Preliminary and jurisdictional considerations in insurance litigation


In what fora are insurance disputes litigated?

Insurance disputes may be litigated before civil courts or referred to arbitration.

If the insurance contract sets forth an arbitration clause (which is very common in large-risk insurance contracts) then the arbitration and its rules as provided in the contract should apply.

In the absence of an arbitration clause, the insurance dispute will be litigated in civil district courts.

The parties themselves may stipulate the exclusive court to judge claims arising from their insurance contract (choice of forum clause). If no choice of forum clause exists, in general, the forum will be the relevant court of the insured’s domicile.

There are no courts specialising in insurance matters in Brazil.

Causes of action

When do insurance-related causes of action accrue?

A one-year limitation period applies to most insurance-related matters. A three-year limitation period applies for insurance beneficiaries against the insurer and for the third party that suffered the loss in the case of mandatory civil liability insurance.

In cases related to civil liability insurance policies, the insured’s term begins when the insured receives a summons in a third-party lawsuit, or when the insured pays the claim to this third party upon the insurer’s previous approval.

In other insurance cases, the term starts upon acknowledgement of a damaging act or fact (in disputes over insurance coverage, for instance, the term starts running when the insured receives a coverage denial notice from the insurer).

Preliminary considerations

What preliminary procedural and strategic considerations should be evaluated in insurance litigation?

The strategy is often case-specific, and the following aspects should be addressed beforehand with lawyers:

  • analysing the insurance terms and conditions, the procedures for notification of a loss and the measures to control or deal with an event;
  • handling documents for the loss adjustment, which is one of the most time-consuming phases of a claim;
  • analysing whether any specific insurance clause or condition applies to the event;
  • checking the insured’s and insured group’s financial and court background;
  • discussing with lawyers and experts hired to conduct the loss adjustment what the expectations regarding the insurance coverage are;
  • during the loss adjustment, evaluating the possibility or need of asking any advance payment from the insurer;
  • from the insurer’s perspective, evaluating the insured’s history and the findings in the loss adjustment to define whether the insurance coverage is due, in total or in part;
  • for both the insurer and the insured:
    • the governing law and jurisdiction;
    • the litigation procedure envisaged in the insurance policy, if it is an arbitration or court jurisdiction;
    • existing court precedents; and
    • the expected time of litigation in the relevant court; and
  • after due consideration, the pros and cons of litigation as opposed to an extrajudicial settlement.

What remedies or damages may apply?

In contractual disputes, the parties may file a lawsuit requesting the specific performance of the obligations under the contract or, alternatively, its termination if the specific performance is no longer possible or if the non-breaching party is no longer interested in it. In the latter case, the party may also claim for damages, including compensatory damages and loss of profits.

The disputes involving insurance obligations mostly revolve around the extent of insurance coverage (total or partial), the lack or limitation of coverage, the aggravation of risk, the payment of indemnification and the harm caused by delayed payment or non-fulfilment of the insurance contract.

Precautionary measures and injunctive relief may be sought by the party, in anticipation of the final claim raised in the lawsuit, provided that the party is able to show that the matter is urgent, and that there is a likelihood of the claim raised in court ultimately being confirmed in the final decision.

Under what circumstances can extracontractual or punitive damages be awarded?

Under Brazilian law, no indirect or punitive damages can be awarded.

Interpretation of insurance contracts


What rules govern interpretation of insurance policies?

Brazil’s legal system is based on civil law, therefore its legal framework comprises numerous laws and codes. By extension, the Brazilian insurance market is regulated by a host of legal documents, including:

  • the Civil Code (enacted by Law 10,406 of 2001), which dedicates an entire chapter to insurance contracts and the overarching principles that govern the relationship between insured and insurer;
  • Decree-Law 73 of 1966, which allows the regulation of the insurance market and activities via rules enacted by the National Council of Private Insurance and the Brazilian Private Insurance Authority (SUSEP); and
  • Supplementary Law 126 of 2007, which sets out the main rules for reinsurance and retrocession transactions in Brazil after dismantling the Reinsurance Institute of Brazil’s monopoly of this area.

However, given the adhesion contract nature of most insurance policies, the courts tend to be more pro-insured on interpreting insurance contracts, in particular when the insured is a consumer (especially under the Consumer Protection Code enacted by Law 8,078 of 1990).

The interpretation of insurance contracts must abide by the general rules for interpretation of private contracts as established in the Civil Code. In international deals (eg, reinsurance), foreign law, practices and principles may also apply in some cases.


When is an insurance policy provision ambiguous and how are such ambiguities resolved?

As a general rule, the interpretation of any contract between private parties must rely on the genuine intention of the parties when entering into the contract, the traditions and customs of the place where it took place, and the principle of good faith of the contracting parties (which is even stricter in insurance contracts).

In addition, insurance contracts may also be subject to the rules of interpretation applying to adhesion contracts (under the Civil Code or the Consumer Protection Code, as the case may be), by which any ambiguous or contradictory provisions in a contract must be interpreted in favour of the party that adhered to it.

