Limiting clauses in civil liability insurance

contrato de seguro

 On the limiting clauses of the legal defense coverage in civil liability insurance

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In liability insurance, The clause that limits the legal defense in the event of a conflict of interest may be limiting of rights or considered harmful if the object of the insurance is distorted. In these kinds of situations, the insured does not choose a lawyer because of their free will, but because of the existence of a conflict of interest with the insurer itself. If the coverage limit is insufficient, in relation to the quantum of the civil liability covered by the insurance, se estávaciando de contenidoen la práctica a la póliza.

In this post we review one of these cases, resuelto por la Civil Chamber of the Supreme Court in judgment of 14 July 2020, (Resolución 421/2020).    It upheld the appeal,  forcing to draw up the bill of the lawyer on the quantum of the civil liability covered by the insurance, amounting to 1.200.000 €, having to subtract the 15.193,5 € already paid by the insurance company. It also ordered MAPFRE to pay the legal interests of art. 20 LCS from the 1 July 2016.

Fact background,,es,Juan Alberto and Paulina filed suit against FTA,,es,Asset Securitization Fund,,es,requesting the declaration of nullity for abusive of the floor and ceiling clauses contained in the novation contract of the mortgage loan of,,es,with the corresponding refund of amounts unduly collected,,es,The Securitization Fund Management Company,,es,Beech,,es,acting on behalf of FTA, he responded to said claim alleging that he lacked passive legitimacy since the entity had no legal personality and that it constituted only a private and open fund and that therefore the passive legitimization corresponded to BBVA as successor of Catalunya Banc that was the Company fund constituent,,es

The Cooperative Society Virgen de la Oliva, as policyholder-insured and the insurance company MAPFRE, as an insurer, signed a policy on 20 October 2010, with effects from 31 October of that same year, named Seguro de responsabilidad civil profesional covering (with an insured sum of 1,2 million €) the responsibility that the directors of said entity may incur.

D. Pío was the managing director of the cooperative since 1978. He was claimed compensation of 1.287.309,66 €. In one of the particular conditions of the policy, stipulated that “(…)  When any conflict between insured and insurer (…) the insured may entrust his legal defense to other lawyers, at your free choice, the insurer being obliged to pay the fees up to the limit of 30.000 € per insured up to the maximum amount insured.

D. Pius decided to appoint a lawyer of your free choice, considering that it existed conflict of interest. D's attorney's fees. Tweet amounted to 121.874,48 €.

D. Pío filed a lawsuit against MAPFRE, claiming the amount of your lawyer's fees, since the limit set on the amount was a limiting clause of your rights.

Primera Instancia

The Court of First Instance No.. 1 of Ejea de los Caballeros issued sentence dated 18 April 2017, estimating part application filed by D. Pío. He considered that the clause was delimiting the risk, not limited.

It ordered MAPFRE to pay D. Pío, the amount left to complete 30.000 € for legal assistance, namely, the amount of 14.806,50 €, más el interés del artículo 30 of the LCS from 23 September 2016.

Provincial Court

D. Pío filed an appeal.

The 2nd Section of the Provincial Court of Zaragoza issued a ruling on the day 3 October 2017, dismissing the appeal. Confirmed the sentence handed down in the first instance.

Supreme Court

D. Pius interposed appeal. He alleged three reasons, although the third was inadmissible:

  • first plea: infringement due to non-application of art. 3 LCS, there being contradictory jurisprudence of the Supreme Court that had considered this type of contractual clause as risk delimiter that, in case of conflict of interest, established a quantitative limit to the free appointment of a lawyer by the insured, while it had also established the limiting nature of said clauses, must meet the formal requirements provided in the article indicated for it to be valid.
  • second reason: infringement due to non-application of art. 3 LCS, there is contradictory jurisprudence of the Supreme Court, because on occasions it had considered as delimiting the risk the litigious contractual clause that limited the guarantee covered in general in the policy, while, on other occasions, I had stated that they had a limiting character, must meet the formal requirements provided in the article indicated for it to be valid.

The Chamber resolved the two reasons jointly.

After analyzing the doctrine and jurisprudence, expressed that:

 “En este caso podría considerarse que dichas cláusulas son implícitamente limitativas del derecho del asegurado a la libre elección de abogado. The coverage expected by the insured is being restricted, and the legal defense accessory to civil liability insurance would be denatured.

(….)

The insurance contract would be distorted if insufficient coverage were established in relation to the interests that have been defended, because the defense and effective protection of the rights of the insured, that constitutes the object of the insurance.

(….)

Indeed, how we have been maintaining, the insured does not choose a lawyer of his own free will, but because of the conflict of interest between him and the insurer. One, despite being compelled to do so, the coverage limit is insufficient, as in the case it was 1500 €, this implies distorting the insurance contract, as it limits the insured's free appointment of a lawyer that defends your interests, and empties it into content practice . In these cases, the clause can be qualified as limiting the insured's right and its validity is conditioned to the special acceptance regime provided for in article 3 the CHA.”

 

Ultimately, para la Sala,  the clause in dispute should be classified as limiting: The insured saw the policy distorted in relation to its legal defense, as MAPFRE only had the obligation to pay a quarter of the amount recorded by its lawyer. The insured amount was more than 1 million euros, while the limit of legal defense is established in 30.000 €, a considerable difference between both amounts, which made the Chamber consider that it was, in this case, before a limiting clause of the rights of the insured, which in practice left the contract empty of content.

The Supreme Court upheld the cassation appeal filed by D. Pío.

Conclusion

In liability insurance,  in which notoriously insufficient limits are set for legal coverage in relation to the insured amount,  dichas cláusulas pueden considerarse como “limiting” del derecho del asegurado. Con ellas sevacía de contenidola posibilidad de libre elección del abogado prevista en la póliza para situaciones de conflicto de intereses con la propia aseguradora.

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