LAHORE: Majority of insurance policy holders try to exploit the facility of liquidated damages after receiving the group insurance claims without any protest, said sources.

They said the policy holders, or beneficiaries in case of their death, initiate recovery proceedings on the first hand and then turn up with demand of liquidated damages after settling their principal claim without any protest or prior condition. Nothing is found on the record to establish before the appellate forums that the principal amount was received under protest or subject to any condition, they added.

According to the sources, the relevant law bounds any insurance corporation to make payment of the principal claim within 90 days, otherwise it will be liable to pay liquidated damages if payment against the principal claim exceeds the prescribed limit of 90 days.

It may be noted that the liquidated damages are an exact amount of money, or a set formula to calculate the amount of money, a party will owe if it breaches a contract, in order to compensate the injured party for its losses. These damages are payable for the period during which the insurance company continues its failure to pay off the principal amount.

In most of the cases, said sources, the insurance companies retain the amount payable to the policy holders for no reason and invest or utilize in their commercial activities or retain in the bank to earn the profit during the pendency of recovery proceedings by the policy holders or their beneficiaries. In such cases, they said, the insurance companies are liable to pay the liquidated damages for using the amount. However, no such claim can be entertained if the policy holders settle their claim with the company during the pendency of the recovery proceedings.

Since the insurance corporation neither retains the principal amount not utilized it in any commercial activity to earn profit, therefore, it is not liable to pay the liquidated damages after the date when the principal amount was paid to the claimant, they stressed.

Copyright Business Recorder, 2023