Insurance contract law

Question 1

General issues of insurance contract law

Answer 1

1. Specific legal status and treatment by both private law and public law
2. Traditional distrustful attitude of the law towards insurance
3. Traditionally conceived as a law protective of the insurer

Question 2

Key characteristics of insurance contract law

Answer 2

1. Aleatory nature
2. Indemnity rule
3. Utmost good fait
4. Adhesion (standard) contract
5. The inversion of the production cycle

Question 3

Insurable interest

Answer 3

The interest (either pecuniary or moral) of the insured in the non-occurrence of the insured event that must be pre-existing to the conclusion of the insurance contract.

Question 4

Indemnity rule

Answer 4

The insured should never become better off because of the insurance contract. The insurance contract can cover the entire loss, but never more than the actual loss suffered by the insured. This rule does not apply to life insurance.

Question 5

Over- and under-insurance

Answer 5

Over-insurance is when the insured amount is higher than the insured value.

Question 6

Subrogation

Answer 6

The assumption by a third party (insurer) of another party’s legal right to collect a debt. An indemnity insurer may be entitled to be subrogated to the rights of insured as against a third party who is responsible for the damage to the insured.

Question 7

Multiple insurance

Answer 7

For indemnity insurance, a time-wise or proportional reduction must take place in case of good faith, and a nullification of the contracts in case of bad faith. Multiple insurance does not affect non-indemnity insurance.

Question 8

Obligation of good faith of both parties

Answer 8

For policyholder: to be open and correct, to take preventive measures, and to mitigate damage
For insurer: to inform , warn, and protect policyholders of possible misconduct

Question 9

Contract of adhesion

Answer 9

The insured has no say in the writing of an insurance contract

Question 10

Consequences of the inversion of the production cycle

Answer 10

• There is a need for statistics
• Insurers must behave like a trustee of the premiums => state supervision is needed
• Information asymmetry in favour of the insurer

Question 11

Vertical and horizontal legislation

Answer 11

Vertical: legislation that imposes rights and duties upon contracting parties
Horizontal: legislation that only prohibits certain clauses. (more deregulatory approach)

Question 12

Five degrees of mandatory force

Answer 12

1. Contractual level: no legislation
2. Suppletory level: the law is only applicable in the absence of derogating contractual agreement
3. Mandatory level: no derogation from the law is allowed
4. Social order: deals with more important matters
5. International mandatory level: applies even if another national law is applicable

Question 13

Ad validitatem

Answer 13

The written form is a requirement for the validity of the contract

Question 14

Ad probationem

Answer 14

The written form is only required as a legally imposed form of evidence

Question 15

Period of grace

Answer 15

The period during which the insurer is still bound to fulfil its obligations in case of non-payment of the premium

Question 16

Non-insurable risk

Answer 16

The risk that if the insurer had known of, he would not have covered

Question 17

Aggravation of risk

Answer 17

In case of non-life insurance, the insured must inform the insurer of an aggravation of risk and the insurer is allowed to react by either ending the contract or raising the premium.

Question 18

Insurer’s claim to damages

Answer 18

The claim by the insurer against the policyholder for late declaration, if the insurer can prove he suffered a loss because of it

Question 19

Claims of direct actions

Answer 19

A direct action is when the victim of an insured event can bring an action directly against the insurer and obtain compensation directly from the insurer.

Question 20

Res inter alios acta, aliis nec nocet nec prodest

Answer 20

A law doctrine which holds that a contract cannot adversely affect the rights of one who is not a party to the contract.

Question 21

Vnuk v. Zavarovalnica Triglav (2014) C-162/13

Answer 21

The concept of “use of vehicle” (as interpreted from Art 3(1) of the First Directive) covers any use of a vehicle that is consistent with the normal function of that vehicle, not restricted to road use

Question 22

Isabel Rodrigues de Andrade v. Jose Manuel Proenca Slavador (2017) C-514/16

Answer 22

The concept of “use of vehicles” does not cover a situation in which an agricultural tractor has been involved in an accident when its principal function, at the time of the accident, was not to transport but to generate, as a machine for carrying out work.

Question 23

Jose Torreiro v. AIG Europe Limited (2017) C-334/16

Answer 23

The first paragraph of Art 3 of Directive 2009/103/EC must be interpreted as precluding national legislation which makes it possible to exclude from compulsory insurance cover injuries and damage than result from the driving of motor vehicles on certain roads/terrain, irrespective of their characteristics.

Question 24

BTA’ AS v. BNA’ AS (2018) C-648/17

Answer 24

The concept of “use of vehicles” covers a situation such as the opening of the doors of a stationary vehicle, and a situation in which damage to the property of a third party is caused by the use of the vehicle by a passenger.

Question 25

Eschig v. UNIQA Sachversicherung AG (2009) C-199/08

Answer 25

Art 4(1) of Council Directive 87/344 must be interpreted as not permitting the legal expenses insurer to reserve the right, where a large number of insured persons suffer loss as a result of the same event, itself to select the legal representative of all the insured persons concerned.

Question 26

Stark v. D.A.S (2011) C-293/10

Answer 26

Art 4(1) must be interpreted as not precluding a national provision under which a person may select only legal representatives who have their chambers at the place of the court or administrative authority having jurisdiction at first instance, on condition that that restriction relates only to the extent of the cover by the insurer and that the reimbursement actually provided by that insurer is sufficient, this being a matter for the referring court to determine

Question 27

Sneller v. DAS (2013) C-442/12

Answer 27

Art 4(1) must be interpreted as precluding a legal expenses insurer from providing that the costs of legal assistance provided by a legal representative chosen freely by the insured person will be covered only if the insurer takes the view that the handling of the case must be subcontracted to an external lawyer. This ruling will not differ depending on whether or not legal assistance is compulsory under national law

Question 28

Differences that may influence cross-border insurance business

Answer 28

• “knowing your customer”
• understanding the true risk proposed for cover
• language, culture
• including expectations of the local policyholder
• the need for local claims handling
• the form and prevalence of frauds
• the tax and labour law environment
• the legal, regulatory, and supervisory environment
• cross-border redress options