Multi-risk Home Insurance and Limitation Clauses

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Multi-risk home insurance: Should they indemnify the new value or the real value?

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The answer to the question will depend on the wording of the insurance policy. multi-risk home insurance.  If the insurance contract refers to valor nuevo and a limitation is introduced to “true” said clause is considered limiting and for it to be valid, it must meet the requirements established in article 3 LCS.

 On sentencing 6 July 2020, with No Resolution 399/2020 of the Civil Chamber of the Supreme Court one of these cases is solved. La póliza del seguro se refería primero alvalor de nuevopara posteriormente introducir una limitación al “true”.  La Sala estimó el recurso de casación interpuesto por Dña. Crescence and D. Teófilo against SEGUROS CATALANA OCCIDENTE, S.A.

He ordered the defendant to pay compensation, 10.860 €, after the claim has been insured in the multi-risk policy for the home. It considered that the clause that established a limit to the amount of compensation was limiting the right of the insured, and, therefore, was taken for not, by not complying with the requirements demanded in art. 3 LCS.

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

Ms.. Crescence and D. Teofilo hired a multi-risk insurance for the home with INSURANCE CATALANA OCCIDENTE, S.A. The contract had particular and special conditions. An insured sum was set in the Particular Conditions, within contained risk, for "furniture and trousseau", of 63.000 €. Within the particular conditions, maximum compensation limits were established.

Ms.. Crescence and D. Teófilo suffered damage to some clothing in their home due to the leakage of water from a pipe. The insurance company disagreed as to when it should pay for the damages produced.

Ms.. Crescence and D. Teófilo filed a lawsuit on 30 October 2015 against SEGUROS CATALANA OCCIDENTE, S.A.

Primera Instancia

The Court of First Instance and Instruction No. 3 of Durango issued sentence on 7 September 2016, partially estimating the demand. Sentenced SEGUROS CATALANA OCCIDENTE, S.A., to pay to Ms. Crescence and D. Teófilo, 5.000 € plus the interests of the art. 20 LCS.

Provincial Court

Ms.. Crescence and D. Teófilo filed an appeal.

The 4th Section of the Provincial Court of Bizkaia issued judgment on 28 July 2017, dismissing it. Fully confirmed the sentence handed down in the first instance.

Both in the first instance and in the Provincial Court, the clause was considered to be risk delimiting and not limiting, not being necessary to comply with the provisions of art. 3 LCS. They set the compensation amount at 4.832 €, plus interest of art. 20 LCS.

Supreme Court

Ms.. Crescence and D. Teófilo filed an appeal for cassation and an extraordinary appeal for procedural infringement. Only the appeal was admitted.

The alleged reason was the inapplication of the article 3 LCS, which was estimated by the Chamber, without examining the other grounds of appeal.

In this case, The Chamber brought up the doctrine on the distinction between delimiting and limiting conditions of risk.

In this sense, Hall said “(…) To prevent the insured from being surprised by his reasonable expectations of coverage and his hopes of compensation for the loss suffered frustrated, toda vez que, being perfectly legitimate to limit the risk that is the object of the contract, however, for it, the insured, as the weakest part, must be duly warned, avoiding ignorance of the general conditions of such nature predisposed and imposed by the insurance companies in their policies.

Is precise (…) ensure that it obtains a reliable knowledge of the risk covered. "

To define the bounding and limiting clause, brought up the STS 661/2019, of 12 December, who claimed that "a delimiting condition defines the object of the contract, outlines the commitment assumed by the insurance company, so that, if the claim occurs outside said delimitation, positive or negatively explained in the contract, The obligation of the insurance company to take charge of your coverage is not born.

The limitation clauses, On the contrary, play different role, insofar as the risk is produced, they act to restrict, condition or modify the right of compensation of the insured. "

For his part, the STS 853/2006, of 11 September established what a risk delimiting clause should specify:

  1. "What risks constitute said object;
  2. to what extent;
  3. for how long; and
  4. in what temporal or spatial sphere. "

Ultimately, para la Sala, the limiting clauses restricted, conditioned or modified the insured's right to compensation, after the insured risk occurs.

And this is what happened in the proposed case.

“(…) we consider that the general litigious condition has a limiting character, insofar as it restricts and conditions access to the corresponding compensation for the damage suffered to clothing, that have become useless, and that is thus limited to the real value of the insured object, in front of the general proclamation of compensation of the content to new value, in a condition (…) of the policy, (…) first it is proclaimed that such value will be compensated for later with the expression it will be limited to make a referral to a general condition. "

Conclusion

Despite being lawful to establish a limit to the right to compensation, This limit must comply with the requirements set forth in art. 3 LCS. The insurer cannot impose a non-negotiated limiting clause and add it to the home's multi-risk policy without it being highlighted and expressly signed by the insured.

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