Preliminary and jurisdictional considerations in insurance litigation
In what fora are insurance disputes litigated?
Belgian insurance legislation does not contain specific rules on the fora for litigating insurance disputes.
Insurance claims are usually brought before civil courts in accordance with Belgian judicial law.
The competent court is the court of the place where the policyholder is domiciled (or if the policyholder is a company, where the company has its registered office), pursuant to the mandatory rules of the Belgian Judicial Code.
Insurance disputes may be brought before the small claims court, the court of first instance, the commercial court or the police court, depending on the value of the claim, the nature of the claim and the capacity of the parties. In the last instance, the court of appeal may rule on insurance cases, and subject to certain conditions, the Belgian Supreme Court.
Belgian insurance legislation prohibits clauses in insurance policies where the parties agree in advance to submit their disputes to arbitration. It is only after the occurrence of a dispute that the parties may decide to settle their disputes through arbitration. This rule does not apply to specific insurance policies such as transport and credit insurance and reinsurance.
Insurance disputes can in general also be brought before the insurance ombudsman. This will suspend the limitation period applicable to insurance claims. The ombudsman will try to help the parties reach an amicable solution, without having the authority to impose binding obligations on the parties. If no amicable solution is reached, the ombudsman may provide non-binding advice to the parties. This advice is not confidential and can be used in court proceedings.
Causes of action
When do insurance-related causes of action accrue?
Insurance-related causes of action mostly accrue in light of an insurance company’s (partial or total) refusal to pay out under the insurance policy because of contractual exclusions, a breach of the policyholder’s information obligations before issuing the policy or a breach of a contractual obligation. For investment-linked life insurance policies, the disputes often relate to mis-selling issues and arise when the underlying investments perform poorly.
The limitation period for bringing claims under an insurance policy expires three years from the occurrence of the circumstances that give rise to the claim. A specific limitation period of 30 years exists for certain types of claims under life insurance contracts.
What preliminary procedural and strategic considerations should be evaluated in insurance litigation?
In recent years, the Belgian legislator has paid a great deal of attention to alternative dispute resolution, also with respect to insurance. The insurance sector itself encourages insurance companies and intermediaries to resolve policyholder conflicts amicably. For example, according to the Belgian professional organisation for insurance companies Assuralia, an amicable settlement is reached in 80 per cent of all cases where legal expenses insurance is involved.
Therefore, it is common practice in Belgium for parties to enter into negotiations when there is an insurance dispute. However, these negotiations are not confidential and may be used in legal proceedings, unless covered by legal privilege (eg, confidential lawyer-to-lawyer communications) or a confidentiality obligation under a specific NDA. The willingness of insurance companies to settle insurance claims depends on several factors: the importance of the commercial relationship, the precedential value and possible reputational risks, inter alia.
In Belgian court proceedings, the successful party is entitled to a judicial indemnity to compensate that party for the legal costs it has incurred.
Lastly, specific attention should be paid to the role and position of the insurance intermediary. Because a majority of the insurance policies in Belgium are concluded through insurance intermediaries, the intermediary is often the first point of contact for the policyholder in the event of a claim and will also perform important claims management obligations. Furthermore, in the event of an insurance dispute, often both the insurer and the insurance intermediary are summoned before the court by the policyholder. In that regard, Belgian case law often holds the insurer liable for the actions (and inactions) of the insurance intermediary, for example, in the event that the insurance intermediary is not licensed, in the event of serious mismanagement or if the insurance intermediary has embezzled funds in the context of investment-linked life insurances.
What remedies or damages may apply?
The applicable remedies or damages depend on the capacity of the claimant and the type of insurance. In general, the policyholder will claim due performance of the insurance policy by the insurer.
The 2014 Insurance Act imposes the obligation on the policyholder to take all reasonable measures to prevent and limit the consequences of the insured incident. If the policyholder does not comply with this obligation, the insurer is entitled to either reduce its performance under the policy to the amount of the loss suffered by the insurer as a result of the policyholder’s non-compliance, or to refuse cover if the policyholder acted with fraudulent intent.
There are specific rules for fraudulent insurance claims and claims that appear to be completely fictitious or overestimated. The insurer may reduce its performance (if the policyholder has acted in good faith) or even refuse cover (if the policyholder has acted in bad faith). Under certain circumstances, the insurer may terminate the insurance policy.
Under what circumstances can extracontractual or punitive damages be awarded?
In principle, Belgian insurance law does not allow punitive damages to be awarded. The policyholder is only entitled to be indemnified for the actual damage suffered. This implies that the policyholder must be put in the same financial position as if the insured risk had not materialised. The amount of any compensation is therefore limited, and the insurer cannot be liable for additional damages.
