Insurance Payout Inaccurate, Commercial Code Challenged

Legal counsel Rendi Vlantino Rumapea conveying the petition’s subject matters at the preliminary hearing of the judicial review of the Commercial Code, Tuesday (1/23/2024). Photo by MKRI/Panji.

JAKARTA (MKRI) — Nias, North Sumatera resident Sopan Santun Duha filed a judicial review petition of Article 251 of the Commercial Code (KUHD) to the Constitutional Court (MK). The Petitioner of case No. 2/PUU-XXII/2024 felt his constitutional rights have been violated as he had received an inaccurate insurance claim payout to the amount of Rp224.5 million, which was supposed to be Rp735 million. However, at the preliminary hearing for the case on Tuesday, January 23, 2024 in the plenary courtroom, legal counsel Rendi Vlantino Rumapea added that the Petitioner had passed away.

“Article 251 of the KUHD has opened up ample opportunity for insurance companies to take advantage of it for their self-interests and for evading accountability for mistakes or negligence that they themselves make/commit,” Rumapea said.

Article 251 of the Commercial Code reads, “Every incorrect or false notice, or every concealment of facts known by the insured party, even though made in good faith, the nature of which is such that the agreement concerned would not have been made, or would not have been made under the same conditions if the insuring party learnt the factual situation of all these matters, shall render the insurance concerned void.” The Petitioner alleged that the norm was against Article 1 paragraph (3), Article 27 paragraph (1), Article 28D paragraph (1), and Article 28G paragraph (1) of the 1945 Constitution.

The Petitioner argued that the article had neglected to provide fair legal certainty, assurance, and equal treatment before the law for the insured/policyholders. He argued that this arrangement had often been used as a legal loophole by insurance companies, which resulted in losses for policyholders.

He also argued that the article had given insurance companies the right to act as a judge of its own case, by allowing it to assess whether there is a false or incorrect notice and concealment of certain facts allegedly made by policyholders. Insurance companies can cancel policies unilaterally without considering and assessing policyholders’ arguments.

The insurance company’s right and authority to cancel a policy unilaterally has clearly negated the protection of premium and sum insured that the policyholder should receive. Therefore, the Petitioner asked the Court to declare Article 251 of the KUHD unconstitutional and not legally binding.

The Petitioner was the heir/beneficiary of policyholder Latima Laia, who passed away on July 21, 2022. On August 15, 2022, he filed a claim to the insurance company, which amounted Rp735 million.

However, in a letter dated December 29, 2022, the insurance company unilaterally rejected the claim and took a unilateral policy by only paying out Rp224.5 million on the ground that based on the results of re-underwriting, the insurance company found the policyholder’s data or medical records that had not been submitted while filling out the policy form.

However, the Petitioner stressed, the policyholder had filled out the form as required. Meanwhile, the policyholder’s request that an agent accompanied her while filling the recovery form as a form of utmost good faith to avoid mistakes was ignored by the insurance company.

The case began when the policyholder increased the premium from Rp500,000 to Rp2 million in 2018 and was approved by the insurance company. This increase led to the increase of the value of claim or benefits received by the Petitioner, which would be Rp735 million if the policyholder experiences a risk.

In February 2020, the insurance company approved a premium holiday application submitted by the policyholder. Then in February 2022, the policyholder applied for reinstatement of the policy after premium leave by first fulfilling the requirements set by the insurance company, including filling out a premium leave termination form, paying the outstanding premium due to premium leave for two years of Rp48 million, and conducting a medical check-up at the Gloria Teluk Dalam Clinic appointed by Prudential on March 17, 2022.

On March 30, 2022, the insurance company declared the policy active. All terms and conditions set by Prudential in order to restore the policy are in the process of due diligence and underwriting to conclude that the policy was reactivated with the value of benefits as stated in the policy, Rp735 million. 

Justices’ Advice

Constitutional Justice M. Guntur Hamzah observed that the Petitioner had not explained the constitutional impairment. The Court, he added, does not adjudicate concrete cases; it reviews laws against the 1945 Constitution.

“I have not found in your petition the constitutionality issue relating to the norm,” he said.

Meanwhile, Constitutional Justice Anwar Usman highlighted the petitum. He said that if the a quo article was declared unconstitutional and not legally binding when the Petitioner did not propose any alternative norm, there would be legal vacuum.

Petitioner Has Passed Away

Before concluding the hearing, panel chair Constitutional Justice Ridwan Mansyur asked the legal counsel to confirm that the Petitioner had passed away. Counsel Rumapea said he had passed away in December 2023.

“With the Petitioner’s passing, you must insist on continuing the petition or otherwise. Please state your [decision] at the next hearing, because the Court will take a stance after you state [your decision],” he said. He also informed that the petition revision must be submitted by 14 days.

Author       : Mimi Kartika
Editor        : Nur R.
PR            : Andhini S.F.
Translator  : Yuniar Widiastuti (NL)

Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian versions, the Indonesian version will prevail.

Tuesday, January 23, 2024 | 17:02 WIB 65