Overview 2022 Supreme Court case law on the Insurance Act
The new year has made its entrance, but Lydian's Insurance team is taking one last look back at some interesting judgments made by the Supreme Court in 2022 on the Insurance Act of 2014 (Insurance Act).
1 CASS. 7 MARCH 2022 - RISK AGGRAVATION
Article 81, §1 Insurance Act (former Article 26, §1 Land Insurance Contracts Act) obliges the insured to notify the insurer of new circumstances or changes in circumstances, which are of a nature to cause a significant and permanent aggravation of the risk of the insured event occurring.
In a judgment of 7 March 2022, the Supreme Court ruled on a damage event relating to a fire in a property that was initially insured as a restaurant, but was repurposed as a swingers’ club during the term of the fire insurance contract.
The Supreme Court has confirmed the narrow interpretation of article 81, §1 Insurance Act: circumstances that may merely increase the consequences or the extent of a possible claim are not covered by the insured's duty of notification. Only new or changed circumstances that increase the likelihood of the realisation of the insured damage must be reported.
2 CASS. 18 MARCH 2022 - NULLITY FOR UNLAWFUL OBJECT
On 18 March 2022, the Supreme Court ruled on insurance contracts with an unlawful object.
The case concerned an insurance contract covering the risks inherent in renovation works. However, building renovation is a regulated activity and in the case before us, its access conditions were not met.
The Supreme Court ruled that an insurance contract covering the liability of an insured who engages in a regulated activity without complying with its conditions of entry only has an unlawful object to the extent that the cover is intended to maintain a situation contrary to public policy or to obtain an unlawful advantage. Such insurance contracts are null and void. Thus, the unlawful nature of the insured good or activity does not necessarily imply that the object of the insurance contract itself will be considered unlawful.
The Supreme Court decided that in the case at hand, the insurance contract did not seek to create or maintain a situation contrary to public policy or confer an unlawful advantage. The insurer was therefore ruled against on this point.
3 CASS. 28 APRIL 2022 - SUBROGATION BY THE INSURER
Article 95, first paragraph Insurance Act provides an insurer, that has provided coverage, with a subrogatory claim against the liable third party. The Supreme Court, in a judgment dated 28 April 2022, sharpened the definition of 'insured' and 'third party'.
The case concerned an omnium car insurance policy taken out by a company in which the company's manager was listed as the main driver. The manager drove into the façade of a house under the influence of alcohol, for which he was criminally convicted. The insurer granted cover to the company (being the policyholder) on the basis of the omnium car insurance policy and subsequently claimed reimbursement of the amount paid out from the manager.
Both at first instance and on appeal, the insurer was proved right, as the courts held that the manager was a liable third party within the meaning of article 95, first paragraph Insurance Act and not an insured. According to the courts, an insured within the meaning of article 95, first paragraph Insurance Act was the person to whom the insurer provided the insurance coverage in the specific case.
However, the Supreme Court held that the person who is the holder of an insurable interest is an insured and is covered against property damage when he is designated as an insured by the insurance contract. This insurable interest may be that the insured who does not own the insured property (in the present case, the manager) must return it to the policyholder (in the present case, the company).
The court then ruled that the property insurer subrogated to the rights of an insured cannot exercise recourse against another insured whose insurable interest is covered by the same insurance contract.
This Supreme Court judgment demonstrates the importance of proper risk analysis and accompanying premium budgeting, as an insurer will not necessarily be able to successfully lodge a subrogatory reimbursement claim against every apparent third party in case of a covered claim.
4 CASS. 29 APRIL 2022 - LIMITATION PERIOD FOR THE DIRECT CLAIM BY AN INJURED PARTY AGAINST THE INSURER
Pursuant to article 88, §2, first paragraph, Insurance Act, the claim arising from the injured party's own right against the insurer (pursuant to article 150 Insurance Act) is time-barred by the lapse of five years, to be counted from the event giving rise to the damage or, if there is a crime, from the day on which it was committed, and this subject to special legal provisions.
However, the second paragraph of this provision states that if the injured party proves that he did not learn of his right against the insurer until a later time, the time limit only starts to run from that time. In any event, the time limit expires after 10 years, counting from the event giving rise to the claim or, if there is a crime, from the day it was committed.
