Recent Cassation case law on the Insurance Act 2014: an overview

Every year, Lydian's Insurance team looks back at some interesting rulings from the Belgian Supreme Court (Court of Cassation) during the past year regarding the Insurance Act 2014 (“IA”). In 2023, the Court of Cassation ruled on several interesting insurance topics.

1.    Distinction between property insurance and liability insurance

On 24 January 2023, the Court of Cassation ruled on an alleged violation of section 141 IA which defines the term 'liability insurance'.

A leasing company and a transport company had entered into a rental agreement for a vehicle with an “omnium insurance' component. The agreement contained a “Own Damage Coverage” clause, that provided that the insurer would assume the risk of damage or loss of the leased vehicle and claim settlement in well-defined cases.

The contested appeal verdict of the Limburg Correctional Court, Tongeren division qualified the "omnium insurance" contract as liability insurance. 

The leasing company, however, argued that such qualification violates section 141 IA, given that comprehensive or self-insurance must qualify as property insurance and not liability insurance.

The Court of Cassation ruled that property insurance is a non-life insurance policy aimed at preserving a specific property in which the insured has an interest. It follows that self-insurance is property insurance and not liability insurance.

The appellate judges, according to the Court, had wrongly held that the "Own Damage Coverage" clause stipulated between the parties was liability insurance. 

The qualification as property insurance contract or liability insurance contract affects the legal provisions applicable to the relevant insurance contract.

 

2.    Forfeiture of right to insurance benefits and the injured party's own right

A Toyota brand van and BMW brand passenger car were involved in a road accident. The driver of the Toyota and a passenger of the BMW died as a result.

At the time of the accident, the BMW was driving with a copy of a test drive plate at the front and with a copy of a dealer plate at the rear. The BMW was owned by a garage owner who was insured by the applicant in Cassation under the relevant test drive plate.

The insurer of the Toyota van brought a claim for damages against the insurer of the BMW. Both the first judge and the appellate court granted this claim.

The insurer of the test drive plate of the Toyota van brought an appeal in Cassation against the contested judgment. It argued that the judgment under appeal erred in finding that affixing a copy of the test drive plate constituted an increase in risk that could not be imputed to the injured party. The insurer argued, on the other hand, that driving under said test drive plate qualified as a case of non-insurance that could be held against injured third parties.

For compulsory liability insurance, Article 151, § 1 IA stipulates that the exceptions, exemptions, nullity and loss of rights arising from the law or the contract cannot be invoked against the injured party, regardless of whether they occurred before or after the claim. However, annulment, cancellation, termination or suspension of the contract may be invoked against the injured party if they occurred before the occurrence of the damage.  Through this legal regime, the injured party enjoys great protection as the insurer will only be able to assert a limited number of defences against him.

Examples of such compulsory liability insurance include mandatory liability insurance for vehicles, professional liability insurance for architects and fire liability insurance for publicly accessible establishments.

The defences that can be raised against the injured party in the case of compulsory liability insurance can be divided into two groups. These are, first, defences relating to the absence of insurance. Secondly, the insurer can raise defences derived from the absence or inadequacy of coverage.

As mentioned above, it was held on appeal that the use of a copy of a test drive plate is an increase in risk that is not opposable to injured third parties. Indeed, the number of insured vehicles cannot be known if copies are used for multiple vehicles.

The insurer of the Toyota van, on the other hand, believed that this situation qualified as a case of non-insurance, which can be held against injured third parties. This interpretation would therefore grant less protection to injured third parties.

In its judgment of 9 February 2023, the Court held that this question concerned an interpretation of Common Provisions of the Benelux Agreement of 24 May 1966 and it was thus compelled to refer this question to the Benelux Court for a preliminary ruling in order to avoid divergent jurisprudence.

The Advocate General at the Court of Cassation already stated in his conclusions that he was in agreement with the contested judgment and that the situation did not qualify as a defense that could be held against the injured parties. The Advocate General argued that the legislator's intention was to protect injured third parties as efficiently as possible.

