1. Solvency II - Insurance Code Amended
Legislative Decree No. 74 of 12 May 2015 was published in the Official Gazette on 15 June 2015, which has made all necessary amendments to the Insurance Code in order to implement the new developments introduced by Directive 2009/138/EC (Solvency II) on the taking-up and pursuit of the business of Insurance and Reinsurance.
As is well known, the Directive introduces a new prudential supervisory regime for the purpose of providing a regulatory framework aimed at the maximum protection of the users of insurance services and at the creation of a new system providing supervisory authorities with better instruments for assessing company solvency.
IVASS' regulations shall now be enacted with a view to implement the new rules.
2. Insurance and financial products - The supervision passes to Consob
Amongst the many amendments introduced by Legislative Decree No. 74 of 12 May 2015 above, it is worth mentioning the one concerning the allocation of supervisory duties between Consob and IVASS over insurance and financial products.
The new article 3 of the Insurance Code foresees that "1. The main aim of the supervision is the adequate protection of the insured and of the parties entitled to the insurance services. For such purpose, IVASS pursues the health and prudent management of insurance and reinsurance companies as well as, together with Consob, each to the extent of the respective scope of authority, their transparency and fairness towards customers. Another aim of the supervision, yet dependent on the latter, would be the stability of the system and of the financial markets …".
A new article 187-bis has also been introduced, which foresees (amongst other provisions) that:
"3-bis. In fulfilling the duties mentioned in paragraph 1 and if so requested by the situation, even following the prudential control process under article 47-quinquies, IVASS may adopt preventive or corrective measures towards specific insurance or reinsurance companies, including specific measures also concerning: a) the business restriction, including the power to prohibit the further sale of insurance products ….; 3-ter. The exercise of the supervisory powers under paragraph 3-bis, letter a), is assigned to CONSOB, to the extent falling within the respective scope of authority…".
3. Payment Protection Insurance - European Court of Justice, IVASS and Banca d'Italia
With its judgment dated 23 April 2015 (in Case C-96/14) the European Court of Justice has clarified that article 4, paragraph 2, of Directive 93/13/EEC of the Council, dated 5 April 1993, concerning the unfair terms in contracts entered into with consumers, must be interpreted to the extent that - in order to ascertain whether the clauses which foresee limits and/or cases of exclusion of the effectiveness of an insurance agreement covering the payment obligations of the mortgage loan instalments in the event of the borrower's total incapacity for work fall within the concept of unfair term - the national judge must assess whether:
- "first, that, having regard to the nature, general scheme and the stipulations of the contractual framework of which it forms part, and to its legal and factual context, that term lays down an essential component of that contractual framework, and, as such, characterises it, and,
- secondly, that that term is drafted in plain, intelligible language, that is to say that it is not only grammatically intelligible to the consumer, but also that the contract sets out transparently the specific functioning of the arrangements to which the relevant term refers and the relationship between those arrangements and the arrangements laid down in respect of other contractual terms, so that that consumer is in a position to evaluate, on the basis of precise, intelligible criteria, the economic consequences for him which derive from it".
Likewise, by way of official statement dated 5 June 2015, it has been disclosed that IVASS and Banca d'Italia have met the consumers, insurance companies and intermediaries, banks and financial companies representatives to discuss the issue: "Policies linked to loans – IVASS and Banca d'Italia courses of action to protect consumers".
On the occasion of any such meeting - as may be read in the official statement - many criticalities have been found in the production and distribution of insurance policies linked to loans.
- as regards production, an excessive standardisation of the policies has been ascertained; many exclusions and limitations are foreseen, as well as periods of 'lack of coverage' periods and/or deductibles, which are excessively wide and often cumulated amongst them; the lack or belated repayment of the portion of the premium 'not enjoyed', in the event of early redemption of the loan;
- as regards distribution, cases of 'forced' sales have been ascertained (the policy, albeit optional, is actually imposed by the bank/finance company as a condition to take out the loan); lack of any checks as to whether the policy meets the customer's effective needs; poor information to the customer on the features, limits and cost of the insurance coverage.
