The new Romanian Civil Code (the “NCC” ) sets out new regulations applicable to insurance contracts, while partially abrogating the old legal framework on insurance, ( i.e. Law 136/1995). From the latter, only the dispositions regarding Motor Third Party Liability Insurance as well the regulations referring to the insurance-related protection compulsory funds (i.e. the Guarantee Fund and the Street Victim Protection Fund) remain in place.
Taking into account that the NCC became applicable on October 1st, 2011, it is worth noting, that the insurance contracts entered into before this date remain subject to the old legal framework, while the NCC framework applies to insurance contracts concluded after such date.
The NCC is, generally speaking, an attempt of the state to unify / simplify and where needed, improve the effectiveness and applicability of civil law in Romania, within the context to the Romania’s broader reform of the justice system. This orientation is reflected in the matter of insurance contracts as well, as the NCC re-systematizes (re-encodes) many of the old regulations, while bringing several significant modifications to the latter, two of which are briefly presented below.
- Non-disclosure and misrepresentation when concluding an insurance contract
One important modification relates to the regime of non-disclosure or misrepresentation committed by the insured/contractor at the conclusion of the insurance contract.
Before the NCC the legal sanctions for non-disclosure or misrepresentation when concluding an insurance contract were not addressed expressly and therefore the doctrine and jurisprudence were not unanimous about the effects of such , the NCC regulates this particular situation in a clear manner.
According to the new stipulations of the law:
- in case the insured or the contractor’s (i.e. the contractor being a person who enters into the insurance contract and pays the premiums but is not the insured person) non-disclosure/misrepresentation is made in bad faith (e.g. intentionally), the insurer may obtain in court the avoidance of the contract in case such information is essential for the insurer to consent writing the insurance and/or would have determined the insurer to offer different terms and conditions for such insurance, regardless whether the non-disclosure/misrepresentation had any effect on the occurrence of the insured event. In such cases, the risk coverage ceases (and should in theory be considered as it has never existed, as per any ordinary avoidance case) while the insurer is specifically entitled by law to retain the already paid premiums and to ask for the payment of premiums due until the date the insurer had become aware of the non-disclosure/misrepresentation (which is an exception from the general rules of avoidance, i.e. exception from the principle “restitutio in integrum”);
- in case the non-disclosure / misinterpretation is not committed in bad-faith, this situation does not entitle the insurer to avoid the insurance contract. However, if the discovery of the non-disclosure/misrepresentation occurs before the insured event, the insurer is entitled to maintain the contract and claim for a premium increase or to terminate the contract 10 days after having notified the insured/contractor, and the insurer will have to return any undue premium amounts that have been paid (i.e. premium amounts corresponding to the period the risk is not covered further) If the discovery occurs after the insured event, the indemnification to which the insured is entitled shall be reduced by the proportion between the paid premiums and the premiums that should have been paid in case of a full and correct disclosure.
- Elimination of general insurers’ subrogation rights against liability insurers.
The new NCC removes the previous express rights of non-life insurers (e.g. Motor & Hull car insurers) to subrogate their insured/beneficiaries within the limits of the insurance, so as to recover the indemnification amounts from the civil liability insurers (i.e. MTPL insurers) of the persons are legally held liable for the insured events. Therefore, such subrogation can only be effected as a result of an express convention between the general insurer and its insured client.
In the event such convention is missing, the general insurer is only allowed to claim the amounts paid as indemnification against the liable person (and not also against the liability insurer), while the liable person, facing such claim, has two possibilities: either to request the court that its liability insurer be summoned as guarantor within the trial, or turn against its liability insurer by a separate court action, after satisfying the general insurer’s claim.