Notice to insurance companies

Provision of notice

What are the mechanics of providing notice?

First, it must be checked whether the insurance contract stipulates any specific notice procedures.

As a general commercial practice, any way of giving written notice to the insured and to the insurer is acceptable (eg, notice by email or even formal letters hand-delivered to the recipient’s address).

There are cases in which policies provide not only for notice of loss, but also for notices of risk aggravation and notices for potential loss (ie, not just effective and concrete losses already verified).


What are a policyholder’s notice obligations for a claims-made policy?

In a claims-made policy, policyholders are required to notify the insurer as soon as they become aware of a loss or a third-party claim or damage.


When is notice untimely?

As a rule, the insurer must be notified once the insured becomes aware of a loss. Untimely notice should not harm the insurer’s right to carry out investigations, protect the salvage, engage in loss adjustment and even give opinions on any settlement being negotiated with third parties.

Denial of coverage for untimely notice is a common practice in Brazil. However, there are also court precedents recognising the insureds’ right to coverage if late notice has neither harmed the insurers’ right to investigate nor unduly increased the risk and losses.

What are the consequences of late notice?

In most of the cases, the possible consequences are: total or partial forfeiture of coverage; and charging of additional insurance premiums.

Insurer’s duty to defend


What is the scope of an insurer’s duty to defend?

It is not a common practice in Brazil to impose the burden of defence on insurers.

Unless otherwise agreed, liability insurance generally provides coverage for the insured’s defence costs (ie, the insurer’s duty to finance the defence). To secure this kind of coverage, the insured must give timely notice to the insurer on any insured event or third-party claim; in addition this, the insurer will have the right to check whether the costs for the insured’s defence are fairly estimated and meet market standards.

In third-party claims, the litigation can be handled either by the insured alone (with frequent reporting to the insurer) or by both insured and insurer (the latter acting as intervening party in most cases, after being formally summoned and joining the litigation), each filing its own defence.

Therefore, the rule is the insured takes over the defence and reports on the strategy and further steps to the insurer. The insured may settle upon having the insurer's approval, or settle in the event of clear mitigation of the risk or loss if the insurer fails to provide prompt and justified reasons for rejecting the settlement. During the claim settlement procedure and even after a final decision securing the coverage, the insured may be reimbursed for the defence costs incurred. It is not common to have the insurer directly handling an insured’s defence in insurance-related litigation.

Failure to defend

What are the consequences of an insurer’s failure to defend?

In very specific situations where the parties have agreed that the defence would be conducted by the insurer directly, any failure to do so may trigger the Brazilian general rules on damages, and the insurer can be required to hold the insured harmless on account of this failure.

Standard commercial general liability policies

Bodily injury

What constitutes bodily injury under a standard CGL policy?

Under civil liability insurance, which is comparable to a CGL policy in Brazil, bodily injury generally means physical injury caused to a person’s body, excluding psychological or mental harm, unless otherwise set forth in the agreed conditions. In some insurance products, coverage for bodily injury encompasses death and disability.

Property damage

What constitutes property damage under a standard CGL policy?

Under civil liability insurance, which is comparable to a CGL policy in Brazil, property damage generally means physical harm, deterioration or destruction caused to tangible property or assets. Different provisions apply to inclusion or exclusion of financial losses to the concept of property damage.


What constitutes an occurrence under a standard CGL policy?

An occurrence under civil liability insurance generally refers to the occurrence of a harmful act or fact for which the insurer is liable under the corresponding coverage (eg, bodily injury, moral damage and property damage to a third party). Policies may vary from all-risks coverage to specific nominated risks policies.

How is the number of covered occurrences determined?

Each insurance policy establishes the number and limitation of covered occurrences. Most of the policies provide for the maximum amount of coverage stipulated in the insurance contract, and certain others may also include the number of occurrences covered.

It is also possible to consider ancillary occurrences and multiple claims deriving from the same occurrence (eg, the 72 hours clause).


What event or events trigger insurance coverage?

The events triggering insurance coverage are those specifically described in the terms and conditions of the insurance policy.

How is insurance coverage allocated across multiple insurance policies?

Multiple insurance policies covering the same interest may be concurrent or in excess. If the policies are silent on it, a concurrence regime shall apply.

Except for life, which may be insured by multiple policies concomitantly on the same basis, other interests may only be insured once, and, in some cases, with an express additional percentage (eg, purchase cost plus 20 per cent value).

First-party property insurance


What is the general scope of first-party property coverage?

In first-party property insurance, commonly referred to in Brazil as property insurance or operational insurance, a company takes out insurance to protect its assets and operations against property damage, loss of profits and other losses from shutdown, slowing the pace of its activity or even financial impact derived from material damage. This means the company does not depend on a third-party insurance policy taken out to cover third-party claims.

