December 16 2008
In a decision dated October 2 2008(1) the Second Civil Division of the Court of Cassation (the French supreme court) ruled for the first time on the application of coverage over time within the meaning of the About Act.
The act - which is named after Senator Nicolas About, the originator of the foregoing private member’s bill which was passed on December 30 2002 - introduced a new system for medical malpractice insurance.
The act made ‘claims made’ professional indemnity insurance mandatory for medical practitioners. Thus, the insurer whose policy is in effect when a claim is first filed against the medical practitioner must handle the claim and is not entitled to recover against the practitioner’s former insurers.
However, a debate had developed between trial and appeal courts as to the application of coverage over time within the meaning of the act in cases of successive contracts.
Some courts took the view that, pursuant to the second paragraph of Article 5 of the act, the policy in effect at the time of the loss-triggering event should continue to apply during a discovery period of five years from the date of expiration of the policy.
Others argued that Article L251-2 of the Insurance Code (as amended by the act), which prescribes that losses are to be covered first and foremost by the contract in force at the time of the first claim, applies to all contracts concluded or renewed after the act entered into force.
The Court of Cassation has now put an end to such debate.
On March 7 2003 the heirs of a deceased patient, who had undergone surgery before the act entered into force (ie, before December 31 2002), sued the surgeon.
The surgeon had taken out two successive insurance contracts with two different insurers to cover his professional liability. The first was in force until December 31 2002 and the second from January 1 2003.
The loss-triggering event - the surgery - occurred in March 2002, but the claim was made on March 7 2003.
In its decision of July 12 2007 the Bourges Court of Appeals upheld the judgment of the first-instance court of Châteauroux dated October 24 2006. The appellate court took the view that, pursuant to the second paragraph of Article 5, the policy in effect at the time of the loss should continue to apply during a discovery period of five years from the date of its expiration.
On an appeal on a point of law filed by the insurer ordered to cover the claim, the Second Civil Division of the Court of Cassation reversed the appellate court’s decision based on two provisions, namely the first paragraph of Article 5 and the seventh paragraph of Article L251-2.
The ruling of the Court of Cassation is the first in which it has rendered a decision setting forth the principles governing the application of coverage over time within the meaning of the act.
The court quashed the appellate court’s decision for lack of legal foundation, stating that: (i) Article L251-2 applies to all policies effected or renewed after the act entered into force on December 31 2002; and (ii) coverage is governed by the provisions of the seventh paragraph of Article L251-2 of (as amended by the act), which excludes the operation of the ordinary rules of Article L121-4 of the code and prescribes that losses are to be covered on a priority basis by the contract in effect at the time the first claim is filed.
As a consequence, the insured may now direct his or her claim only against the insurer whose contract is in effect at the time of the claim.
In expounding the reasoning for its ruling, the court criticized the appellate court for deciding that the contract in effect at the time of the loss-triggering event should continue to apply for a period of five years after the contract’s expiration even though the first claim against the surgeon had been filed on March 7 2003 (ie, at a time when the surgeon’s professional liability was covered by another insurer with effect from January 1 2003).
The Court of Cassation isued that ruling even though the later insurer was not a party to the case and there was no alternative means by which the court could ensure that the loss would be covered. In so doing, the court followed the recommendations of the advocate general, who has issued an advisory opinion analyzing the points of law on which this appeal was based. The advocate general had concluded that, pursuant to the second paragraph of Article 5 of the act, the former insurer would be liable under the five-year discovery period attaching to its policy pursuant to the act only if the surgeon were not carrying professional indemnity insurance at the time the claim was filed.
In issuing the ruling, the Second Civil Division sat en banc, which means that it had to rule on an important and sensitive issue.
The reference to the seventh paragraph of Article L251-2 at the very beginning of the decision also means that the case involved a matter of principle.
Furthermore, the court ensured that its October 2 ruling would be widely published by ordering that it appear in the court’s bulletin and annual report and be posted to the court’s website. This shows the will of the court to unify the case law and ensure that the act is construed the same way by all trial and appellate courts.
It is therefore indisputable that the ruling is a precedent resolving the issue of coverage over time within the meaning of the act.
The Caen and Paris Courts of Appeals have already ruled in accordance with the Court of Cassation's interpretation of the act, in decisions dated October 28 2008 and November 21 2008 respectively.
However, it is uncertain whether the trial and appellate courts which so far had taken the view that the policy in effect at the time of the loss-triggering event should continue to apply during a discovery period of five years from the date of expiration of the policy will reverse their own precedents.
Should one or more appellate courts refuse to follow the precedent of October 2 2008, then any appeal on a point of law to the Court of Cassation will be heard by a ‘full court’.
The full court could make a determination different from that made by the Second Civil Division, but given the wide publication of that ruling and the recommendations of the advocate general, it is highly unlikely that the full court would depart from the precedent set by its Second Civil Division.
The ruling made by the Court of Cassation should be regarded as a persuasive precedent and has been welcomed by all insurers that participated in the preparation of the act, since it is in keeping with the principles of the act.
The court should reaffirm its ruling in all similar pending and future cases.
For further information on this topic please contact Carole Sportes at BOPS (SCP Bouckaert Ormen Passemard Sportes) by telephone (+33 1 70 37 39 00) or by fax (+33 1 70 37 39 01) or by email (email@example.com). The BOPS website can be accessed at www.bopslaw.com.
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