Extracontractual damages are relevant in the event of a breach of pre-contractual information obligations and in the event of the nullity of the insurance policy. In the latter case, the aggrieved policyholder could in addition to claiming the nullity of the insurance policy also claim extracontractual damages. Both remedies (a claim for the nullity of the insurance policy and a claim for damages) are often raised together in insurance litigation.
Interpretation of insurance contracts
What rules govern interpretation of insurance policies?
The 2014 Insurance Act contains a specific interpretation rule, stating that the interpretation most favourable to the policyholder will prevail. The basic contract interpretation rules of the Belgian Civil Code also apply to insurance policies. The primary rule is that the contract should be interpreted on the basis of the common intention of the parties.
When is an insurance policy provision ambiguous and how are such ambiguities resolved?
An ambiguity exists when there is a lack of clarity over the meaning of a certain clause of the insurance policy or when two or more clauses of the insurance policy contradict each other. Such ambiguities are usually resolved by applying the interpretation rules applicable to (insurance) contracts.
In the event of an ambiguity in a specific clause of an insurance policy, the 2014 Insurance Act stipulates that the interpretation most favourable to the policyholder will prevail. This rule applies to all terms and conditions of the insurance policy, irrespective of whether they have been individually negotiated by the parties.
In addition to the specific interpretation rule of the 2014 Insurance Act, there are the general Belgian civil law interpretation rules applicable to contracts. The interpretation rule in the 2014 Insurance Act takes precedence for most insurance policies. However, the civil law interpretation rules remain relevant for specific insurance policies, such as the insurance of certain industrial risks. The civil law interpretation rules imply that, if a contract (clause) can be interpreted in various ways, preference should be given to the interpretation (i) pursuant to which the contract may be performed, (ii) which corresponds best to the content of the contract, and (iii) which is customary in the region where the contract was entered into.
In addition, there is a tendency in the Belgian legal literature to give effect to good faith when interpreting contracts, which means that reference is made to the manner in which a normal, prudent and reasonable person would have acted to resolve the interpretation dispute, in accordance with fairness and reasonableness.
Notice to insurance companies
Provision of notice
What are the mechanics of providing notice?
When a claim occurs, the policyholder must report the claim to the insurer. If applicable, the policyholder may also report the claim to the insurance intermediary (either an insurance broker or agent). Subject to any specific requirements in the policy, there are no specific formal requirements. However, for evidentiary purposes, it is highly recommended that this notice is given in writing.
Under the 2014 Insurance Act, the notice given to insurance companies of the claim for compensation suspends the limitation period. This suspension continues until the insurance company has issued a final decision. This is beneficial to the policyholder since it provides protection when negotiating with an insurance company.
For liability insurance policies, the 2014 Insurance Act states that the policyholder must provide the insurer with all information related to the insured claim as soon as possible, such as all civil and criminal procedural documents, notices of default and registered letters. Furthermore, the policyholder must defend itself against the claim and appear before court, failing which the policyholder must compensate the insurer. In addition, the policyholder must mitigate the damage and, in general, cooperate with the insurer.
In that context, the policyholder is not entitled to compensate the injured party or conclude a settlement agreement without the prior written approval of the insurer. Similarly, the policyholder cannot acknowledge or accept liability to the injured party, as this would prejudice the insurer’s rights. Such acknowledgment or recognition is not enforceable against the insurer.
What are a policyholder’s notice obligations for a claims-made policy?
The policyholder’s notice obligations are typically described in the insurance policy, in addition to the general notice requirements under the 2014 Insurance Act (see question 8). Specifically for claims-made policies, the time of notification of the insurance claim to the insurer will determine whether the insurer provides cover. If the claim is notified after the insured period (but relates to incidents that occurred during the insured period), the insurer will not provide cover.
When is notice untimely?
The policyholder’s notice obligations are typically described in the insurance policy, including the time frame in which to provide notice.
The 2014 Insurance Act obliges the policyholder to complete the notice of claim for the insurer as soon as possible and where appropriate within the term agreed in the insurance policy. There is no legally determined period in which the notice must be made.
Even if the insurance policy provides for a specific period in which the policyholder must report the claim to the insurer, the 2014 Insurance Act stipulates that the notice of claim may also validly be made after the expiry of this contractual period, provided that notice is given as soon as possible. The policyholder bears the burden of proof.
What are the consequences of late notice?
The policyholder’s notice obligations are typically described in the insurance policy, as well as the consequences of late notice.
The 2014 Insurance Act makes a distinction between the unintentional and the intentional breach of the obligation to provide notice (on time).
If the policyholder unintentionally fails to comply with the obligation to provide notice on time, the insurer may claim compensation provided that the latter can prove that it suffered actual damage as a result of the late notice.
