Preliminary and jurisdictional considerations in insurance litigation
In what fora are insurance disputes litigated?
In France, insurance disputes are litigated in the following fora:
- first instance civil courts;
- first instance commercial courts;
- courts of appeal; and
- the French Supreme Court (the Court of Cassation).
Several factors are considered to identify which of the above fora has jurisdiction at first instance; namely, the identity of the parties (are the parties deemed to be commercial or civil entities?) and the amounts at stake (is the claim below or over €10,000?).
If all the parties involved are deemed to be commercial entities, the dispute must be brought before the commercial court that has territorial jurisdiction, regardless of the amount of the claim. It should be borne in mind, however, that commercial entities can choose to bring their disputes before another commercial court or indeed a civil court, provided they entered into a valid choice-of-jurisdiction clause.
If all the parties involved are deemed to be civil entities, the dispute must be brought before the appropriate civil court, which will depend on the amounts at stake: if the claim is for less than €10,000, the dispute must be heard by the county court (Tribunal d’instance), whereas if the claim is for more than €10,000, it must be brought before the High Court (Tribunal de grande instance).
If some of the parties to the dispute are deemed to be civil entities and others are deemed to be commercial entities, the rules are as follows:
- if the proceedings are initiated by the civil entity, it can either elect to bring its claim before the appropriate civil courts or the appropriate commercial courts;
- if, however, the proceedings are initiated by the commercial entity, it has no choice but to bring its claim before the appropriate civil court (and possible choice-of-jurisdiction clauses providing that disputes should be brought before commercial courts are without effect as they cannot be raised against civil entities).
Regarding the above, the following criteria should be borne in mind regarding the identity of the parties: natural persons and consumers are deemed to be civil entities; businesses and insurers are usually deemed to be commercial entities; and mutual insurance companies are deemed to be civil entities.
In all the instances described above, parties are obligated to attempt to solve their disputes amicably before they may initiate proceedings.
Alternative dispute resolution - including, but not limited to, arbitration - is an option, but only in certain circumstances (arbitration clauses, for instance, cannot be invoked against consumers).
Once a first instance decision has been rendered, the parties may initiate appellate proceedings, if they so wish, which does not require obtaining prior permission. The distinction between commercial and civil that exists at first instance disappears at the appellate level, as courts of appeal hear commercial and civil cases alike. A final appeal is then possible before the Court of Cassation, but only on points of law and provided this final appeal meets the Court of Cassation’s admissibility criteria.
Causes of action
When do insurance-related causes of action accrue?
After a loss, the insured has a two-year time limitation period during which it can seek an indemnification from its insurer, in accordance with the terms of the policy at issue (the time limitation period, however, only starts to run from the moment the insured becomes aware of the loss).
If the indemnification of the loss gives rise to a dispute as to coverage and no amicable solution is found, the insured must initiate proceedings for specific performance against its insurer within the two-year time limitation period described above. It should, however, be noted that this time limitation period may be interrupted by the insured (by sending notice to the insurer via registered mail) and that it can only be successfully invoked by the insurer provided the policy at issue reproduces the sections of the French Insurance Code that governs the applicable time limitation and further indicates how the insured may interrupt it.
French insurance law also allows third-party victims to bring a direct action against the liability insurer of the liable party. In practice, therefore, third-party victims tend to simultaneously initiate proceedings against both the alleged liable party and its liability insurer, thereby creating a procedural situation where the liabilities of the insured and its liability insurer are ruled upon in the final judgment. The two-year time limitation period that applies to coverage disputes does not, however, apply to direct actions by third parties against insurers, in which case the applicable time limitation will depend upon the specific rights of the third-party claimant (by way of illustration, actions based in tort or contract law are time-barred after five years, and the applicable time limitation is of 10 years if the third party suffered bodily injury, although it only starts to run from the date its condition is deemed to have stabilised).
What preliminary procedural and strategic considerations should be evaluated in insurance litigation?
In a possible coverage dispute, two particular issues should be considered as a matter of priority, namely:
- Can the insurer produce a copy of the policy signed by the insured (or can it otherwise prove that the insured was made aware of the full contents of the policy)?