In Brazil, there are two types of first-party property insurance: all-risk operational policies and named risks.


How is property valued under first-party insurance policies?

Before offering coverage, the insurer may ask the insured for updated expert reports, the latest balance sheet and financial information to properly evaluate the insured’s operations and assets. The insurer may also carry out its own analysis and on-site inspection to ascertain the value of the insured’s assets and operations.

Natural disasters

Is insurance available in your jurisdiction for natural disasters and, if so, how does it generally operate?

In general, natural disasters are excluded from standard conditions of coverage for property and named insurance policies, and must be treated separately in special clauses and additional coverage provisions.

For an all-risks policy, all types of perils are covered unless otherwise expressly stated in an exclusion clause.

Natural disasters, when covered, may prompt discussions regarding their status as a proximate or remote cause. Earthquake coverage is not common in Brazil as earthquakes rarely occur, and tropical storms are not as intensive as those in the areas surrounding the Gulf of Mexico, which means the market is underdeveloped in this respect. Floods may be considered the most common natural cause for losses, but this insurance is not taken out by most insureds as they are not aware it exists.

Directors’ and officers’ insurance


What is the scope of D&O coverage?

D&O insurance policies generally cover the losses incurred in connection with directors and officers in the exercise of their management roles.

D&O insurance usually offers three types of coverage:

  • Type A: coverage for financial losses suffered directly by directors and officers.
  • Type B: reimbursement of amounts incurred by the company as compensation for directors’ and officers’ losses. If a hold harmless agreement is in place, the company may indemnify the directors and officers for financial losses covered by the D&O insurance and then claim reimbursement from the insurance company.
  • Type C: coverage for losses arising from certain claims asserted against the company in the capital markets, mostly in cases of joint liability with the directors and officers.

In Brazil, D&O insurance has the following basic coverage:

  • defence costs, encompassing all fees: attorneys’ fees, court costs, necessary expenses incurred in defences or appeals by or on behalf of directors and officers;
  • indemnification, covering the damage suffered by directors and officers on account of their managerial role, excluding punitive, consequential and indirect damage; and
  • freezing of assets (bank accounts, mostly), in cases of injunctions to search, seize and freeze the directors’ and officers’ assets.

In 2017, SUSEP issued new regulations on D&O insurance by which insurance companies are allowed to provide coverage for fines and penalties, which is especially important for companies supervised by the Central Bank of Brazil, the Brazilian Securities Commission and other governmental authorities.


What issues are commonly litigated in the context of D&O policies?

The most litigated issues in the context of D&O policies are: (i) coverage in debt reorganisation and bankruptcy scenarios; (ii) coverage in cases involving alleged insider trading; (iii) coverage in cases involving alleged acts of corruption of directors and officers, mostly when leniency agreements take place; and (iv) disclosure of information by the company and its directors and officers to the insurer.

Cyber insurance


What type of risks may be covered in cyber insurance policies?

Financial protection is offered against civil liability arising from data privacy breaches (either by hackers or resulting from a company’s errors and negligence), including defence costs in investigations and lawsuits. Covered risks include, for example, the:

  • public disclosure of private data or third-party corporate data that is confidential or otherwise under the insurer’s responsibility or custody;
  • contamination of data by malicious code or malware, undue refusal to grant access requested by authorised people, theft of access codes inside the insurer’s premises or computer systems, etc;
  • actions taken by outsourced companies under the insured’s responsibility;
  • defence costs, reasonable costs for legal consulting in investigative procedures and costs incurred to notify users about any data breach, etc; and
  • control costs and expenses.

What cyber insurance issues have been litigated?

To our knowledge, no public report or case has been revealed thus far.

Terrorism insurance


Is insurance available in your jurisdiction for injury or damage caused by acts of terrorism and, if so, how does it generally operate?

Injury or damage caused by acts of terrorism is usually excluded, although specific clauses for coverage may be negotiated. In the products offered in the Brazilian market, acts of terrorism are those involving the use of force or violence in attacks directed at persons or properties for political, ideological or religious reasons to disseminate terror, fear and property or psychological damage on a large scale.

Ordinary coverage encompasses property damage, loss of profits and other damage related to riots, strikes, lockouts and malicious acts.

Update and trends

Key developments of the past year

Are there any emerging trends or hot topics in insurance law in your jurisdiction?

A bill of law on insurance and reinsurance matters is still pending final approval by Brazilian legislative bodies. This bill of law provides the insureds with increased protection, namely the right to access insurers’ documents on ascertainment of loss within the claim settlement procedure; and more protective drafting of insurance contract clauses.

The Brazilian insurance market is experiencing the following trends: (i) the creation of cyber insurance to cater to technology innovations and even to recent laws on data protection and processing, access, disclosure and liability issues; and (ii) a new regulatory framework for judicial bonds related to labour claims, and also the expanding of this market in response to compliance matters and investigations.

Law stated date

Correct on

Give the date on which the information above is accurate.

December 2019