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What general rules, requirements and procedures govern the conclusion of (re)insurance contracts in your jurisdiction?
The main substantive insurance and reinsurance rules are contained in the Insurance Contract Act 1980. Generally, all of the act’s provisions are mandatory and will prevail over the terms and conditions of the policy unless the latter are more favourable to the insured. Regard should also be had to the Civil Code.
The conditions of the insurance contract must be written in a clear and precise way, and signed by the insured (there are special rules for electronic contracts).
Further, clauses that limit or restrict the rights of the insured must be highlighted and written in bold, and explicitly accepted by the policyholder or insured. Otherwise, the clause may be null and void. It is a requirement to include a statement that the policyholder or insured has read the limitative clauses, if any, and agrees to them. The policy must describe, in a clear and comprehensive manner, the guarantees and covers and the applicable exclusions and limitations, which must be highlighted.
Regarding large risks insurance, as defined by Law 20/2015 on the regulation, supervision and solvency of insurance and reinsurance entities, the provisions of the Insurance Contract Act are not mandatory and parties may depart from them. Reinsurance is also not subject to the mandatory provisions of the act.
Marine insurance is regulated by the Maritime Navigation Act 2014, which abrogated the former rules contained in the Commerce Code.
Are (re)insurance contracts subject to any mandatory/prohibited provisions?
In general, all of the provisions of the Insurance Contract Act are mandatory, with some exceptions.
Regarding large risks insurance, the provisions of the Insurance Contract Act are not mandatory and parties may depart from them. The fundamental effect of an insurance contract involving a large risk is that the parties are free to agree as they wish, subject to the general limits to party autonomy and to the fundamental principles of insurance. However, the act may apply to a large risk on a supplementary basis if no other provision is made in the insurance contract.
As for reinsurance contracts, reinsurance is regulated as a type of casualty insurance and is not subject to the mandatory provisions of the act. Therefore, party autonomy fully operates subject to the general limits to party autonomy (ie, the law, public morality and public policy).
Can any terms by implied into (re)insurance contracts (eg, a duty of good faith)?
Terms implied by statute are fairly common under Spanish civil law. Notably, this is the case of contracts for sale. There are some limited cases in insurance law (data protection rules and protection for extraordinary risks in connection with certain lines) and virtually none with regard to reinsurance contracts.
The courts could imply and incorporate terms when interpreting, construing or integrating the contract, but this is rare. In principle, incorporation by usage of principles such as ‘follow the fortunes’ or ‘follow the settlements’ would be feasible, subject to evidence and consistent observance in the relevant market.
What standard or common contractual terms are in use?
The policy is usually divided into general, particular and special conditions. Under normal circumstances, particular and special conditions prevail over the general conditions. Particular conditions (the schedule) concern:
- the parties’ names;
- the risks insured;
- the sum insured;
- the territory;
- the inception date and duration; and
- the premium.
Standard terms concern:
- the description of the risk;
- payment of the premium;
- the effects of non-payment of premium;
- notification of losses and claims;
- claims procedures; and
What is the state of development in your jurisdiction with regard to the use of ‘smart’ contracts (ie, blockchain based) for (re)insurance purposes? Are any other types of financial technology commonly used in the conclusion of (re)insurance contracts?
In Spain, smart contracts are still in their infancy and no legal regulation applies. The technology faces significant legal challenges in order to apply it to insurance contracts.
Electronic means are used to conclude insurance contracts, namely in the field of motor insurance, although a combination of electronic, telephone and physical means are used. The insurer requires that the policy be signed and sent to it physically.
According to the Law on Information Society Services and Electronic Commerce (34/2002), contracts concluded by electronic means are valid when all legal requirements for their validity are met, namely the consent of the contracts.
What rules and procedures govern breach of contract (for both (re)insurer and insured)?
Breach of re(insurance) contracts is governed by the Insurance Contract Act and the Civil Code.
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