- Can the insurer rely on the questionnaire that was completed by the insured upon subscription?
As confirmed by unvarying case law, an insurer can only invoke specific clauses of the policy (such as exclusion clauses or coverage conditions) against the insured if it can prove that the insured was made aware of the full contents of the policy. If this is not the case, the insurer will not be in a position to successfully raise these clauses to the detriment of the insured however valid the said clauses might otherwise be. In practice, the most common method of proving that the insured was made aware of the full contents of the policy is to produce a copy of the policy that has been signed and initialled by the insured. Alternatively, if the insurer does not have this at its disposal, it would be free to use another method, provided it shows that the insured was made aware of the full text of the policy.
Since 1989, French insurance law has abandoned the spontaneous declarations regime, in favour of that of the insurance questionnaire. Since then, during the subscription phase, the prospective insured has no longer been under an overriding duty to make spontaneous declarations as to the insurable risk, and merely has to respond to the questions found in the insurance questionnaire submitted by the insurer (mainly on the understanding that the insurer is best placed to identify the issues that are key when accepting or pricing the risk). In practice, this questionnaire potentially has far-reaching consequences, because it is solely on its basis that the insurer can deny or reduce coverage as a result of intentional or unintentional false declarations the insured may have made at subscription. It is, therefore, paramount that the insurer verifies that it possesses a copy of the questionnaire that has been completed and signed by the insured. It is, moreover, very important that the insurer then verifies that all the questions are sufficiently clear and precise, as unclear or generic questions are systematically set aside by French courts and may not be relied upon by the insurer.
If the insurer is contemplating bringing a subrogation claim against the liable third party, it must be particularly attentive to the gathering and preservation of evidence in the hours or days following the loss so as to safeguard its interests. In such instances, interim relief and urgent fact-gathering investigations can be sought and obtained quite rapidly by way of an interlocutory decision obtained from the court that has territorial jurisdiction.
What remedies or damages may apply?
In the instance of a coverage dispute, the insured would be seeking a judgment condemning the insurer to pay the indemnity owed under the policy (ie, specific performance). As French insurance law is, inter alia, built on the ‘indemnification principle’ (ie, the principle according to which insurance contracts must only provide indemnification for the loss suffered by the insured and not exceed this threshold), the specific performance sought by the insured is not susceptible to lead to a situation where it has been enriched, as a result of the loss and its indemnification under the policy.
While the insurer would not seek a remedy or damages from the insured, it could invoke applicable terms of the policy to try to limit its liability. The relevant clauses, which would have to be valid, could, for instance, set out a maximum coverage amount or a deductible, exclude certain types of risk or subordinate the effects of the policy to specific conditions (such as yearly technical maintenance operations or the presence of an alarm system connected to a remote surveillance service provider). If the insurer can prove that, upon subscription, the insured failed to provide truthful information regarding the risk, it can either invoke unintentional false declaration or intentional false declaration of the risk, as the case may be. Unintentional false declaration can lead to a proportional reduction of the indemnity owed (based on the premiums the insurer would have requested, had it been given a reliable description of the risk), while intentional false declaration leads to the policy being avoided - and the insurer keeping the premiums paid to date, which therefore become akin to damages.
Naturally, in the instance of a subrogation claim, the insurer may be awarded the damages the liable third party would otherwise have been condemned to paying to the insured (damages awarded to the insurer being capped at the amount of the indemnity it paid to the insured).
Under what circumstances can extracontractual or punitive damages be awarded?
It follows from the indemnification principle (see question 4) that insureds cannot be awarded damages that go beyond the indemnity that is provided in the policy, as this could lead to the insureds being richer than in the event the loss had never occurred. Specific performance of the policy therefore remains the main avenue available for the insureds.
