In the case of insurer delay due to filing error, what remedy should be pursued?

• A. No penalties
• B. Interest only
• C. Interest and a 10% penalty
• D. A 10% penalty only

Answer: (C)

When an insurer delays payment because of its own filing error, the remedy includes both interest and a 10% penalty. The interest covers the time value of the money that was delayed, compensating for the period the payment remained unpaid. The 10% penalty adds a separate, punitive component intended to deter and compensate for the improper filing mistake. This combination specifically addresses the fault (the filing error) and ensures the insured is not left bearing the cost of the delay. Leading with only interest would not punish the improper filing, while a penalty alone wouldn’t compensate for the actual delay in funds. In practice, you apply the statutory interest on the overdue amount from when the payment should have been made, and add 10% of the amount due as the penalty.