Welcome to our insurance updater. We will highlight key legislative and regulatory developments in Europe. We will also review court judgments and insurance market publications that are likely to be of interest to you. The Court of Genoa recently ruled against the validity of ‘claims-made’ clauses in third party liability policies, i.e. clauses limiting coverage to those claims which are notified to the insurer during the policy period (as opposed to claims occurring clauses, which cover events taking place during the relevant policy period). The Genoese Court’s ruling follows a series of similar decisions made in Italian courts of first instance (in particular the Court of Rome) that have considered claims-made clauses invalid because they do not comply with the general principles set out in the Italian Civil Code.
In particular, according to the Genoese Court, claims made clauses limit the possibility for the insured to be indemnified for any claims arising from those events which have taken place during the life of the policy, but notified after the end of the policy period. The Court believes such policies are contrary to the rationale behind third party liability policies. The court stated that the aim of such policies should be to transfer the risks of potential claims from the insured to the insurance company, and should not limit policy coverage only to events that have been notified during the validity of the contract. Claims-made policies materially reduce the protection granted to the insured, especially as under Italian law the damaged party has up to five years to make a claim.
The judgments in the courts of first instance conflict with the interpretation of the Italian Supreme Court (Corte di Cassazione), which in 2005 ruled that claims made pursuant to such clauses are valid as long as they have been specifically approved by the insured in writing. However, in distinction from the Common Law system, under Italian law case precedents (even decisions of the Supreme Court) are not binding upon other courts and, even if persuasive, there is no obligation for judges in the lower courts to follow the decisions made in similar cases.
It is expected that confusion as to the legality of claims-made clauses will continue for some years, even if it is likely that the interpretation of the Supreme Court will ultimately prevail, as the principal function of the Supreme Court is to streamline the interpretation of the lower courts with reference to the interpretation of the statutory provisions.