In a judgment dated 29 April 2022, the Supreme Court held that the knowledge by the injured party of his right against the insurer should be understood as the knowledge that a normally prudent and diligent person would have in the same circumstances, and not the knowledge he actually has.
5 CASS. NOV. 4, 2022 - LIMITATION PERIOD FOR THE DIRECT CLAIM BY AN INJURED PARTY AGAINST THE INSURER
On 4 November 2022, the court ruled once again on article 88, §2, first paragraph, Insurance Act
The facts are straightforward: a lawyer had made a mistake concerning the limitation period of a legal claim on behalf of his client, making it time-barred before it could be lodged. This compromised the lawyer's professional liability.
The question to be decided by the Supreme Court was when in such case the harmful event, within the meaning of article 88, §2 Insurance Act, had occurred.
The Supreme Court held that in the case of a direct claim by the injured party against his lawyer's liability insurer on account of a late claim filed by that lawyer, the harmful event is the time at which that claim has become time-barred.
6 CASS. 12 MAY 2022 - DAMAGE PREVENTION AND MITIGATION OBLIGATION FOR THE INSURED'S AUXILIARY
Article 75 Insurance Act imposes a duty of damage prevention and mitigation on the insured in every damage compensation insurance. This means that the insured must take all reasonable measures to prevent or mitigate the consequences of the insured event. Article 76 provides that the insurer who suffers a disadvantage due to a breach of the duty to prevent and mitigate damage can claim a reduction in benefits up to the amount of the disadvantage suffered or even refuse coverage if the failure to comply with the duty to prevent and mitigate damage occurred with fraudulent intent.
In a judgment of 12 May 2022, the Supreme Court ruled that this duty to prevent and mitigate is personal in nature and therefore does not apply to an insured's auxiliary, but only to the insured entitled to indemnity.
Under Belgian common law, the principal is liable for the mistakes of his auxiliary, even if the principal is not personally at fault. In insurance law, however, if an auxiliary does not mitigate the damage, the insurer may not attribute that to the principal-insured.
7 CASS. 18 MAY 2022 - APPLICATION OF AGGRESSIVE INTERVENTION CLAIM ON APPEAL TO INSURANCE ACT
In a judgment of 18 May 2022, the Supreme Court ruled on aggressive intervention claims brought for the first time on appeal, applied to insurance law. An aggressive intervention claim is an action in which a third party becomes part of the proceedings and which seeks to obtain a condemnation against that third party.
During the proceedings before the Liège Court of Appeal, the insurer of the civil liable party intervened voluntarily and conservatively. This intervention sought to safeguard the insurer's rights.
Following the intervention of the civilly liable party’s insurer, the third-party victim requested through their written pleadings that the insurer be condemned in solidum, as he was now a party to the appeal proceedings.
The Court of Appeal ruled that, to the extent that the third-party victim could not have filed an application for compulsory intervention against the insurer in the appeal proceedings, he also could not take advantage of the insurer's voluntary intervention to then bring a claim for condemnation against her.
The Supreme Court supported the Court of Appeal in this, clarifying in a judgment dated 18 May 2022 that the prohibition of article 812(2) of the Judicial Code cannot be circumvented by relying on article 143 Insurance Act. In other words, the insurer's obligation to assume the defence of its insured does not affect the application of article 812(2) of the Judicial Code.
8 CASS. 3 JUNE 2022 - POLICYHOLDER AS INJURED PARTY WITH DIRECT CLAIM AGAINST INSURER
Article 150, first paragraph Insurance Act , which applies to liability insurance policies, provides that the insurance gives an own right to the injured party against the insurer.
Article 55 Insurance Act defines the injured party as the person to whom damage has been caused for which the insured is liable.
In a concise judgment, the Supreme Court ruled that the fact that the policyholder, to whom damage has been caused for which the insured is liable, is a party to the insurance contract does not exclude his capacity as an injured party.
9 CASS. 24 JUNE 2022 - INTERRUPTION OF LIMITATION PERIOD
Article 89, third paragraph Insurance Act (former Article 35, third paragraph Land Insurance Contracts Act) provides that if the damage event is notified in time, the limitation period is interrupted as long as the insurer has not notified the other party of its decision in writing.