Although there is no final judgment in these proceedings yet given the pending Benelux Court ruling, this judgment is interesting for several reasons. For one, this judgment shows that disputes and ambiguities remain with regard to whether or not defenses are opposable to injured parties. In addition, it is very important to remember that in the case of non-insurance, insurance simply does not exist and the insurer cannot be obliged to provide coverage. Therefore, the burden of proving the existence of insurance lies with the injured party.

 

3.    Time of notification requirement by liability insurer seeking redress

The insurer must notify the policyholder/insured of its intention to seek redress as soon as it becomes aware of the facts on which its decision is based (Art. 152(2) IA). 

In a judgment of 17 March 2023, the Court of Cassation clarified that this duty of notification on the part of the insurer arises at the moment it learns of the precise circumstances of the accident on the basis of which it can judge whether the insured caused the damage and whether there are grounds to seek redress. 

On appeal, it was held that the insurance company, which learned the identity of the principal driver of the vehicle on 27 September 2017 and did not send the notice until 3.5 months later, gave timely notice of its intention to seek redress.

The Court of Cassation had to rule on the appeal courts' assessment of the timeliness of said and found that the time required for administrative processing in an insurance company had to be taken into account, and that the the interests of the policyholder were not violated by a notification 3.5 months later. 

Accordingly, the appeal in cassation was dismissed.

 

4.    Qualification of a "claim" under a liability insurance policy

The insured must report the claim to the insurer as soon as possible and, in any case, within the period stipulated in the policy (Article 74, § 1 IA). 

In its judgment of 21 April 2023, the Supreme Court provided details on its qualification of said 'claim' by stating that it requires that the insured knows or should know that he can be held liable for damage he causes to the injured party. Consequently, it does not require that the insured has already been sued by the injured party. In this way, some degree of proactivity is expected from the insured.

 

5.    Right of recourse for the liability insurer

In this case, the defendant caused an accident on 20 January 2016 by deviating from the roadway and colliding with a storefront. The claimant, the defendant's insurer, informed the defendant in writing on 11 February 2016 of its intention to pursue redress because of alcohol consumption behind the wheel. 

The main legal question at hand related to is when the insurer must give a valid notice of intention to recover.

The insurer must notify the insured of its intention to seek redress as soon as it becomes aware of the facts on which that decision is based (art.152(2) IA). The notification must not only be timely, but also clearly indicate the ground for recourse. The court held that the notice must be given as soon as the insurer knows the precise circumstances of the accident.

The appellate court declared the right of recourse void because the notification was premature: at the time of the notification, the insurer did not have the facts on the basis of which it intended to exercise recourse. The appellate court found that the notice was given by the insurer using a standard letter with a classic and general justification, without showing that it had at that time become aware of the concrete facts that could support its intention to seek redress.

The insurer disputed the need to state specific facts in the notice and argued that the appellate court was wrong to impose requirements on the content and timing of the notice.

The Court of Cassation, in its judgment of 5 May 2023, held that it follows from article 152(2) IA that the insurer must notify the policyholder and the insured of the ground on which it intends to seek redress. Accordingly, the Supreme Court held that, in view of the findings of fact in the judgment under appeal, the appellate court was right to hold that the insurer's notification did not satisfy the requirements of section 152(2) IA.

This ruling highlights the importance of a properly substantiated notification with reference to concrete details rather than a general reference to a possible ground of recourse. If such precise definition of the ground of recourse is not possible for the time being, the insurer should wait until it has all the necessary information before issuing a notice within the meaning of article 152(2) of the Insurance Act.

 

6.    Liability insurance, intervention in court proceedings - Appeal by intervening party (criminal proceedings)

The facts underlying the Supreme Court judgment of 23 May 2023 relate to a road traffic accident. The claimant was the insurer of an insured summoned before the police court following an accident on 10 September 2019.

At the hearing on 26 October 2020, the insurer was granted record of its voluntary intervention and in the minutes of the hearing on 29 March 2021, at which the case was taken under advisement, the claimant was listed as a voluntary intervener.

The judgment of the police court ordered the claimant's insured to compensate the first defendant's damages. According to that judgment, the insurer did not make any claim and no claim was made against the insurer.

The claimant then filed an appeal against the police court's judgment as a voluntary intervener. The plaintiff's grievance form stated that the grievances relate to the civil action and that, according to the plaintiff, it was not the insured part that was at fault but rather the defendant.