IVASS and Banca d'Italia shall now give specific instructions to the market, requesting that the products and sale practices are realigned with the guidelines given.
4. Medical Malpractice - IVASS prohibits the sale of a product not deemed adequate
By way of decision No. 0047185 of 29 May 2015, IVASS - by applying article 184, paragraph 2, of the Insurance Code - has prohibited the sale of a policy covering medical civil liability offered by an Italian insurance company in light of the criticalities arising out of the offer itself and in performing the policy at issue.
In particular, IVASS requested the company to:
"a) make a critical review of the products sold, by redrawing up the products more specifically tailored depending on the different customer targets aimed and on the specific needs for coverage expressed (for instance, by foreseeing the creation of two different products, one concerning the risks deriving from the activity carried out by doctors at public or private structures, the other one concerning the outpatient activity carried out by the professionals);
b) take special precaution in the risk undertaking phase by checking, on a case by case basis, the adequacy of the product offered compared to the specific needs of each single professional and, thus, by also foreseeing specific queries in the adequacy form, in order to ascertain whether there is any other 'primary insurance' (either personal or of the respective structure);
c) indicate clearly, both in the adequacy form and in the contract terms and conditions that, failing any 'primary insurance', the policy shall not be effective for any doctors working exclusively inside a hospital;
d) give adequate instructions to the distribution network for the checks as to whether the product meets the customer's specific requests and for correctly managing all pre-contractual disclosures;
e) during the specific implementation of the control measures requested to Top Management for checking whether the sale network and the adjusters are working correctly, identify solutions which are capable of ensuring the fulfilment of the foreseen due diligence, transparency and fairness obligations, as well as of the principles mentioned in the new adjustment policy document prepared by the Board. The fact of defining beforehand, in the claims area's operational regulations, the situations in which the non-effectiveness of the policy and the review of the criteria for calculating the penalty foreseen to avoid delaying behaviours in managing claims may be objected undisputedly by outside counsels and by the outsources, respectively, is instrumental to the achievement of the above-mentioned aim …".
5. Medical Malpractice - Some recent guidelines by the Court of Rome
With a recent judgment dated 30 April 2015, the Court of Rome has taken up again the question of medical and health liability, by going over some principles on the subject-matter:
- the alleged injured party must produce the lack of recovery or the worsening of the pathology, and the default of the doctor and/or of the hospital;
- the doctor must prove that the default did not depend on a cause attributable thereto or that he/she was not the cause of the damage;
- should the Judge not be in a position to ascertain that the damage derived from the behaviour of the doctor and/or of the hospital, the Judge must check whether, had any such behaviour deemed censurable not taken place (or upon a more appropriate and omitted behaviour), the results - according to a normality criterion applied to the specific concrete case, would have been different and better, based on the principle of 'more probable than not'.
6. D&O and PI - The Court of Cassation on the quantification of damage in the actions for liability brought by the bankruptcy against the corporate bodies
With its recent judgment No. 9100/15, the Court of Cassation (sitting en banc) has provided important guidelines in an area historically characterised by a great level of uncertainty: namely, that of the quantification of damage within the scope of the actions for liability brought by the bankruptcy against the corporate bodies.
According to the Court: "in an action for liability brought by the bankruptcy receiver of a corporation against its director, the indemnifiable damage must be identified and paid off by taking into consideration the specific breaches of the director, whereby the claimant is under a duty to produce the latter, in order that it is possible to check the existence of a causality link between such breaches and the damage in respect of which compensation is claimed. In the aforesaid claims, the lack of accounting ledgers of the company, even if attributable to the defendant director, does not justify in itself that the damage to be compensated is to be identified and paid off to an extent corresponding to the difference between the liabilities and the assets ascertained in bankruptcy, whereby such criteria may solely be used for the purpose of equitably paying off the damage, if the conditions of paying off any such damage arise, provided that the reasons having prevented the ascertainment of the specific damaging effects which may be specifically traced back to the director's conduct are mentioned, and provided that the recourse to any such criterion appears to be logically probable in connection with the circumstances of the specific case".
