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23 June 2009
In a judgment dated April 8 2008 the Genoa Court addressed the thorny issue of claims-made clauses.
The court held that a claims-made clause - which makes the effectiveness of a guarantee dependent upon the point at which the injured party makes its claim - has the effect of making a contract 'atypical' and void. The court based its finding on two principles.
First, the court found that claims-made clauses are contrary to Article 1917 of the Civil Code, which is essential to the validity of a contract and regulates insurance contracts on the basis of the loss-occurrence model.
Second, it found that such a clause deprives the contract of its basic rationale, as there is effectively no transfer of risk from the insured to the insurer.
The issue of the validity of claims-made clauses was considered by the Court of Cassation in 2005,(1) when it held that an insurance contract structured according to the claims-made scheme is a legal, if atypical, contract. However, it stipulated the need for specific approval of the clause in writing if it limits the insuring party's responsibility (for further details please see "Recent Rulings on Claims-Made Cases").
Despite the 2005 decision, the trial courts have since expressed conflicting opinions, largely because the Court of Cassation's reasoning was not wholly convincing. In certain recent judgments the Rome Court has diverged from the principle established by the Court of Cassation, holding claims-made clauses to be null and void because they contradict the code's prohibition of insurance for putative risk. In other cases, the clause was simply found to be an unfair term and therefore unenforceable unless specifically approved in writing by the insured. Other decisions have upheld the clauses as being compatible with the system of insurance on the grounds that they do not limit the insurer's responsibility, but define the limits of the coverage it provides. On this analysis, claims-made clauses are lawful on the basis of Article 1322 of the code, which provides that "the parties may freely determine the contents of [a] contract within the limits imposed by law".
The insurance contract examined by the Genoa Court was a contract of one year's duration that provided for coverage of claims made against the insured party during the term of the policy and notified to the insurer within the same period.
The court stated that:
"The coincidence of timeframes… makes it almost certain that the insured party will not see its property protected from the need to satisfy the claims of those [parties that] may incur damages as a result of professional activity, except in exceptional and isolated cases...
The rationale of an insurance contract pursuant to Article 1917(1) of the code is absent - namely, the transfer of risk from the insured party to the insurer."
The court concluded that:
"Subordinating the effectiveness of the policy to the presentation of the claim by the injured party and to the relevant communication to the company by the insured party within the period of effectiveness of the contract - within a year in this case - when we know that claims may be presented years after the fact, taking into account the five-year period of limitation applicable to torts and the 10-year period for contractual liability, makes it impossible for the contracting party to exercise its right."
For further information on this topic please contact David Maria Marino at Giuffrè Scorcelli Rosa & Partners - Studio Legale by telephone (+39 02 76 39 07 44) or by fax (+39 02 76 39 06 81) or by email (email@example.com).
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