On May 6 2016 the Joint Divisions of the Supreme Court published a long-awaited judgment (9140) on the issue of the validity and enforceability of claims-made clauses.
Principle of law
In line with its own previous judgments, the Supreme Court established the following principle of law:
"In a civil liability insurance contract, clauses which make the operation of insurance coverage subject to the condition that both the wrongful action and the claim occur and are made within the policy period, or at least within the specific period of time indicated in the contract... are not unfair. Under certain conditions, however, [such clauses] may be held null and void in the absence of interests worthy of protection or... in the case of consumers, because it determines a significant imbalance in the rights and obligations under the contract."
In the grounds of the judgment the court established the following additional principles of law, which appear to be reassuring for market players:
- Claims-made clauses do not contravene Article 2965 of the Civil Code, which provides that covenants that make it excessively difficult for a party to exercise the right under a contract are null and void.
- Violation of the Civil Code as regards good faith in the execution of a contract will not result in the nullity of contractual covenants (including claims-made clauses). Such a violation may give rise only to liability for damages.
- Claims-made insurance policies do not breach Article 1895 of the Civil Code (which provides for the nullity of insurance contracts covering risks that occur before the conclusion of a contract), since in the insurance of civil liability "the risk to the insured's assets... is realised gradually, because it is not confined only to the wrongful action... but the claim of the damaged third party is also needed". For this reason, a claims-made clause is lawful as it "does not prejudice the existence of the risk that [in consideration of a wrongful action] other elements occur which may affect the damaged third-party insured's assets".
- A claims-made clause is not unfair (under Article 1341 of the Civil Code) as it does not limit the liability of the insurer, but rather defines the insuring grant.
However, the drawbacks of the judgment may be identified in passages which, after acknowledging the duty of any professional to take out insurance covering his or her professional negligence (as a result of legislative measures passed from 2011 to 2014), state that "the judgment of suitability of the policy is unlikely to be positive in the presence of a claims-made clause, which, however articulated, exposes the insured to gaps in the coverage".
The decision adds that this aspect will be taken into account "in the preparation of the presidential decree to establish the minimum requirements of insurance coverage for healthcare professionals".
For further information on this topic please contact David Maria Marino at DLA Piper Italy by telephone (+39 02 80 61 81) or email (firstname.lastname@example.org). The DLA Piper website can be accessed at www.dlapiper.com.
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