Extracontractual or punitive damages are not, therefore, usually envisaged. While isolated judgments do, upon occasion, award damages that go beyond the indemnity provided in the policy, on the grounds of the insurer’s contractual liability, this is rare and case law does not really enable one to extrapolate clear rules or criteria. Moreover, in instances where the insurer is usually judged to have acted in bad faith in attempting to avoid the policy, the damages are not, strictly speaking, punitive, in that they only aim to put the insured in the position it would have been in had the insurer respected its contractual obligations. In other words, the damages are not awarded to punish the insurer, nor can they lead to the insured being richer than in the event the loss and the insurer’s ensuing behaviour had not occurred: the extracontractual damages only aim to provide the insured with compensation for the prejudice it has effectively suffered.
Interpretation of insurance contracts
What rules govern interpretation of insurance policies?
The fundamental principle is, of course, respecting the will of the contracting parties. Therefore, if the policy is clear, it should not be interpreted by the courts, but merely applied (enforced). Judgments that interpret clear and unambiguous policies are consequently at very high risk of being overturned upon appeal.
If the policy is ambiguous and requires interpretation, parties and the courts can turn to the interpretation guidelines provided in the Civil Code (though it should be borne in mind that these are but guidelines and French courts are under no obligation to apply them). These rules are as follows:
- if the parties’ common intentions cannot be deduced from the terms of the contract, the terms at issue must be given the meaning and effects a ‘reasonable person’ would give them;
- contracts are to be interpreted in their entirety, and clauses are not to be read independently from one another;
- similarly, contracts that concern the same operation should not be interpreted independently from one another, but together; and
- specific provisions prevail over general provisions.
The above guidelines could be taken into account by parties and French courts when interpreting a policy. There are, however, additional rules that are specific to the way an ambiguous policy would be interpreted (see question 7).
When is an insurance policy provision ambiguous and how are such ambiguities resolved?
French insurance law tends to have a pro-consumer and therefore a pro-insured slant. Ambiguous policy provisions are therefore often interpreted (or indeed set aside) in the way that is most favourable to the insured.
First, if the insured is a consumer, ambiguities must be interpreted in its favour by application of the relevant sections of the French Consumer Code.
Second, when the contract is non-negotiable and entered into by accepting standard terms proposed by the service provider (as would be the case for virtually all insurance policies entered into by consumers), ambiguities are interpreted in the way that is least favourable to the offeror (ie, the insurer).
Third, certain clauses that are specific and key to insurance policies, such as exclusion clauses, must be drafted in such a way as to be readily understandable by the insured upon first inspection (to avoid any doubt as to what is covered and, conversely, what is excluded from coverage), pursuant to the relevant sections of the French Insurance Code. Exclusion clauses that require interpretation are automatically set aside, as they are held not to be readily understandable, in violation of the imperative rules set out in the French Insurance Code.
Notice to insurance companies
Provision of notice
What are the mechanics of providing notice?
The mechanics of providing notice to the insurer after the occurrence of a loss are fairly free. Indeed, although the insured is under a legal obligation to notify its insurer of losses that are susceptible to give rise to an indemnity and to do so ‘as soon as it is aware of their occurrence and, in any case, within the timeframe provided in the policy’, French insurance law does not impose particular means of providing notice. The insured is therefore free to give notice via standard mail, email or over the phone (though this is obviously unadvisable, as it is sure to give rise to issues of proof of notice). Moreover, notice can be given by the insured’s agent as well as to the insurer’s agent.
Notice should, however, only be given (i) from the date the insured is aware of the loss and (ii) provided the loss is susceptible to give rise to an indemnity under the policy at issue.
What are a policyholder’s notice obligations for a claims-made policy?
Claims-made policies do not impose specific notice obligations on the insured that would go above and beyond the standard notice obligations (see questions 8, 10 and 11) or that would replace them. Therefore, in a claims-made policy, the insured’s notice obligation is that described in question 8.
As is the case in other jurisdictions, French insurance law provides that under a claims-made policy the insurer only owes its coverage if, upon subscription, the insured was not already aware of the circumstances that later gave rise to the claim at issue.
