House committee hears competing views on bill to ease bad-faith suits, set 33% attorney fee

San Juan — The House of Representatives Committee on Banking, Insurance and Commerce heard testimony June 11 on Proyecto de la Cámara 363, a bill to amend articles 27.164 and 27.165 of Puerto Rico's Insurance Code to (1) eliminate a mandatory prior notification to the Office of the Commissioner of Insurance before an insured can file a bad-faith or unfair-practices suit, (2) clarify that the statutory cause of action can be brought concurrently with other remedies, and (3) fix attorney fees at 33 percent of the recovery in favor of a prevailing insured.

Supporters said the bill would speed access to courts and strengthen remedies for homeowners and condominium associations that they say still suffer long delays after Hurricane Maria; opponents warned it would encourage meritless litigation, raise insurance costs and could be improperly retroactive.

The committee hearing combined legal and technical testimony. "La notificación requerida ante el comisionado ... resultó en un requisito formalismo que no tuvo ninguna consecuencia sobre el comportamiento de las aseguradoras," said Ignacio Veloz, president of the Federación de Condominios y Control de Acceso, summarizing condo owners' complaints that notifications produced no remedial action. Veloz told the committee that many condominium claims remained in court years after the 2017 storms and that some insureds accepted minimal payments out of desperation.

The Department of Justice and the Colegio de Abogados y Abogadas de Puerto Rico's Río Piedras delegation said they generally favor removing the prior-notification step but urged careful technical fixes. "No tenemos objeción a la enmienda propuesta," said Perla Iris Rivera Guardiola, attorney for the Department of Justice, while noting the Office of the Commissioner of Insurance (OCS) should be given procedural clarity and that the project lacks a specific replacement administrative procedure.

Office of the Commissioner of Insurance Alexander Adam Vega told the committee his agency's experience since the 2018 law has shown the 60-day notice-and-cure period rarely produced remediation: "La experiencia es que ha resultado un ejercicio ffatil," he said, adding that the action at issue is judicial in nature and should follow ordinary court procedures. Vega also recommended allowing plaintiffs to assert both statutory and contractual claims in the same lawsuit (a model used in Texas), arguing that judicial forums are the proper place to adjudicate damages that an administrative office cannot award.

Insurers and MAPFRE said elimination of the notice requirement plus a mandatory 33 percent fee would have major costs and unintended consequences. "La imposicif3n de un por ciento fijo de 33 por 100 ... socavan principios fundamentales," said Iraelia Pernas, executive director of the Association of Insurance Companies, citing industry data and arguing the bill mirrors earlier Florida language that led to large litigation increases and market stress. Pernas referenced an OCS note, cited in testimony, stating that 99.7 percent of Maria-related claims have been resolved (OCS data cited as of Aug. 3, 2024) and warned that retroactive application and an automatic fee could be shifted into higher premiums or reduced market capacity.

MAPFRE's representative, Wilda M. Zurillo Pef1a, told the committee the bill contains retroactive language that could affect already-resolved or adjudicated claims and warned it could "premiar" insureds who rejected pretrial settlement offers. Zurillo gave examples from litigation where initial claims were reduced significantly through the judicial process and said a mandatory automatic fee would create perverse incentives.

The Colegio de Abogados's José Javier Lamas Rivera said the college supports removing the prior-notification barrier because it lengthens delay (in practice often turning into 120 days or more when combined with court scheduling) but opposes allowing double recovery for a single harm. The college also said it generally supports the 33 percent contingency benchmark but asked for clarifying language to avoid conflicts with statutes that limit contingency fees for minors and incapacitated clients.

Several witnesses recommended alternatives to outright elimination of administrative steps. Industry witnesses and condominium representatives both suggested a compulsory pre-filing "reconsideration" or mandatory informal reconsideration with the insurer (distinct from voluntary mediation) that would require the insurer to review the claim and respond within a set deadline before a court filing. Insurers argued that forcing such a step as a jurisdictional condition would be preferable to an open-ended removal of OCS involvement.

No formal vote was taken at the hearing. Committee members took testimony and questioned witnesses on technical details, including the practical effects of retroactivity, examples of over- or underpayment in past cases, and statistical counts of notifications and complaints received by the OCS.

What happened next: The committee recessed and then resumed testimony from additional stakeholders; no final action or vote on Proyecto de la Cámara 363 was recorded at the June 11 hearing.

Sources: Committee hearing record June 11, 2025; testimony by Perla Iris Rivera Guardiola (Department of Justice), Alexander Adam Vega (Commissioner of Insurance), Ignacio Veloz (Federacif3n de Condominios y Control de Acceso), Iraelia Pernas (Association of Insurance Companies), Jose9 Javier Lamas Rivera (Colegio de Abogados, Redo Piedras delegation), Wilda M. Zurillo Pef1a (MAPFRE).