According to Article 9 of the Insurance Contract Act, an insurance contract is void if, when the contract was concluded, the peril insured against had already ceased or the insured event had already occurred. In the context of daily benefits insurance for illness, an exception to this rule exists for people who qualify as unemployed under the Unemployment Insurance Act, as these individuals may have transferred from group daily benefits insurance to individual daily benefits insurance following termination of employment.
Most Swiss insurance companies have entered into the Freedom of Movement Agreement (January 1 2006) concerning daily benefits insurance. The purpose of this agreement is to regulate the transfer of individuals from one participating group daily benefits insurance company to another, as well as the transfer of a pool of insured individuals between those companies. According to Article 4 of the agreement, ongoing claims which began under the previous daily benefits insurance are converted to the new insurance with the same conditions as the previous insurance contract. The sickness payments claimed under the previous insurance contract count towards the new insurance. On September 27 2016 the Federal Supreme Court (4A_327/2016) considered whether the regulation breaches the prohibition of retroactive coverage according to Article 9 of the Insurance Contract Act.
Between July 1 2012 and February 2014 the claimant (A) was employed as a senior project manager by his former employer (D AG). During this employment, he was insured by the group daily benefits insurance with C Insurance. On November 26 2013 A terminated his employment with D AG from February 28 2014. Between December 12 2013 and February 28 2014 A was unable to work due to his asthma.
On March 1 2014 A began work as a project manager for his new employer (E GmbH). Under his new employment, he was insured by the defendant's (B AG) group daily benefits insurance. Starting on March 14 2014 A was unable to work again due to his asthma. His employment with E GmbH was terminated as of July 31 2014. A then claimed for sickness payments under his daily benefits insurance from B AG, which declined the claims payment based on Article 9 of the Insurance Contract Act. Thus, A claimed the payments from B before the Federal Supreme Court.
The Federal Supreme Court clarified that this case did not fall under the exception of Article 9 because A did not qualify as unemployed and because the exception concerned the transfer to the individual daily benefits insurance only and not to another group daily benefits insurance. Thus, A could not base his claim on this exception.
Concerning the Freedom of Movement Agreement, the Federal Supreme Court noted that it was concluded between the insurance companies only and was thus not directly bound by Article 9 since the Insurance Contract Act only regulates insurance contracts between the insurer and the policyholder or the insured, respectively. However, the agreement may indirectly affect these contracts and be bound by the act in these areas.
With regard to the qualification of the agreement, the court did not have to make a decision on whether the agreement qualified as a true contract in favour of third parties or whether the agreement's regulations automatically became part of the daily benefits insurance contract. This was discussed in the doctrine but has yet to be answered by the courts. In this case, the court left the question open, as the general policy conditions of the insurance contract included a specific regulation stating that the insurance did not cover any pre-existing conditions unless continuation of insurance coverage was required under the Freedom of Movement Agreement. Thus, the agreement had become a part of the insurance contract and the court had only to decide whether the agreement included any regulations that breached the prohibition of retroactive coverage according to Article 9 and would thus not be directly included in an insurance contract between the insurer and the insured.
In order to answer this, the court considered whether the purpose of Article 9 is to prohibit such coordination between insurers. The court held that this case was not a transfer of the insurance contract from the old to the new insurance company as A had asserted, but rather an agreement on the follow-up liability (ie, the coverage for ongoing claims after the termination of the insurance contract). According to a previous Federal Supreme Court decision, there is no argument against an agreement where the insurer is liable for ongoing claims after the termination of its own insurance contract. The same is the case under Article 4 of the Freedom of Movement Agreement, with the difference that the new insurer agrees to be liable for these claims instead of the previous insurer. The new insurance may also limit its liability to the terms and duration of the previous insurance contract. According to the court, this agreement does not violate Article 9 and thus A had a claim against B for sickness payments under the group daily benefits insurance.
The Federal Supreme Court ruled that the regulation in the Freedom of Movement Agreement concerning the liability of new daily benefits insurance for ongoing claims that started before the conclusion of an insurance contract under the previous insurance contract does not breach the prohibition of retroactive coverage according to Article 9 of the Insurance Contract Act. Unfortunately, the court had no need to decide on the qualification of the agreement, as the standard policy conditions of the insurance contract in this case explicitly referenced the agreement. The qualification of the agreement therefore remains an open question.
For further information on this topic please contact Markus Dörig or Alexandra Bösch at BADERTSCHER Rechtsanwälte AG by telephone (+41 44 266 20 66) or email ([email protected] or [email protected]). The BADERTSCHER Rechtsanwälte AG website can be accessed at www.b-legal.ch.