Ineffectiveness of clauses restricting access to co-insurance in personal insurance

Granada, 2020-03-10

Recently, the Spanish Supreme Court declared in its ruling dated 14 November 2019 the clause in a personal insurance policy that seeks to charge to the insured amount the premiums received by other co-insurers to be ineffective. Rather than being restrictive, the ineffectiveness of the clause had to be pronounced because it radically undermines the rights of the insured party.

The clause included in the individual policy regulates the insurance as a complement to another that has been taken out by the same insured party, so that, according to its literal wording, it would operate as a supplement to that premium paid under the other contract, up to the limit of the maximum guarantee contracted.

If it was damage insurance, the clause would be a provision for a concurrent insurances situation similar to that set out in article 32 Insurance Contracts Law (cumulative insurance, referred to, for example, in rulings 783/2000, 22 July; 1068/2002, 14 November; 1136/2004, 23 November; 1379/2008, 3 January 2009; and 205/2010, 8 April). The purpose of this provision is that damage insurance guarantees full compensation for the damage that the insured party has actually suffered, but without producing an undue benefit for the insured party and unfair damage for the insurer. For this reason, judgement 244/2005, of 14 April, in a case of civil liability insurance in which two insurance policies on the same risk coexisted, albeit under a subsidiary regime, declared that the clause establishing the relationship between the two insurances for the purposes of compensation was a delimitation of the risk.

The coexistence of insurance policies takes place in the field of personal insurance, where the provision of article 32 of the Insurance Contracts Law does not operate. In the following case, the policyholder had taken out two professional disability insurance policies – one individual and one collective – with the same company for the same risk (professional disability involving the definite loss of the pilot's license). This is a contractual option aimed at covering as much as possible in the event of an extremely serious contingency, such as the loss of professional activity (as would be the case, for example, if several life insurance policies were taken out for the same risk, the death of the insured). In personal insurance, the principle of effective compensation, typical of damage insurance, does not operate, so that the benefits insured in personal insurance policies can be accumulated among them without proportional distribution.

Since in personal insurance there is no legal provision similar to that of Article 32 of the Insurance Contracts Law, a contractual clause that prevents the insured party from receiving all the sums insured, establishing a system of compensation between the different policies, cannot be considered to delimit the risk, but rather the rights of the insured are only limited in relation to what is contained within the contract, which means that, in personal insurance, the insured party can demand full compliance with each individual contract.

Author: Luis Sánchez Pérez, Attorney at law

Medina Cuadros Abogados