French insurance update

Author:Mr Gildas Rostain and David Meheut
Profession:Clyde & Co
 
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This is a selection of recent interesting rulings and decisions in the field of non-marine insurance in France.

Nullity of policy for lack of fortuity

Cass. Civ. 2, 15 avr. 2010, n° 08-20.378, F.D.

Pursuant to article 1964 of the French Civil Code, all contracts of insurance must have a fortuitous character ("caractère aléatoire"). Indeed, if a contract lacks fortuity, it will be found null and void.

This was what happened in the instant dispute where a policy was taken out by the Bar Association of Bastia (Corsica) for its liability in relation to the management of client accounts. A client sued the Bar Association for misappropriation of his funds by a member of the Bastia Bar. The insurance policy was held to lack fortuity since the Bar Association knew, well before the policy had been taken out, that this Bar member was not properly operating the sub-accounts of his clients.

Need for stipulation on time-limitation in direct insurance

Cass. Civ. 2, 14 janv. 2010, n° 09-12.590, D

Under French law, the limitation period applicable to non-marine insurance is two years (article L.114-1 French Insurance Code) which is shorter than the general limitation period of five years for contractual claims. The French Insurance Code requires the insurer to insert a clause reminding the insured of this two-year period and of the ways of interrupting it (article R.112-1). In this case, the insurer was deprived of its right to invoke a limitation defence since it had failed to insert such a clause.

Conditions of liability of an insurer for the acts of a broker

Cass. Civ. 2, 14 janv. 2010, n° 09-10.220, F –D, Sté MMA vie assurances mutuelles et a. v. Epx M.

The insured under a life insurance contract had asked its broker to obtain a minimum rate of 6%, whereas the insurer applied a rate of 4.25% and then 4.1%. In fact, the broker had negligently failed to properly inform the insured on the rate that would effectively apply. The insured brought a claim in liability against the broker and the insurer. The Court of Appeal had found the insurer liable and the French Supreme Court quashed the appeal on the ground that there was no proof that the broker was acting under a power of attorney given by the insurer. www.clydeco.com 1 May 2010 www.clydeco.com 2

Subrogation in credit insurance

Cass. Com., 1er déc. 2009, n° 08-20.656, FS-P+B+R, SA Direct Océan v. SARL L'espadon et a.

In credit insurance, subrogation is governed by a separate provision, namely article 22...

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