The Supreme Court, in a judgment dated 24 June 2022, held that when the party who made the declaration of the damage event cannot itself bring a claim for coverage, the interruption of the limitation period is only terminated by the insurer's notice to the party who can bring the claim for coverage.
10 CASS. 9 SEPTEMBER 2022 – INTERRUPTION OF PAYMENT TERM IN FIRE INSURANCES
1 In a judgment dated 9 September 2022, the Supreme Court ruled on article 121 Insurance Act which regulates the payment of damages in the context of fire insurances. According to that article, payment must be made within 30 days following the date of the conclusion of the expertise or, in the absence of such expertise, the date of the estimation of the amount of the damage. Moreover, the conclusion of the expertise or the estimation of the loss must take place within ninety days following the date of the declaration of the damage event. However, if the insurer notifies the insured in writing of reasons which, beyond its will and that of its agents, prevent the conclusion of the expertise or estimate of the loss, the above deadlines shall be suspended.
The Supreme Court ruled that a mere refusal of coverage by the insurer cannot be qualified as a reason that prevents the conclusion of the assessment or the estimation of the damage within the meaning of article 121 Insurance Act beyond its control.
2 Furthermore, article 121, §7 of the Insurance Act still provides for a penalty in case of exceeding the above-mentioned deadlines, which consists of an increased interest rate. The Supreme Court ruled that this sanction only applies when the late payment by the insurer is due to its fault or negligence, which is not the case when the insurer refused coverage in good faith, even if that refusal later turns out to have been unjustified.
11 CASS. 3 NOVEMBER 2022 - COVERAGE DENIAL DUE TO INTENT
Article 62, first paragraph Insurance Act provides that, notwithstanding any clause to the contrary, the insurer cannot be obliged to provide cover to the person who intentionally caused the damage event. Intentional fault requires the will to cause damage resulting from the realisation of a risk covered by the insurance contract. In such a case, the insurer may refuse cover both for damage arising from the realisation of the risk covered by the insurance contract and for damage that has a necessary link with it.
In a judgment of 11 January 2021, the Liège Court of Appeal ruled on the coverage obligation of an insurer covering the civil liability of an insured who had caused bodily harm to a third party by throwing stones. The Court of Appeal first held that, given the previously determined criminal qualification of unintentional blows and injuries, there could also be no intent to harm the physical integrity of others under insurance law. Such intent could therefore not, according to the Court, serve as the basis of intentional fault.
However, according to the Court of Appeal, throwing stones is also an act of intimidation, and the harmful consequences of such an act of intimidation are such as to give rise to the civil liability of its perpetrator. According to the Court of Appeal, therefore, the intentional fault of the perpetrator within the meaning of article 62, first paragraph Insurance Act, being the will of the perpetrator to cause damage that would normally be covered under civil liability insurance, was established. Consequently, the insurer's denial of coverage was justified, according to the Court of Appeal.
The perpetrator did not accept this view of the Court of Appeal. By ruling that the perpetrator intended to cause damages other than those for which the insurer's intervention was sought, the Court of Appeal, according to the perpetrator, denied him coverage for damages that were nevertheless established not to have been caused intentionally, since the facts had been classified by the criminal court as unintentional blows and injuries.
The contested judgment therefore decides de facto, according to the perpetrator, that the perpetrator had the intent to intimidate and that this conduct can give rise to liability under article 1382 of the old Civil Code, but the damage for which the victim claims compensation does not consist of the consequence of intimidation, but in the loss of an eye. Since the damage to the eye was not caused intentionally, it should be covered by the insurer.
The Supreme Court overruled the Court of Appeal in its judgment dated 3 November 2022. The Supreme Court held that the insurer cannot refuse coverage on the basis of the intentional fault when the damage resulting from the realisation of a risk covered by the insurance contract is different from the damage the insured intended to cause. Indeed, in that case, the damage does not have a necessary link with the intentional fault.
Although not entirely clear, the Supreme Court then seems to hold that the perpetrator’s intention in his act of intimidation was to cause fear to the victim and that he thus committed an intentional fault. The Supreme Court seems to further hold that the consequences thereof, namely the victim's loss of an eye, did not extend to damages that had a necessary link with the intimidation. Therefore, the Supreme Court's reasoning seems to be that the perpetrator only sought damages as a result of the act of intimidation, but not the loss of an eye. Thus, the insurer could not deny coverage for the damage to the eye merely because of the existence of the intentional act of intimidation.
