Article I of Law N°29946 - Insurance Agreement Act (LCS for its acronym in Spanish) considers insurance in which there is a business disparity between the insured and the insurer, to the point that the same article refers to the Consumer Protection and Protection Code.
The LCS brings problems to so-called 'large risk' insurance.
One of the main problems is the period the insurer has, once the loss is notified, to reach a decision on the provision of coverage, as, according to Article 74, the loss will be covered by the insurer if no statement is made in regards to the coverage. In large and complicated claims, the haste to pronounce can lead to take a stance of rejection without the proper sustenance.
The solution for those who want to keep the LCS as it is, is the application of Article III of Title I of the Law, which states: "The insurance contract is concluded by adherence, except in clauses that have been negotiated between the parties and differ substantially from those pre-written."
The reference to the aforementioned Article III only allows that, given that we are dealing with a negotiated contract, the rules of the adhesion contacts are not applied. In cases of large risk insurance, the interpretation contra proferentem is not applicable.
However, the application of Article III is not a solution because the parties could not, even if it is their will to, agree contrary to what is established in Article 74 of the LCS, because of its mandatory nature.
We hope that this issue is addressed conclusively for the interest of the insurance market.
This author is co-authored by Pedro Richter Valdivia at Torres Carpio Portocarrero & Richter Abogados in partnership with DAC Beachcroft LLP.