The Belgian Constitutional Court confirms the application of the (short) three-year limitation period, as applicable in insurance law, for claims for annulment of Branch 23 life insurance policies.

In its judgment of 22 October 2020, the Belgian Constitutional Court ruled that the application of the three-year limitation period (which applies specifically to claims arising from insurance contracts) to claims for annulment of a Branch 23 life insurance policy, does not violate the principle of equality (Articles 10 and 11 of the Constitution). The preliminary question to the Constitutional Court was put by the French-speaking Brussels Commercial Court. 

According to the requesting party, the application of the short, three-year limitation period to claims for annulment of Branch 23 life insurance would discriminate against individuals who have invested in financial instruments and savings products which are also linked to investment funds, but which are subject to the common civil law limitation period of 10 or 5 years. 

Under common civil law, a claim for annulment lapses after 10 years (unless the period has been shortened by virtue of a special law) (Article 1304 of the Civil Code) and a claim based on pre-contractual liability lapses after 5 years (Article 2262bis, §1 of the Civil Code). 

On the basis of Article 88 of the Insurance Act, any legal claim arising from an insurance contract lapses after three years from the occurrence of the event giving rise to the right to claim or from the day on which the injured party became aware of that event, and in any event without exceeding a period of five years, except in the case of fraud. 

As the policyholder of a Branch 23 life insurance, in the context of the claim for annulment, often claims not to have been sufficiently informed of the nature and risks of the product at the time of the conclusion of the contract,, the ‘event giving rise to the right to claim’ dates back more than three years prior to the start of proceedings, resulting in the claim thus being time-barred when it is brought before a court against the insurer. 

In its judgment, the Constitutional Court considers that a policyholder of a Branch 23 life insurance contract on the one hand and an investor in a financial product on the other hand, are in two objectively different circumstances. Although, from an economic point of view, a Branch 23 life insurance contract is similar to the contract under which a private individual invests in a financial product, this does not alter the fact that a Branch 23 life insurance contract has the main characteristics of an insurance contract (designation of beneficiary, aleatory character, etc.). In addition, the introduction of the short limitation period for legal claims arising from insurance contracts was made with reasonable justification in order to avoid the risk of loss of evidence in the event of a claim and also in order to ensure the proper functioning of the insurance companies. The Court also explicitly ruled that the three-year limitation period does not entail a disproportionate limitation of the rights of the persons concerned. 

With this judgment, the Belgian Constitutional Court has settled an important and already frequently held discussion in the context of disputes relating to Branch 23 life insurance contracts. The Branch 23 life insurance contract, which is characterized by the lack of a capital guarantee and is linked to an underlying high-risk investment product, is often challenged by the policyholder on the basis of a claim for annulment for error or fraud, or on the basis of a breach of pre-contractual information obligations where the policyholder would not have been adequately informed of the nature and risks of the insurance contract. An important counterargument of the insurer in such cases is that the claim of the policyholder is already time-barred. 

This judgment of the Belgian Constitutional Court confirms the (correct) application of the courts with regard to the short limitation period of three years with regard to claims for annulment of a Branch 23 life insurance contract.