12 CASS. 10 NOVEMBER 2022 – LEAD OF THE DISPUTE
Article 143, second paragraph Insurance Act provides that the insurer has the right, in respect of civil interests and to the extent that the interests of the insurer and the insured coincide, to fight the claim of the injured party in the place of the insured. He may compensate the latter if there are grounds to do so. The third paragraph of this article provides that such interventions by the insurer shall not imply any admission of liability on the part of the insured, nor shall they cause him any prejudice.
In the case at hand, a car insurance policy had been taken out in which Ms C.N. was declared the principal driver and her son, Mr J.S., the non-usual driver. Mr J.S. subsequently had an accident resulting in damages to third parties. The insurer compensated these damages to the injured parties and then sued Ms C.N. in the civil court, where the nullity of the insurance contract for intentional concealment or intentional misrepresentation of information about the risk (article 59 Insurance Act) and repayment of damages was sought.
According to Ms C.N., article 143 of the W.C. was violated as the insurer had paid damages without prior discussion of responsibility for the accident and as Mr J.S. disputed his responsibility for the accident.
The Liège Court of Appeal ruled that it was up to Ms C.N. to prove that the insurer's intervention vis-à-vis the injured parties was not justified, for which she had to prove that Mr J.S. was not liable to the compensated persons. According to the Court of Appeal, this evidence was not produced. The court held that there was no doubt that Mr J. S. would have been held liable for the damages resulting from the loss of control of the vehicle.
The Court of Appeal therefore ruled that the insurer had not caused any harm to Ms C.N. by compensating the injured parties for the damage suffered. According to Ms C.N., the Court of Appeal placed the burden of proof on her by doing so, which would violate the division of burden of proof in criminal cases.
The Supreme Court ruled that if the insurer has compensated persons harmed by a breach of criminal law on the basis of the above provisions and then takes the insured to civil court to obtain reimbursement of the compensation, the claim for reimbursement is based on the criminal breach.
Consequently, it is up to the insurer to prove (i) that the constitutive elements of the infringement are present and, (ii) if the defendant invokes a justification that applies prima facie, that this justification does not exist. According to the Supreme Court, the judgment on appeal did not violate the division of the burden of proof in criminal cases.
13 CASS 24 NOVEMBER 2022 – EXCLUSIONS IN INSURANCE POLICIES AGAINST NATURAL DISASTERS
The Supreme Court ruled on 24 November 2022 on the allowed exclusions in insurance policies against natural disasters.
In the underlying facts, the risks associated with fire and natural disasters of a school complex were covered by four insurers under a group insurance contract. In the general terms and conditions of that insurance contract. Under the heading 'natural disasters', an exclusion had been included for damage to garden sheds, sheds, storage sheds and their possible contents, fences and hedges of any kind, the gardens, plantings, entrances and courtyards, terraces, as well as luxury goods such as swimming pools, tennis and golf courts. This provision adopted the wording of Article 127, second paragraph, point c, Insurance Act verbatim.
The school complex also included a swimming pool. In 2016, the school complex, including the swimming pool, sustained significant damage resulting from heavy rain and gusts.
The insurers refused to provide cover for the damage to the swimming pool as, according to them, it was a luxury good that was excluded under the insurance contract.
According to the school complex, however, the pool in question was not a luxury asset as it was only used professionally and pedagogically in the context of mandatory swimming lessons. According to the school complex, the exclusion from the general terms and conditions of the insurance contract and Article 127, second paragraph, point c, Insurance Act for "luxury goods" should after all always be assessed according to the specific circumstances and not merely based on the nature of the good.
The Supreme Court held that the sole plea of the school complex, invoking the violation of Article 127, second paragraph, point c, Insurance Act, could not lead to cassation and was therefore without the necessary interest as that plea did not criticise the contested judgment for accepting the validity of a clause that would not be allowed under Article 127, second paragraph, point c, Insurance Act.
The Court therefore dismissed the appeal in cassation on a formal ground, rather than ruling on whether a swimming pool is always a luxury good within the meaning of Article 127, second paragraph, point c, Insurance Act for which a valid exclusion is possible.
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