On restitution and insurance

An insurance claim cannot be categorized as ‘restitution’ per se, because restitution presupposes a violation of law.

Darren M. De Jesus

Last Thursday, the Independent Commission for Infrastructure (ICI) held a joint meeting with several government offices to discuss a whole-of-government approach to the restitution, or recovery, of public funds spent by contractors and public officers involved in the corruption-riddled flood control projects of the Department of Public Works and Highways (DPWH). Retired Supreme Court Justice Andres Reyes Jr., chairman of the ICI, correctly said, “Justice is not enough; we need restitution.

A day before that, a meeting was held between DPWH Secretary Vince Dizon and Insurance Commissioner Attorney Reynaldo Regalado for the signing of a data-sharing memorandum of agreement to fast-track government claims processes against insurance companies that issued surety bonds in favor of contractors involved in “ghost projects.”

As the press conferences and conversations spill over into the insurance context, the difference between insurance claims, as a form of indemnity, and restitution, as recovery due to a commission of a crime, has blurred and overlapped when, in fact, these two concepts — insurance claims and restitution — are different.

Restitution, as defined under Article 104 of the Revised Penal Code, is a remedy available after a crime has been established. It forms part of the civil liability of a person convicted of an offense, requiring the offender to return what was unlawfully taken or to repair the damage caused. It is, in essence, a correction of wrongdoing, and restitution cannot exist without a wrongdoer.

Insurance, including surety bonds, is a relationship that was not borne from a crime. It is based on an insurance contract, voluntarily entered into between the parties. The insurer promises to compensate the insured or beneficiary for specific losses in exchange for the payment of a premium. When an insurer pays a claim, it is not punishing anyone, nor is it correcting a moral wrong. It is fulfilling a contractual promise based on a valid, legal and binding insurance contract.

This is why an insurance claim is an act of indemnity, not restitution. Indemnity seeks to restore the insured or the beneficiary to the financial position they were in before the loss occurred. It repairs; it does not accuse. It compensates; it does not condemn.

In the case of the DPWH flood control projects, insurance payouts, if any, must be seen as private, contractual payments between insurer and insured or beneficiary. Unless fraud, deceit or other criminal conduct is proven, there is no “crime” to speak of. Thus, respectfully, an insurance claim cannot be categorized as “restitution” per se, because restitution presupposes a violation of law.

In simpler terms, insurance is a promise kept, not a punishment imposed. It belongs to the realm of contracts, not crimes. Justice demands restitution from wrongdoers; insurance provides indemnity to the wronged. To confuse the two would not only distort legal meaning but also undermine the essential purpose of insurance, which is to provide financial protection, not penal consequences.

It is from these definitions that insurance companies must properly approach the claims by issuing bonds covering the identified DPWH projects. Insurance companies are also victims in the conspiracy to defraud the government, and each claim must be reviewed carefully, yet with a sense of urgency, in order to properly indemnify the government.

Source: tribune.net.ph