Following Decision 9140 by the Joint Sections of the Supreme Court on May 6 2016, information asymmetry and the protection of insurance contract clauses became widely debated topics.
While the court focused on the need to assess the validity of claims-made clauses on a case-b y-case basis, this approach could also be applied in principle to any insurance contract clause that is not regulated by the Civil Code or other legislation.
The court affirmed this potentially systemic principle without providing a precise indication of the criteria that should be used to conduct a validity test under Article 1322 of the Civil Code1.
Is a clause invalid only when it violates mandatory rules, public order or public morality, as per Article 1343 of the Civil Code2? Can a clause be held invalid if it violates the Constitution's basic principles? Is a clause unworthy of protection in all cases where the interests of the parties to the contract or single covenant are tipped in favour of the stronger party, particularly where the contract or covenant is characterised by information asymmetry in the stipulation phase?
The absence of court guidance in this regard could result in uncertainty, as seen in decisions issued by the merit courts following Decision 9140. A number of courts ruled that the claims-made clause subject to scrutiny was lawful in the given circumstances, while others ruled on the contrary, relying on the absence of the validity requirement.
In this context, it cannot be overlooked that, since 2010, strict and wide-ranging pre-contract information duties have been introduced by the Italian insurance regulator to reduce information asymmetry, which is typical in insurance contracts3.
The introduction of such duties and the opportunity for proposers to focus on the main aspects of a contract (including exclusion and limitation clauses) before concluding could, in principle, play an important role in the discussion of the validity principle between insurers, insureds and judges.
If the proposer is given a comprehensive explanation of the contract, including its main features and relevant limits, and the insurer can provide evidence in this regard, the scope for challenging an insurance contract's ex-post clauses under the validity principle should be reduced.
These points underline the importance of drafting clear and unambiguous policy wording, arranging clear and exhaustive pre-contract information and supervising the sale of insurance products by distribution networks.