Responding to a Final Demand Letter in Philippine Car-Accident Insurance Disputes
— A Comprehensive Legal Guide —
1. Why the “final demand” matters
In Philippine practice a final demand letter is an extrajudicial demand:
- It interrupts prescription under Art. 1155 of the Civil Code and fixes the date from which legal interest may be reckoned.
- It is treated by courts and the Insurance Commission (IC) as a condition precedent showing the insured’s good-faith effort to settle before suing.
- Failure to answer it may be evidence of unfair claims-settlement practice (Insurance Code, §247) and of bad-faith denial, opening the door to moral, exemplary damages and attorney’s fees under Arts. 19 & 20 of the Civil Code and long-standing jurisprudence (e.g., Fortune Ins. v. CA, G.R. 115278, 23 May 1995).
2. Governing law & regulations
| Source | Key provisions relevant to demand-letter disputes |
|---|---|
| Insurance Code of 2013 (Rep. Act 10607) | §236–§247 (uniform claims standards); §387–§407 (Compulsory Motor-Vehicle Liability Insurance, “CTPL/CMVLI”); §439–§440 (Insurance-Commission adjudication ≤ ₱3 million) |
| Civil Code | Arts. 1144 & 1155 (prescription of contractual actions & effect of demand); Arts. 19–21 & 2200 et seq. (abuse of right, damages, interest) |
| Land Transportation & Traffic Code (RA 4136) & MMDA/PNP traffic rules | Documentary prerequisites: police report, driver’s license, vehicle OR/CR |
| Alternative Dispute Resolution Act (RA 9285) | Voluntary mediation/ arbitration clauses in the policy |
Contractual time-bars. Where the policy is silent, actions on a written contract prescribe in 10 years (Art. 1144). Special policies (e.g., fire) may stipulate 1-year limitations authorized by §63 of the Code; CMVLI claims must be filed within 1 year from denial before the IC and within 1 year from IC decision to the Court of Appeals (Sec. 439).
3. When is a letter “final”?
A letter becomes final when it:
- Recites the facts of the collision and the claim history;
- Identifies the policy (number, insured vehicle, coverage limits);
- States the exact amount demanded, with a computation of repair costs, medical bills, loss of use/income, and interest;
- Cites the legal basis (specific Code sections, policy clauses, jurisprudence);
- Fixes a deadline (commonly 7–15 calendar days) “otherwise we shall file the appropriate complaint with the Insurance Commission and/or the proper court.”
4. Drafting tips for the insured/claimant
- Send it by registered mail or courier with proof of delivery; serve a PDF copy by e-mail to the insurer’s claims head for good measure.
- Attach—never merely “offer to produce”—critical evidence: traffic-investigator’s sketch & report, photos, OR/CR, medico-legal certificates, repair quotations, towing receipts, proof of income (for business-loss claims).
- Preserve a sworn narration of witnesses; their affidavits become annexes when you later file an IC complaint.
- Specify that interest shall run from receipt of this letter at 6 % per annum (the prevailing legal rate per BSP Monetary Board Circular 799).
5. How the insurer should respond
A timely, reasoned reply shows good faith:
- Acknowledge the letter and the policy number.
- State the action taken: ongoing adjuster’s investigation, request for additional documents, or offer of settlement.
- If denying or reducing the claim, cite particular policy provisions (e.g., own-damage deductible, exclusions for unauthorized driver, fraudulent exaggeration) and enclose the surveyor’s report.
- Give a firm timetable (e.g., “We shall release repair payment within 5 banking days after receipt of the repair shop’s final invoice”).
- Close with a without-prejudice clause inviting further talks or IC mediation.
Warning: A bare “We reiterate our earlier denial” is almost always viewed by courts as an arbitrary refusal (see Malayan Ins. v. CA, G.R. 93892, 11 Mar 1994) and triggers liability for damages and attorney’s fees.