If the policyholder acted with fraudulent intent, the insurer may refuse to provide cover, regardless of whether the insurer has suffered damage as a result of the late notice.
Insurer’s duty to defend
What is the scope of an insurer’s duty to defend?
If the policyholder has notified a third-party claim to the insurer, the (liability) insurer is obliged to defend the policyholder. The insurer must take charge of the dispute as soon as it becomes apparent that the insurer is obliged to provide cover. Absolute certainty on the insurer’s obligation to provide cover is not required, since the policyholder may gradually prove it is not liable or it may gradually become apparent that the insurer is not obliged to provide cover.
However, the insurer’s right to take charge of the dispute is also a fundamental right of the insurer. This right gives the insurer free choice to, inter alia, appoint a lawyer, negotiate with the aggrieved party and invoke the appropriate legal remedies.
Failure to defend
What are the consequences of an insurer’s failure to defend?
There are two limitations to the insurer’s duty to defend. First, the duty to defend is limited to civil proceedings. This principle does not apply to criminal proceedings, where the insurer is not in charge of the dispute and the policyholder retains full autonomy. Second, the civil interests of the insurer and the insured must coincide. If the interests do not coincide, the insurer’s duty to take charge of the dispute does not apply. For example, their interests are not fully aligned if the aggrieved party’s claim is not fully covered by the insurance policy. In such case, the policyholder itself shall account for a portion of the damage. Similarly, the interests of the insurer and the insured no longer coincide if the insurer is entitled to partial recourse against the policyholder or if the cover is limited. Lastly, it is also possible that the insured has a financial interest that is not fully covered by the insurance policy. The right of the insurer to take charge of the dispute is therefore limited to the extent that the insurer is obliged to provide full cover. When a liability insurer neglects its duty to defend the insured in a wrongful way, the insured’s remedy consists of forcing the insurer to provide cover.
Standard commercial general liability policies
What constitutes bodily injury under a standard CGL policy?
Bodily injury consists of any injury to the body, such as death or wounding.
What constitutes property damage under a standard CGL policy?
Property damage consists of damage to or destruction of property.
What constitutes an occurrence under a standard CGL policy?
The insured occurrence is typically described and defined in the insurance policy. The insurer often requires a written notice from a third party in which the policyholder is identified as being liable.
Absent detailed provisions in the insurance policy, a standard CGL policy occurrence is triggered by a dispute (ie, broadly interpreted as the difference of opinion between persons whose interests are involved in a liability-based claim for compensation).
In addition, reference can be made to the definition of complaint in the ‘Rules of conduct for complaints management in the insurance sector’, which is ‘any expression of dissatisfaction - in relation to the insurance activities of the company - to which an implicit or explicit answer is expected’.
How is the number of covered occurrences determined?
This is typically determined in the insurance policy. The 2014 Insurance Act contains no particular rule on the number of covered occurrences.
What event or events trigger insurance coverage?
The insurer is contractually liable to provide insurance cover for damage suffered by the policyholder during the insured period stipulated in the insurance policy and within the limits of the insurance policy.
How is insurance coverage allocated across multiple insurance policies?
The 2014 Insurance Act contains specific rules on ‘over-insurance’ (ie, when the same loss is insured in multiple insurance policies). According to the mandatory indemnification principle, the performance due by the insurer may not exceed the damage suffered by the policyholder. This implies that if a policyholder is duly compensated by an insurer, it can no longer claim additional compensation under other insurance policies covering the same damage.
If the over-insurance is the result of bad faith on the part of the policyholder, the insurance policy is null and void. If there was no intention of the policyholder to breach the indemnification principle, the insurer’s liability to provide cover is reduced proportionately and pursuant to detailed rules set out in the 2014 Insurance Act.
First-party property insurance
What is the general scope of first-party property coverage?
A first-party property insurance policy provides cover for damage to property that is suffered by the policyholder. The 2014 Insurance Act distinguishes between (i) insurance pursuant to which the insurer is obliged to perform a specific service (eg, legal assistance insurance), and (ii) insurance for the payment of compensation (eg, fire insurance).
How is property valued under first-party insurance policies?
The exact valuation of property can be a difficult exercise, for example, as regards insurance for works of art and jewellery, or insurance for loss of profit. To avoid issues over the determination of the value of the (lost or damaged) property once an insured event has occurred, the parties to an insurance policy have the opportunity to determine the property value in advance.
First, the parties may opt for the reconstruction value, the restoration value or the replacement value, even without deduction resulting from depreciation. A policyholder may thus insure goods for a higher value than the real value of those goods, without breaching the indemnification principle, which prevents the policyholder from becoming unjustly enriched.