In claims-made policies, however, insurers and insureds can agree in the terms of the policy itself that during the life of the policy the insured will be under an obligation to notify the insurer of any and all factual circumstances that do not constitute a loss but are reasonably likely to give rise to a claim and, therefore, a loss, at a later date. If such a factual declaration is made during the life of the policy, and the underlying factual circumstances later give rise to a claim, then the date that is used to attach the loss to a given coverage period will be the date of the factual declaration rather than the date of the claim. This contractual mechanism is often found in claims-made policies as it offers advantages for both the insured and the insurer (ie, more transparency from the insurer’s point of view, and more certainty as to coverage from the insured’s point of view).
When is notice untimely?
As indicated above, the insured must provide notice as soon as it is aware of the loss’s occurrence and, in any case, within the time frame provided in the policy (this rule applies to all but a few instances, such as hail damage or burglary, where it is French insurance law, rather than individual policies, that dictates the time frame within which notice must be given). Moreover, the French Insurance Code provides that the notice period provided in the policy cannot, in any case, be less than five days.
What are the consequences of late notice?
If such a sanction is provided in the policy, in the fashion prescribed by the French Insurance Code, and the insured’s violation of its obligation causes a prejudice to the insurer, late notice can give rise to a forfeiture of coverage.
In practice, however, it is quite rare that late notice leads to such sanctions.
Indeed, for the insurer to successfully raise forfeiture of coverage, the following conditions need to be met, on the facts:
- the policy clause that sets out the legal duty to provide notice within a timely fashion and provides that failure to do so will give rise to forfeiture of coverage needs to meet certain layout requirements (eg, it needs to be in bold, in capital letters or underlined) so as to stand out compared with neighbouring clauses;
- the insurer needs to prove that the delay has caused it to suffer a prejudice (for instance, it prevented the insurer from participating in court-appointed investigations or safeguarding its interests in the context of a possible future subrogation claim); and
- the insurer must produce a signed and initialled copy of the policy, or otherwise prove that the full text of the policy was brought to the insured’s attention, as it will not otherwise be in a position to invoke the policy’s coverage forfeiture clause against the insured (see question 3).
Insurer’s duty to defend
What is the scope of an insurer’s duty to defend?
French insurance law does not impose a generalised and overriding duty to defend upon insurers. Policies can, however, include clauses that provide that the insurer has a contractual right or, in certain cases, a contractual duty to defend its insured.
Proceedings management clauses (clauses de direction du procès) give the insurer the option to assume control over the way its insured will run its defence, should it so wish.
Incidentally, caution must be exercised by insurers when they decide to assume control over the insured’s defence, as by doing so, the insurer is deemed to have waived the right to invoke certain policy terms against the insured at a later date (for instance, exclusion clauses). This rule is, however, subject to certain qualifications: (i) the waiver does not concern all of the policy’s terms; and (ii) the waiver can be set aside if, upon taking control of the insured’s defence, the insurer makes the relevant reservations of rights (which have to be precise and as detailed as possible, rather than constitute boilerplate clauses, and have to be reiterated in all exchanges with the insured).
Legal assistance clauses (clauses de défense recours), on the other hand, give the insurer the obligation of defending its insured, if the insured elects to use it. In that respect, proceedings management clauses and legal assistance clauses are different in that the former is usually tied to a civil liability cover (whereby the insurer may ultimately be compelled to provide an indemnity as a result of the insured being found liable), whereas the latter is, in fact, an autonomous cover.
There are also more comprehensive, autonomous legal protection insurance contracts (assurance de protection juridique) that require the insurer to provide more substantial legal support, but we will not discuss them in greater detail, as they fall outside of the scope of this overview.
Failure to defend
What are the consequences of an insurer’s failure to defend?
As indicated above, there is no general duty for insurers to defend their insureds.
If, however, an insurer is bound by a legal assistance clause but nevertheless fails to defend its insured when called upon, it would be in violation of its contractual obligations and would consequently expose itself to being condemned on the basis of contractual liability.
Standard commercial general liability policies
What constitutes bodily injury under a standard CGL policy?
French civil law and French insurance law defines bodily injury as any harm to or unwanted alteration of a victim’s body.
