The Law of April 4 2014 on Insurance was published on April 30 2014 in the Official Gazette and will enter into force on November 1 2014. Previously, prevailing case law and commentary in Belgium held that the General Insurance Act 1874 remained applicable to aviation insurance even after the Land Insurance Act 1992 entered into force.
While some view the new law as a whirlwind piece of legislation, others see it as long overdue, since it has been in preparation for more than two years.
Although at first glance the new law seems to create uncertainty regarding aviation insurance – as it repeals the General Insurance Act – its actual impact on aviation insurance contracts is likely to be limited. This is good news, as the General Insurance Act was usually seen as giving parties substantial freedom to draft insurance policies according to their own intentions. Moreover, the simplicity of the General Insurance Act facilitated the co-insurance process with foreign insurers (including with the London market).
This update provides a brief overview of the aim and scope of the new law, and assesses its impact on aviation insurance by addressing the issue of the direct right of action granted to an injured party against the insurer.
The new law is intended to simplify the legislative framework for insurance by codifying:
- certain provisions on control;
- the majority of the Land Insurance Act;
- the General Insurance Act; and
- the Law of March 27 1995 on Insurance Mediation, Reinsurance and Insurance Distribution.
The majority of the Land Insurance Act has been codified in Part 4 of the new law, while the General Insurance Act has been codified in Part 5.
Further, the new law provides increased protection for insurance takers, insureds, beneficiaries and third parties with an interest in the performance of insurance contracts through its implementation of the EU Solvency II Directive (2009/138/EC). In this respect, the law establishes new rules regarding, among other things:
- the drafting process for contractual documents;
- the information provided to insurance takers before and after conclusion of the contract; and
- limitations to the availability of segmentation.
The scope of the new law is broad, as it applies to:
- all Belgian insurers;
- foreign insurers established in Belgium; and
- foreign insurers that provide insurance services in Belgium, but are not established in Belgium.
The law also applies to contracts with an explicit choice of Belgian law.
The General Insurance Act is understood to apply to aviation insurance. Accordingly, since Part 5 of the new law codifies the General Insurance Act almost in its entirety, it may be assumed that Part 5 will apply to aviation insurance.
In principle, the new law will not change the previous regime for aviation insurance. This excludes application of the direct right of action – provided for in Part 4 of the new law – to aviation insurance, as Part 4 is a duplicate provision of the previous regime applicable to non-aviation insurance. This regime complicates the possibility for insurers to deny cover on the basis of exclusions and breaches of warranty.
Instead, claims by third parties should remain subject to the special regime under Article 20.9 of the Mortgage Act, which applies to "all insurance contracts which do not fall within the scope of the [Land] Insurance Act 1992" – including aviation insurance contracts. This special regime does not provide for a direct right of action, but creates a lien in favour of the third party, leaving more room for insurers to deny coverage where exclusion causes or breaches of warranty exist.
Since the new law does not modify this provision, it is reasonable to interpret its scope as extending to all insurance contracts which do not fall within Part 4 of the new law (governing general insurance contracts). Thus, the lien – not a direct right of action – will still be granted to the injured party. This appears to be consistent with Parliament's intention to codify the existing laws.
For further information on this topic please contact Pierre Frühling at Holman Fenwick Willan LLP by telephone (+32 2 643 34 00), fax (+32 2 643 34 88) or email (email@example.com). The Holman Fenwick Willan website can be accessed at www.hfw.com.