Second, the policyholder may determine the sum insured in the insurance policy. The insurer has no obligation to verify the insured amount. However, the law contains specific rules on over- and undervaluing the insured risk.
Third, the parties may include an appraised value for the insured goods. If the insured goods have been significantly impaired, each party may reduce the amount of the appraised value or terminate the contract. This appraised value only binds the parties to the agreement. The insurer who is consequently subrogated to the rights of the insured may only claim what is due from the liable party on the basis of the general liability rules.
Is insurance available in your jurisdiction for natural disasters and, if so, how does it generally operate?
Insurance cover for natural disasters is legally included under simple risks fire insurance (as opposed to fire insurance covering commercial and industrial risks). In other insurance policies, it is up to the parties to decide whether natural disasters are covered.
In principle, the simple risks fire insurance policy provides cover in the event of earthquakes, floods, the overflowing or blocking of public sewers, and subsidence.
Directors’ and officers’ insurance
What is the scope of D&O coverage?
The scope of the D&O coverage is linked to the typical risks that company directors, managers and officers may face, such as: regulatory and other investigations and inquiries; cyber-attacks; risk of data loss; criminal and regulatory fines, penalties, and securities or shareholder claims.
D&O coverage and related indemnities are receiving a higher level of focus and attention from insurers in view of the increasing risks that D&Os are exposed to, both from a regulatory and a Belgian law perspective and their increasing exposure to personal liabilities.
What issues are commonly litigated in the context of D&O policies?
There are several coverage issues:
- whether the D&O policy will provide cover if there is an investigation in which D&Os are involved;
- whether the D&O policy terms are clear and easy to follow;
- whether the D&O policy will be able to cover claims in all jurisdictions;
- whether there is cover for the cost of (legal) advice in the early stages of an investigation;
- how claims against D&Os will be controlled and settled;
- how the interaction between the D&O policy and the company’s indemnification obligations is managed; and
- what cover applies in the event of a conflict of interests between D&Os and the company.
What type of risks may be covered in cyber insurance policies?
There is no standard cyber insurance cover under Belgian insurance law. However, the market for cyber risk insurance in Belgium is developing at a fast pace. This is not without challenges: the occurrence of cyber risks keeps increasing, regulatory fines increase exponentially and the risk is difficult for insurers to quantify.
Cyber risk insurances typically cover the following:
- First-party insurance:
- costs of investigations;
- theft of money;
- expenses incurred in notifying a breach of business interruption losses as a result of cyber attacks;
- cyber exhortation; and
- reputational damage.
- Third-party insurance:
- cost of losing data;
- cost of restoring data; and
- defence costs.
- Any additional cover:
- crisis management; and
- forensic services.
What cyber insurance issues have been litigated?
The Belgian cyber insurance market is evolving at a rapid pace. There has been no published case law on cyber risk insurances yet.
Is insurance available in your jurisdiction for injury or damage caused by acts of terrorism and, if so, how does it generally operate?
There is specific legislation in Belgium requiring certain insurance policies to provide cover against damage caused by terrorism. The 2007 Terrorism Insurance Act’s purpose is twofold: (i) the Act intends to ensure that insured persons who suffered damage as a result of a terrorist attack are compensated fairly and in a timely manner, and (ii) the Act intends to guarantee the stability and sustainability of the entire insurance sector. Pursuant to the 2007 Terrorism Insurance Act, insurance companies may join the non-profit entity TRIP VZW/ASBL (TRIP), which stands for Terrorism Reinsurance and Insurance Pool, together with the Belgian State. TRIP creates a pool comprising insurance companies, reinsurance companies and the Belgian state, with the purpose of indemnifying all terrorism risks covered by the insurance policies issued by the members of the pool. A dedicated Terrorism Claims Advisory Committee advises TRIP on the appropriate amount of payouts to the victims, which are allocated to the different members of TRIP.
Insurance policies that are required by the 2007 Terrorism Insurance Act to cover damage caused by terrorism relate to civil liability insurance, accident insurance, life insurance, hospitalisation insurance, etc. In other insurance policies, terrorism risks may be excluded.
Update and trends
Update and trends
Updates and trends
The 2014 Insurance Act is currently being reviewed by a working group with the aim of drafting a new insurance act.
In addition, the Belgian Companies Code is being reviewed and updated. An important new development currently being discussed concerns a liability cap for D&Os. This cap would apply to the D&O’s internal or external liability, to liability in the context of bankruptcy proceedings and to the civil consequences of a crime. Four different liability limits are currently foreseen in the draft act, depending on the turnover and the total balance sheet of the company: €250,000, €1 million, €3 million and €12 million.