By Article 1081 of the Colombian Commercial Code, proceedings on an insurance policy claim must generally be brought within two years of the date upon which the insured had knowledge of the facts giving rise to the claim, or else the date upon which he ought to have had such knowledge. In cases of first party physical damage claims this will be a relatively straightforward concept, being the date upon which the physical loss occurred. Difficulties arise, however, in those cases where the loss claimed for is contingent upon some other event or happening, an issue that recently came before the Colombian Supreme Court in the case of Cueros y Diseños S.A. v BBVA Seguros Colombia S.A.
The case concerned a fire at the insured premises that took place on 26 December 2004, though the issue in dispute actually concerned the contingent business interruption ("BI") element of the loss. The insured commenced litigation on the BI claim on 26 February 2007, that is to say more than two years after the fire, in response to which the insurer pleaded time bar. The insured contended that the two year limitation period commenced only after three successive factors were given, namely the resumption of the insured’s operation following the fire, which occurred on 26 May 2005, the end of the six month BI indemnity period, which occurred on 26 June 2005, and the final adjustment report, which was delivered on 13 December 2005.
The insured's arguments were rejected at both first and second instance, the court agreeing with the insurer that the limitation period expired two years after the fire, pursuant to Article 1081. However, the insured appealed again to the Supreme Court, which reversed the decision and concluded that the claim was indeed brought within time. The court held that a BI claim was not necessarily to be treated the same as the physical damage claim. In doing so, the judge cited US authorities on the nature of a BI claim but also drew some important distinctions between the American (gross earnings) models of BI cover, and the English (gross profit) form. The present cover adopted the English model, whose purpose the court said was to put the insured in the position they would have been in had the insured loss not occurred, compensating for consequential loss of profit subject only to a stated maximum indemnity period. Accordingly, the "loss" insured, so the court found, was not the fire but the future loss of profit resulting from it, a loss that could only be realised upon the end of the period of interruption of the business, or the end of the indemnity period, whichever was the sooner. Accordingly, in the present case the triggering date was 26 May 2005, when the insured re-commenced its operations, meaning that a claim brought in February 2007 was within time. That said, the court awarded penalty interest only from the time that the lawsuit was served on the defendant insurer, namely in May 2007.
The case provides some useful guidance on the approach of Colombian courts to time bar in policy claims, though it should borne in mind that Colombia's system of judicial precedent does not operate in the same way as that in the common law world. Only once a proposition has been re-stated by the courts three times will it be regarded as formally binding. This case is also a useful reminder of the longevity of Colombian litigation. The claim was initiated in early 2007 but only came to a final conclusion almost ten years later.