6. Next procedural steps if no settlement materialises
6.1 Insurance Commission (Administrative Remedy)
| Stage | Period | Notes |
|---|---|---|
| File verified complaint | within 1 year from insurer’s formal denial or expiry of demand deadline | Include certification against forum shopping |
| Answer | 10 days (extendible) | — |
| Mediation/Conference | 30-day window | Non-appearance may lead to default |
| Decision | 30 days from submission | IC may award up to ₱3 million plus interest & damages |
| Appeal to CA | 15 days | Petition for review under Rule 43 |
6.2 Civil action for damages
- Jurisdiction/value: After RA 11576 (2021) MTCs have exclusive original jurisdiction over claims ≤ ₱2 million nationwide; RTC handles > ₱2 million.
- Venue: Where plaintiff resides or where cause of action arose (Sec. 2, Rule 4 of the Rules of Court).
- Prescription: 10 years from breach of contract; 4 years if suit is based on quasi-delict against the erring driver/owner instead of the insurer.
7. Interest, attorney’s fees & bad faith damages
| Item | Trigger | Typical rate or amount |
|---|---|---|
| Legal interest | When amount is definite and demandable (date of final demand) | 6 % p.a. until satisfaction (Nacar v. Gallery Frames, G.R. 189871, 13 Aug 2013) |
| Attorney’s fees | Proved bad faith or unjustified refusal to pay | 10 % of the award is common but always discretionary |
| Moral & exemplary damages | Fraudulent or oppressive conduct | Courts award from ₱50 k–₱300 k (moral) and a similar figure (exemplary) depending on gravity |
8. Checklist
For the claimant before sending a final demand:
▢ Verify coverage limits & deductibles
▢ Gather all receipts, medical bills, police report
▢ Compute exact peso demand + 6 % interest
▢ Set a clear 7–15-day deadline
▢ Send through traceable service; keep proof of service
For the insurer replying:
▢ Calendar 15-day internal response deadline
▢ Review policy exclusions & prior claims correspondence
▢ Obtain adjuster’s and legal opinions
▢ Draft detailed reply citing clauses & evidence
▢ Dispatch reply by registered mail / e-mail; retain registry receipts
9. Sample templates
Sample Final Demand (excerpt)
“Within fifteen (15) calendar days from receipt hereof, please pay the total amount of ₱ 384,672.45, broken down as follows: (a) Hyundai repair estimate ₱ 285,000.00; (b) rental of replacement vehicle (11 days × ₱ 3,000) ₱ 33,000.00; (c) medical expenses ₱ 26,672.45; (d) moral damages ₱ 20,000.00; and (e) attorney’s fees ₱ 20,000.00.
Otherwise, we shall file the appropriate complaint with the Insurance Commission pursuant to §§439–440 of the Insurance Code, without further notice to you.”
Sample Insurer’s Response (excerpt)
“We acknowledge your 07 April 2025 letter. Our independent surveyor values the repair at ₱ 262,400.00 and found no basis for loss-of-use claims because your vehicle remained drivable. In accordance with Policy Condition 3 on Own-Damage Deductible, we tender ₱ 252,400.00 (repair cost less the ₱ 10,000.00 deductible) payable to your repairer within 3 banking days from your concurrence. Kindly signify acceptance on or before 20 May 2025 so we may process the voucher. This offer is without prejudice to amicable settlement through IC mediation should you so choose.”
10. Frequently-asked questions
- Must I always send a final demand? – Legally you may sue without it, but it strengthens your position and can earn interest and fees from the date of receipt.
- Can I e-mail the letter only? – Courts still require proof of actual receipt, so keep registry or courier receipts.
- What if the insurer asks for more documents after the deadline? – Grant a reasonable extension (usually 5–10 days); courts view outright refusal to cooperate as contributory delay.
- Does a partial payment stop interest? – Only to the extent of the amount paid; interest continues on the unpaid balance.
- Can I go straight to court instead of the IC? – Yes, but if the amount is ≤ ₱3 million the IC route is faster (average 6–8 months vs. multi-year litigation).
11. Key take-aways
The best demand letters are clear, quantified, and legally grounded; the best responses are prompt, documented, and transparent. Failing either invites administrative sanctions, damages for bad faith, and needless litigation costs.
This article is for informational purposes only and does not constitute legal advice. Situations vary; consult a lawyer or the Insurance Commission for guidance on your specific case.