However, the appellate court ruled that the claimant had no interest in appealing this judgment because it had not filed a claim at first instance and there was no pending litigation between the plaintiff and the other parties at first instance since no claim was filed against the plaintiff and no claim was filed.

The question that the Court of Cassation had to answer on 23 May 2023 was whether the plaintiff had the necessary interest to file an appeal against the police court's judgment, even though the plaintiff had not filed a claim and no claim was made against them.

The liability insurer may voluntarily intervene in proceedings brought by the injured party against the insured (art. 153, § 2, subsection 1 IA). This also applies when the lawsuit is brought against the insured before the criminal court (art. 153, § 5 IA).

The Court of Cassation held that the liability insurer can appeal against a decision prejudicial to its interest.

Such an interest is present when the appeal is directed against the order by the first court of the insurer's insured to compensate the injured party for its loss. It is not required here that the injured party has filed a claim against the insurer, nor that the insurer has taken a claim.

The appeal in cassation was therefore well-founded.

 

7.    Interruption of the limitation period

The claim arising from the injured party's own right against the insurer lapses after five years, counting from the harmful event or, if there is a crime, from the day it was committed and this subject to special legal provisions (art. 88, § 2, subsection 1 IA).

This limitation period is interrupted as soon as the insurer becomes aware of the injured party's will to obtain compensation for the damage he has suffered (art. 89 §5 IA). The court stated that the legislative history shows that the interruption ends when the insurer notifies the injured party in writing of its decision to provide or refuse coverage.

In its judgment of 21 May 2023, the Court of Cassation ruled that the insurer's notification of its decision to indemnify or refuse coverage, in order for it to put an end to the interruption, must be clear and unambiguous. From that notification, the injured party must be able to reasonably infer that the insurer has definitively put an end to the negotiations with that notification.

 

8.    Subrogation and interruption of the limitation period

The injured party's sickness and accident insurer brought a subrogatory claim against the insurers of the liable parties on the basis of Article 136 §2, paragraph 4 of the Act on compulsory insurance for medical care and benefits coordinated on 14 July 1994. The latter argued that the claim was already time-barred.

The health insurer argued that the injured party's direct claim had been interrupted by the earlier proceedings and then interrupted again under section 35(4) of the Land Insurance Contracts Act 1992 (LICA), namely from the time it informed the insurers of its desire to obtain compensation until their refusal decision.

On appeal, the foregoing reasoning was rejected because the subrogated itself is not an aggrieved party within the meaning of the LICA and because the aggrieved party had never brought the direct action against the insurers as provided for in section 86 LICA. 

However, the Court of Cassation, in its ruling of 22 September 2023, held that it follows from Article 35(4) LICA that when the insurer is notified of the subrogee's desire for compensation, the limitation period of the subrogee's claim against the insurer is interrupted until the insurer notifies it in writing of its decision or refusal to provide coverage.

 

9.    Coverage over time in liability insurance

According to Article 141 IA, Article 142 IA applies to insurance contracts that aim to provide the insured with cover against all claims for compensation for the occurrence of the damage described in the policy, and to safeguard his assets within the limits of the cover against all debts arising from an established liability.

The insurance guarantee covers damage occurring during the term of the contract and extends to claims brought after the end of the contract (art. 142(1) IA).

The injured parties' dog had bitten the neighbors, for which the neighbors claimed compensation. The injured parties wrote to their insurer but it refused coverage. Apparently, the insurance broker had not taken out insurance for them despite their explicit request for it. The broker was therefore found liable and the direct claim against his professional liability insurer was upheld in the judgment under appeal.

The latter lodged an appeal in cassation because it believed that the contested judgment had misconstrued the concept of "damage" within the meaning of section 142 IA. The insurer argued that the moment of loss should not the time of the denial of coverage, but rather the time of the broker's mistake (which occurred before the policy was taken out).

In its judgment of 29 September 2023, the Court of Cassation rejected the claim and ruled that it follows from sections 141 and 142 IA that the damage within the meaning of section 142 IA is the damage stipulated in the contract and caused to the injured party by the fault of the insured.