Provision of Services of the Personnel of Insurance, Reinsurance, Capitalization and Savings and Home Loans Companies”. This Protocol was unclear, raised serious doubts about its scope and differed from the Administrative Decision with regard to the activities that were allowed. Within days of being approved, the first protocol was revoked and superseded by Resolution 113/2020 issued by the Economic Development and Production Ministry of the City of Buenos Aires and published in the Official Gazette on April 27, 2020. The new protocol was named “Protocol for Independent and Employees of Insurance Company Experts and Loss Adjusters that allow the Adjustment and Payment of Reported Losses to Beneficiaries” (the “Protocol”)

In addition, after the Administrative Decision, the Argentine Superintendence of Insurance published on its website a communique (the “Communique”) and issued a Circular dated April 27, 2020 (the “Circular”) that attempt to clarify and reiterate some points of the Administrative Decision.

As we shall see below, and despite the attempts at clarifications of the Argentine Superintendence of Insurance, the Administrative Decision is unclear and inaccurate, so we understand that this could raise concerns regarding the actual scope of the exception.   

The Administrative Decision issued by President’s Chief of Staff Office

One of the exempted activities that the Administrative Decision establishes is that of experts and loss adjusters, although it does so in a confusing way. Section 8 of article 1 states that the exception applies to “Experts and loss adjusters of insurance companies that allow the adjustment and payment of reported losses to beneficiaries. In no case may their offices be open to the public and all procedures must be virtual, including payments”. We understand that the drafting of the rule could bring up the following questions regarding the scope of the exception.

  1. External loss adjusters or insurer’s employees

The first question that the Administrative Decision brings up is whether the exception applies only to independent experts and adjusters or if it also applies to the internal staff of insurance companies who are in charge of loss adjustments. The Administrative Decision is not clear in this regard. While it mentions “the experts and loss adjusters” and seems to refer to independent professionals, it later refers to them as "of insurance companies", which seem to refer to an insurer’s employees.

If we consider that the Administrative Decision purports, ultimately, to allow loss payments –although such purpose is not mentioned in the drafting of the rule nor in its recitals– it does not seem to be reasonable to make a distinction between independent experts and loss adjusters from those who carry out the same activities as employees of an insurance company.

This construction was undoubtedly confirmed by the Protocol, which expressly includes both employees and independent experts and loss adjusters, not only in its title but also in its scope definition. In the same line, the Communique states that the Administrative Decision benefits both employees and independent experts and loss adjusters.

However, neither the Protocol nor the Communique is an ideal method of construction of the Administrative Decision, which in principle, they could not modify. Therefore, it would be convenient that the President’s Chief of Staff Office clarify the actual purpose of the Administrative Decision.

  1. Any kind of loss or specific losses

The second question is whether the exception applies to losses of any kind of insurance coverage or to a specific one. This question does not arise from the Administrative Decision, but from the platform that must be used to process the movement certificate.

In fact, although the Administrative Decision does not refer to a specific insurance coverage, the website https://tramitesadistancia.gob.ar/ where the exempted personnel must process their movement certificates, only provides the option for “Insurance companies and loss adjustment services that allow payments for car and motorcycle repairs arising from traffic accidents”.

In our opinion, there is no reason to make such a distinction, not only because the Administrative Decision does not mention a specific kind of coverage, but also because in this context it will be as important, or even more important, to pay losses related to commercial, surety, transport and life insurance policies, rather than only paying car and motorcycle repairs.

This limitation seems to be even more unreasonable if we take into account that, for instance, victims of traffic accidents are third parties who could have suffered physical damages that may require a medical examination to be evaluated. In this regard, the Administrative Decision would not allow the victims to be personally examined by a medical expert, nor would it provide them with  a quick solution for their damages, which are probably of greater importance than those related to car and motorcycle repairs.

It is foreseeable, then, that the movement certificate application will correct this specification that does not respond to the exception established by Administrative Decision 524/2020 and that it will allow other activities, as important or even more important, than the verification and adjustments of property damages.

  1. On-site and virtual tasks

The third question is which are the tasks that can be carried out under this exception. On the one hand, it seems that the Administrative Decision allows the adjustment of all claims in order to pay all reported losses, but it also states that offices may not be open to the public and that “all procedures must be virtual, including payments”. The limitation to merely virtual processes undermines what we understand is the purpose of the Decision, since it would not allow important loss adjustment tasks such as the on-site inspections and reviews of insured places and objects. In addition, it greatly limits the scope of the measure, since in general, insurance companies were already carrying out remotely the tasks that technology allowed them to perform virtually.

