Most insurance policies will specify the law of a particular country which the insurers have decided should govern any disputes under the policy and the jurisdiction/courts in which proceedings are to be brought. However, where there is some link to an EU member state it is important for insurers to be mindful of the limiting impact of the Rome I Regulation (choice of law) and the Brussels I Regulation (choice of court/jurisdiction) on the choice of such provisions in insurance contracts.
Jurisdiction clauses/choice of court clauses
The Brussels I Regulation provides the general rule that an insured who is domiciled in an EU member state can only be sued in the courts of that member state. On the other hand, an insurer which is domiciled in the EU, can be sued in its member state of domicile; in the member state of domicile of the plaintiff policyholder/insured/beneficiary; or (if a co-insurer) in the member state in which proceedings are brought against the leading insurer. Agreements extending the right of insurers to sue the insured elsewhere are only valid if the agreement:
- is entered into after the dispute has arisen;
- is concluded with a policyholder who is not domiciled in a member state (except if the insurance is compulsory or relates to immoveable property in a member state);
- relates to certain risks to ships, aircraft or goods in transit;
- relates to a large commercial risk (which broadly includes commercial risks or property risks where the insured is a substantial commercial entity and satisfies specified tests); or
- where both the insurer and the insured are domiciled or habitually resident in the same member state at the time the contract is concluded.
Reform to the Brussels I Regulation has been proposed by the European Commission, however, the Commission’s proposal does not substantially amend the rules which currently apply to jurisdiction provisions in insurance contracts, although it is proposed to extend the rules to include insurers domiciled outside the EU. It is expected to be two or three years, however, before this proposal is adopted.
Choice of Law clauses
The Rome I Regulation applies different rules to choice of law provisions depending on whether the risk in question is classified as a “large risk”.
Where a large risk is concerned, the parties are permitted to choose the governing law subject to certain caveats. However, in the case of an insurance contract covering other risks, the parties can only choose the following law:
- the law of any member state where the risk is situated at the time of the conclusion of the contract;
- the law of the country where the policy holder has his habitual residence (a company has its habitual residence at its place of central administration at the time the contract is concluded);
- in the case of life assurance, the law of the member state of which the policy holder is a national;
- for insurance contracts covering risks limited to events occurring in one member state other than the member state where the risk is situated, the law of that member state;
- where the policy holder pursues a commercial or industrial activity or liberal profession and the insurance contract covers two or more risks which relate to those activities situated in different member states, the law of any of the member states concerned or the law of the country of habitual residence of the policy holder.