In recent years, first- and second-instance judges have ordered insurance companies to pay claims in excess of the sum insured in liability insurance. They did so on the social function of insurance and the right of claims victims to obtain comprehensive compensation for the damage suffered, creating great concern both in the local market as well as among reinsurers.
However, on 8 July 2020, the Supreme Court of Justice of the Nation ("CSJN") re-ratified the enforceability of the coverage limit provided for in the insurance contract to the injured third party by providing that court judgments can only be enforced against the insurance company within the limits agreed in the contract.
Declaring insurance limits unopposable to affected third parties would result in an increase in policy costs, which would be a clear contrast to the objectives sought by the compulsory insurance system: widespread access to insurance, increasing the possibility of compensation for potential victims of car accidents.
However, the negative impact on the solvency of insurance companies cannot fail to be mentioned in the event that the limit of the sum insured in the policies is not respected. Extending the insurance company's liability outside these carefully calculated limits by actuaries would directly affect its ability to deal with compensation to be paid for covered claims.
Martín G. Argañaraz Luque in partnership with DAC Beachcroft LLP.