Bodily injury encompasses the injury itself, but also the financial and non-financial prejudices that follow the said injury, which are, inter alia, evaluated by reference to a non-binding legal nomenclature called the ‘Dintilhac nomenclature’, which lists the types of prejudices victims can claim for as a result of bodily injuries: temporary financial prejudice (eg, hospital fees), permanent financial prejudice (eg, permanent loss of revenues), temporary non-financial prejudice (eg, pain and suffering), permanent non-financial prejudice (eg, handicaps). Moreover, moral prejudice (which is distinct from pain and suffering) can also be claimed for as a result of bodily injury, as can the prejudices suffered by indirect victims (usually the victim’s family).
What constitutes property damage under a standard CGL policy?
Standard CGL policies tend to define property damage in a fairly straightforward way as harm to or loss of a third party’s tangible property, objects, substances or animals. Consequential losses, such as loss of revenue or business interruption loss, for instance, would not be covered.
What constitutes an occurrence under a standard CGL policy?
CGL policies governed by French law will either function on a claims-made or a damaging-event basis. In a claims-made policy, the third party’s claim constitutes the occurrence, whereas in a damaging-event policy, it is the occurrence of the damaging event that caused the loss suffered by the third party that constitutes the occurrence.
How is the number of covered occurrences determined?
In France, CGL policies will usually provide that each individual loss constitutes a separate occurrence. In such a case, the total amount the insured can receive by way of a succession of indemnities for several occurrences of the same risk within a given period will therefore depend on: (i) the deductible applicable to each occurrence; (ii) possible per-occurrence limits; and (iii) a total indemnity limit for the risk at issue.
Certain policies may contain loss aggregation clauses, whereby various losses generated by a common cause are treated as a single occurrence, which may, on the facts of a given succession of losses, be more favourable to the insured or the insurer (depending on the prejudice caused by the losses, the deductible and possible per-occurrence limits). Given the financial impact aggregation clauses can have for both the insured and the insurer, they frequently generate coverage disputes.
What event or events trigger insurance coverage?
See question 16. Depending on the type of policy, coverage will either be triggered by a claim or the damaging event.
How is insurance coverage allocated across multiple insurance policies?
As French insurance law is, inter alia, built on the indemnification principle (see question 4), it governs a multiplicity of coverage situations in such a way that the insured should only receive compensation for the loss effectively suffered and should not make a net financial gain as a result of being in a position to claim for the same loss under several policies.
If, therefore, the insured entered into several analogous or overlapping policies in good faith (and without a view to making a profit in the event of a loss), there are no sanctions and the insured can claim for the entire loss from whichever one of its insurers he or she chooses - and French insurance law provides a mechanism whereby the said insurer will, in turn, have the possibility of seeking contributions from the other insurers on risk.
If, however, the insured entered into multiple insurance contracts fraudulently (ie, so as to make a financial profit in the event of an insurable loss), the contracts at issue will be deemed null and void and the insured can face claims for damages.
First-party property insurance
What is the general scope of first-party property coverage?
First-party property insurance indemnifies the policyholder (or, if applicable, the additional insureds) for the damage to or loss of property. As such, first-party property insurance policies can cover a very wide range of types of property, such as real estate, fine art or animals.
The scope of first-party property insurance policies can either be defined by the property insured or the types of risks that are insured against. Policies can either be drafted according to a named-risk model (eg, ‘this policy only covers the insured’s property against damage caused by water damage, fire, hail’), or according to an all-risks-but model (eg, ‘this policy covers the insured’s property for damage caused by all types of risks except landslides, water damage’).
Individuals are habitually free to decide whether or not to take out property insurance, but certain types of property insurance are legally mandatory, such as the obligatory insurance that a tenant has to take out for the property he or she is renting. Moreover, pursuant to provisions to that effect in the French Insurance Code, insurance cover granted for certain types of risks is automatically expanded by law (by way of example, property insurance providing coverage against fire and other risks automatically also provides coverage for damage caused by natural disasters; see question 22).
Finally, damage to the insured property that is caused by an inherent defect of the said insured property is excluded from coverage, unless otherwise agreed in the policy.
How is property valued under first-party insurance policies?