The relevant breach in the specific scope of the actions for liability for damages in the so-called obligations of conduct is not any breach, but only that amounting to the efficient cause (or joint cause) of the damages, thus in no way can the creditor's production pertain to any type of breach, but, if we may say so, to a qualified breach, that is efficient in theory to causing the damage.
We now need to ask ourselves - according to the Court - "if and which amongst the ('qualified') breaches which may be made by a company director, and that the claimant must have produced as grounds for his/her request for damages, is efficient in theory to cause a damage assumed as corresponding to the entire capital shortfall accumulated by the bankrupt company and ascertained within the scope of the insolvency proceedings. It is clear that this would only be the case, in theory, of those breaches of the duty of due diligence in managing the business which are so general as to make us believe that, precisely due to them, the entire assets have been eroded and causing the losses recorded by the receiver or, in any event, those conducts which may amount to the cause of the financial difficulties leading to the insolvency (but, had they only worsened the financial difficulties, only such worsening could be linked to any such breaches).
Instead, should any such breadth of the effects of the alleged breach not even be conceivable in theory, the claim of identifying the indemnifiable damage in the difference between the liabilities and the assets under the balance sheet, ascertained during the bankruptcy, inevitably lacks any logical grounds: if only because the business is intrinsically connoted by the risk of possible losses, the occurrence of which can therefore never be considered in itself only a significant symptom of the breach of the duties weighing heavily on the director, not even when he/she is charged of having failed to comply with his/her duty of due diligence in managing, precisely since the diligent management of the business does not suffice to guarantee the positive results.
Nor could it be reasonably held that the capital shortfall ascertained in the bankruptcy procedure - as such and in its entirety - is, as a rule, the natural consequence of having deferred the management of the business failing the financial and legal conditions justifying business continuity: for the self-evident consideration that, also in this case, it would not be logically correct to either charge the director with the share of the losses in the balance sheet which could perfectly have already arisen at a moment prior to the occurrence of the crisis situation in all its extent or, above all, heavily weigh on him/her, by way of liability, also the further liabilities that nearly always a company in crisis accumulates in any event even in the winding-up phase, since this clearly does not entail the immediate and automatic discontinuance of any type of cost linked with the existence of the company under winding up and it could perfectly happen that further losses of company value are generated precisely from the discontinuance of business…".
7. Insurance policy taken out by a person lacking the powers to represent the company - Validity
The Court of Padua, with its judgment dated 18 September 2014 has set forth some interesting principles in the matter of policies taken out by a person lacking the powers to represent the company.
According to the Court, the agreement concluded by a false representative of the company may be deemed valid if the person lacking the powers has induced the third party, in good faith, to believe in the existence of his/her own powers and this by applying the principles of reliance or apparentia iuris under article 1398 of the Civil Code.
In the case examined by the Court, the conduct of the person lacking the powers to represent the company was held in an organisational context and in such a way as to induce the third party in good faith not to have any doubts as to the respective capacity to bind the company.
8. Indemnifiable damage for breach of privacy - Minimum threshold of tolerableness - A recent judgment of the Court of Cassation
With its judgment dated 15 July 2014 (No. 16133), the Court of Cassation has ruled on a relatively unexplored issue, namely, that of the indemnifiable nature (and the extent of the latter) of the damage arising out of a breach of privacy.
According to the Court "the non-material damage indemnifiable pursuant to the [Data Protection Code] is not excluded from the check of the 'gravity of the infringement' (concerning the fundamental right to the protection of personal data…) and of the 'seriousness of the damage' (as personal loss effectively incurred by the subject in question) which, generally speaking, is requested by applying article 2059 of the Civil Code in the cases of damage to the inviolable rights provided for under the Constitution. This is also because in the case of non-material damage under the aforesaid article 15, the right protected by said provision is balanced with the principle of joint and several liability - from which the principle of tolerance [derives] - which ... is a point of mediation allowing the legal system to protect the right of individuals within a specific community of persons having to face the cost of a collective existence. The de facto ascertainment... of the judge ruling on the merits ... must be clung to the concreteness of the matter ... Any such ascertainment ... should the offence not exceed the minimum threshold of tolerableness or should the damage be trifling ... may lead to exclude the possibility of [awarding] damages ...".