The National Insurance and Bonds Commission recently added two new articles to the Insurance and Bonding Sole Provisions which set out new surety insurance contract requirements.
Surety insurance contracts must now include:
- a clause stating that the insurer will supply the policyholder with the corresponding certificates for delivery to the insured (beneficiary); or, if so agreed, that the insurer will deliver the certificates directly to the insured;
- confirmation that the insurer is authorised to pay the indemnity for damages without prior notice or consent of the policyholder;
- confirmation that the indemnity may be paid as compensation or as a penalty for the damages suffered. For compensation, if a specific value for claims was previously agreed, it should be reviewed and a damages estimation will not be required; or, if the coverage is limited to an insured amount, compensation should be limited to the actual estimation of damages (ie, the insurer will be liable only up to the limit of the insured amount;
- a procedure for the policyholder to refund the insurer on paid amounts;
- confirmation that the insurer will not substitute the policyholder in the compliance of its principal obligation; and
- a procedure for cancelling the surety insurance policy.
In case of legal action, insurers may not oppose any of the rights and defences that the policyholder has against the insured under the underlying obligation. The contract must not include clauses that contravene surety insurance principles.
For further information on this topic please contact Carlos Ramos Miranda at Hogan Lovells BSTL SC by telephone (+52 55 5091 0000) or email ([email protected]). The Hogan Lovells BSTL SC website can be accessed at www.hoganlovells.com.
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