The methodology used to evaluate the damage and the ensuing indemnity is usually provided in the policy, which will also contain terms that will have an impact on the final amount of the indemnity (deductible, limits per types of risk or total limit for the insured property, etc). Usually, if the loss is partial, the indemnity is calculated by reference to the cost of repairs, whereas if the loss is total, it may be calculated by reference to the commercial value or the use value, depending on the nature of the insured property.
In property insurance, the damage has to be evaluated as at the date of the loss itself.
In accordance with the indemnification principle, first-party property insurance cannot give rise to the payment of an indemnity that exceeds the loss suffered by the insured and therefore leads to a financial gain.
Unless the policy provides otherwise, the insured is free to use the indemnity in whichever it pleases and is under no obligation to allocate it to repairing or replacing the damaged property.
First-party property insurance contracts can also provide additional coverage for consequential losses, such as business interruption losses.
Is insurance available in your jurisdiction for natural disasters and, if so, how does it generally operate?
Until 1982, French insurance law considered natural disasters to be uninsurable.
On 13 July 1982, a law was passed to create a special legal regime intended to remedy this situation and ensure that the greatest possible number of people would de facto have insurance against natural disasters by providing that property insurance taken out in connection with property located in France was automatically deemed to extend coverage to natural disasters (similarly, policies covering business interruption losses were automatically extended to cover such losses in the instance that they were caused by natural disasters). Furthermore, this coverage extension, which is automatic and de jure, cannot be excluded under the terms of the policy.
The French Insurance Code defines natural disasters as natural phenomena whose intensity is abnormal. For a particular event to be qualified as such, a Ministerial Decision has to be handed down (it follows that the two-year time limitation period only starts to run from the date of this decision, rather than the date of the event itself).
To be covered, damage must be deemed to have been directly and overwhelmingly caused by a natural disaster.
Premiums and deductibles for these automatic coverage extensions are provided in relevant sections of the French Insurance Code (or calculated according to formulas provided in it).
Directors’ and officers’ insurance
What is the scope of D&O coverage?
D&O insurance is not compulsory in France and companies that systematically take out D&O insurance tend to be public listed companies among the biggest capitalisations. As a result, D&O policies tend to be somewhat bespoke, rather than standardised policies, so that it is difficult to make general comments as to market practice.
D&O policies are liability policies taken out by companies for their directors and officers (which creates a situation where the policyholder and the insured are not one and the same). As a general rule, they are drafted in an all-risks-except format. They usually provide coverage for: (i) legal costs in the event that proceedings or investigations are initiated against a director or officer; and (ii) damages or sanctions awarded against the said director or officer (though criminal sanctions and fines are, by definition, uninsurable under French insurance law).
The risks that are habitually covered are:
- failure to abide by legal or regulatory obligations;
- directors and officers acting ultra vires; and
- claims against directors to hold them liable for their companies’ liabilities (in instances where companies enter into winding-up proceedings and are deemed to have disproportionate liabilities because of mismanagement).
Apart from the criminal sanctions and fines alluded to above, other risks are excluded, such as intentional wrongdoing (faute intentionnelle), misappropriation of corporate assets, and certain fiscal sanctions and fines.
The French D&O market is generally regarded as healthy and growing, in part because of the sense of heightened legal uncertainty that results from seemingly ever-expanding domestic and international regulations and compliance obligations.
What issues are commonly litigated in the context of D&O policies?
D&O coverage disputes tend to be fairly fact- and policy-specific, given the fact that D&O policies are not standardised policies (see question 23) and terms and wordings may vary significantly from one policy to the next.
Certain issues do, however, tend to arise more frequently, such as:
- whether the director or officer claimed against is deemed an insured under the policy (especially in large international companies, which tend to have vast numbers of subsidiaries, frequently buy and sell companies, and have continuously evolving management staff);
- whether a given risk is covered (for instance, when official investigations are initiated against a director, it can take a significant amount of time before he or she is formally informed of the precise grounds on which he or she may be found liable);
- the extent of coverage (covered legal costs, for instance, are sometimes only defined as ‘reasonable legal costs’ and policies do not always clearly indicate if legal costs are covered in certain extra-judicial matters, such as investigations); and
- coverage disputes between the primary and excess insurers (especially in connection with the D&O insurance programmes of large multinational companies) regarding how their respective layers dovetail.