On the other hand, it does not seem that on-site activities, such as car or building inspections where the accidents take place, would necessarily be against the purpose of the rule, as long as the required social distancing and the health protocols that each jurisdiction establish in accordance with article 2 of the Administrative Decision are fully complied with.  

A quick loss adjustment is necessary not only to allow payments, but also because over time the evidence is likely to disappear and make the loss adjustment process more difficult. Also, in some cases, quick loss adjustments are necessary to continue using the insured goods.

It is possible that when the Administrative Decision states “In no case may their offices be open to the public” it refers only to general administrative and commercial tasks (such as customer service, underwriting, premium collection, receiving loss reports, etc.), which are carried out by the companies with the general public, but it does not refer to the inspections and loss adjustment tasks that Administrative Decision aims to allow. However, this is not clear from the wording of the Administrative Decision.

The Protocol seems to be in line with this construction, although it is not expressly established. Indeed, when it mentions that the Protocol shall be applied prior to implementing “on-site tasks”, or when it establishes interpersonal distancing rules for conducting the “corresponding tasks”, the Protocol suggests a broad construction of the activities that are allowed under the Protocol, although it also prioritizes isolation where possible.

The Protocol would therefore allow experts and loss adjusters to carry out some tasks on-site when it is not possible to carry in isolation, as long as such tasks are not qualified as service to the general public and the applicable health measures are fully complied with. As explained before, this does not arise expressly from the drafting of the Protocol or from the Administrative Decision.

At any rate, the Protocol is not the ideal tool for construing the Administrative Decision. It would therefore be convenient that the President’s Chief of Staff Office clarify this issue.

  1. Payment or other compensations

Another question is the status of obligations of insurers that are not actual payments. The Administrative Decision states that "payments" must be virtual, and the website mentioned above refers to loss adjustments that allow for the “payment” of car repairs. However, insurers are sometimes obliged to provide a service. In fact, sometimes in motor policies, insurers fulfill their obligations by repairing the insured’s vehicles rather than by making payments to the insured. 

The Health Protocol issued by the City of Buenos Aires

As mentioned above, the Protocol was issued by the City of Buenos Aires within the framework of the powers granted by Articles 2 and 3 of the Administrative Decision to each jurisdiction, so that each of them could establish the necessary health measures for the exempted activities to be carried out. 

The new Protocol replaces the first protocol named “Protocol for the Provision of Services of the Personnel of Insurance, Reinsurance, Capitalization and Savings and Home Loans Companies” –which seemed to differ from the Administrative Decision– and regulates the exception to the isolation in an abbreviated manner and, apparently, in the same line as that of the Administrative Decision.

The Communique and the Circular by the Argentine Superintendence of Insurance

As we mentioned before, the Argentine Superintendence of Insurance published on April 20, 2020 on its website a Communique that attempts to clarify some of the issues brought about by the Administrative Decision. For instance, the Communique states that both employees and independent loss adjusters may carry out their activities to allow for the payment of claims.

Additionally, on April 27, 2020 the Argentine Superintendence of Insurance issued a Circular, in the form of a reminder, stating that “all procedures for loss adjustments, including payments, must be virtual”.

Even though it could be understood that the Communique and the Circular have some construing value of the Administrative Decision, since they were issued by the federal authority who is in charge of the regulation and control of the insurance market, in any way may they modify the terms of the Administrative Decision.

In case of doubt, it seems that it would be convenient to stick to the language of the Administrative Decision.

Conclusion

In conclusion, the Administrative Decision is unclear and contains many questions and gray areas that could bring disputes regarding its scope and application. Although the Communique, the Circular and the Protocol could be regarded as reasonable interpretative tools, it would still be convenient that the President’s Chief of Staff Office clarify the scope of the Administrative Decision and that the federal authorities, the City of Buenos Aires and all jurisdictions coordinate their measures to avoid or reduce the differences that could exist between the federal rules and the local health protocols. Meanwhile, insurance market operators should carry out their activities carefully in order to avoid the negative consequences of the lack of clarity of the regulations.