By ruling no. 3622 filed on 17 February, the Court of Cassation dealt with the specific issue of the validity of claim made policies where – as in the majority of cases – they also provide cover for claims made against the insured during the policy period but relating to wrongful actions committed before the effective date of that policy (retroactivity period).
According to the Court of Cassation “…the claim made clause involves the possible time lag between the performance of the insurer (obligation to provide compensation in relation to the risk of occurrence of certain events) and the counter-performance of the insured (payment of the premium), in the sense that the insured’s conduct prior to the date of concluding the contract may be covered by the insurance, where the compensation claim for damage is made for the first time after that date, as in the case in question; vice versa, the insured’s conduct during the full force and validity of the policy may not be covered by the warranty, where the compensation claim for damages is brought after termination of the effects of the contract …”.
The Court of Appeal deemed ineffective the clause in question based upon the deemed absence of risk (which is an essential requirement of the insurance contract).
However, according to the Court of Cassation, the Court of Appeal erred in deeming the risk to be non-existent. Indeed, in the case of the policy in question the risk consists of the possibility that the insured has made wrongful actions in the past “albeit not yet being aware of its unlawfulness or likelihood to cause damage …and the motivation of the Court of Appeal is therefore to be deemed incongruous, where it felt it had to exclude the existence of the risk with reference to events that had already occurred. The risk does not concern past conduct in its material nature, but the awareness by the insured of their wrongful actions and their likelihood to cause damage to third parties. Secondly, it is not said that any wrongful actions induces the injured party to bring a claim for compensation for damages. Secondly, contracts containing the claim made clause usually limit the retroactive period to no more than two or three years prior to the signature of the policy, as well as to cases in which the insured is not aware of the previous offence, the related harmful effects and the intention of the injured party to bring action for compensation, keeping in place, in the absence thereof, the possibility of charging against the insured liability and the effects of inaccurate or reticent declarations, in accordance with Articles 1892 and 1893 of the Italian Civil Code (see, precisely with reference to a claim made clause, Civil Cassation, Section 3, 22 March 2013 no. 7273)….”.