What type of risks may be covered in cyber insurance policies?
Cyber insurance is still relatively new in the French market. Cyber insurance policies are not, therefore, particularly standardised and, at present, only the biggest public-listed companies systematically take out cyber insurance. It is, however, a growing segment, because of the increasing types and occurrences of cyber losses or attacks and the media coverage it generates.
Cyber insurance policies cover both damage caused by and liabilities resulting from cyber attacks or other cyber-related incidents. Risks that are generally covered are data losses and business interruption losses, though other types of prejudice may also be covered, such as costs of system decontamination and ransomware.
Regarding data loss coverage, it should be noted that only the cost of the reconstitution of the data is covered and not the value of the data. Moreover, data loss coverage will usually be subject to certain exclusions, such as instances where the insured has no backup policy or mechanisms in place or instances where the loss of data is the result of a regulatory authority ordering its destruction.
Business interruption coverage can sometimes be triggered by both complete or partial business interruptions caused by cyber risks (note that during the NotPetya attack, St Gobain reported a loss of €250 million caused solely by the slowing down, rather than the interruption, of its operations). However, policies usually provide a deductible period, during which coverage will not apply.
The liability coverage provided by cyber policies covers the insured’s liability, in the instance that its conduct or internal processes regarding IT and cyber matters cause prejudice to a third party, as well as the insured’s defence costs, whether in the event of a third-party claim or in the event of an investigation (sanctions are, however, excluded from the scope of coverage, as they are uninsurable as a matter of public policy).
What cyber insurance issues have been litigated?
It is too early to say: because cyber insurance still isn’t widely subscribed in France, cyber insurance policies have not yet given rise to coverage disputes of note. Moreover, insureds are understandably keen that cyber losses not be overly publicised, which may tend to promote confidential settlements, rather than court proceedings, in instances where coverage disputes arise. As a result of these two factors, for the time being, most cyber coverage disputes effectively revolve around instances where insureds try to trigger the ‘silent cyber coverage’ arguably found in first-party property damage insurance (ie, such policies that are drafted on the all-risks-except format but do not exclude cyber risks). While these disputes cannot, by definition, enable us to identify cyber-policy coverage disputes and trends, they do highlight the risks associated with silent coverage and the need to consider the possible and unwanted overlap between dedicated cyber policies and garden variety property damage policies, which could be a source of disputes in times to come.
Is insurance available in your jurisdiction for injury or damage caused by acts of terrorism and, if so, how does it generally operate?
As a reaction to the wave of terrorist attacks France suffered in the early to mid-1980s, in 1986 French insurance law was modified to include a coverage extension mechanism analogous to that which had been created earlier that decade in relation to natural disasters (see question 22). Since 1986, property insurance that provides coverage against fires has been extended to automatically cover damage caused by acts of terrorism. The relevant section of the French Insurance Code provides that property damage caused by acts of terrorism and consequential losses caused by the said property damage are covered according to the policy terms (deductibles, limits, etc) that apply to fire.
Moreover, if an insured has business interruption loss insurance, it automatically covers business interruption losses that stem from acts of terrorism.
The regime summarised above cannot be excluded under the terms of the policy.
Since 2001, the above-summarised regime has been modified somewhat and been rendered more flexible with regard to large-risks insurance.
Bodily injuries caused by acts of terrorism are, for their part, indemnified by a purpose-built public fund.
The authors are grateful to Sébastien Tadiello for his assistance in the preparation of this chapter.
Update and trends
Update and trends
Updates and trends
The European directive 2016/97 of 20 January 2016 on insurance distribution was transposed in mid- to late 2018, thereby greatly increasing insurance distributors’ duties and obligations. This development could, in the foreseeable future, lead to more disputes and interesting case law relating to insurance distribution.
Similarly, on 25 May 2018, the European Regulation 2016/679 on General Data Protection came into force. As the framework created by this regulation significantly increases businesses’ duties and obligations in the way they collect, handle and use personal data, it may also generate new types of disputes, which could have an impact on liability policies and cyber policies.