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24 September 2019
In a recent ruling (4A 196/2019) the Federal Court addressed the relationship between a contractual forfeiture clause under Article 46(2) of the Federal Insurance Contract Act and the statutory limitation period for insurance claims.
In October 2014 a fire partially destroyed the business premises of a company (C), which notified the claim to its insurer the following day.
On 17 November 2015, after extensive investigations of the claim, the insurer wrote a letter to C with the subject "rejection of claim" and stated that due to various contradictions and inconsistencies, it would provide no insurance coverage for the loss event of 13 October 2014, subject to the elimination of its doubt as to the involuntary nature of the loss event.
After a meeting with C, the insurer issued the following declaration on 4 March 2016: "We are prepared... to waive the plea of the statute of limitation to the extent that prescription has not already occurred to date. We reserve all other rights, defences and objections".
On 30 March 2016 the insurer confirmed its coverage declinature.
On 1 February 2018 a legal action was filed at the Commercial Court, essentially requesting payment of the insurance benefits for the fire loss which C had incurred. The Commercial Court dismissed the action on the grounds that, among other things, the claim had been forfeited in accordance with the General Conditions of Insurance (GCI).
C appealed the decision before the Federal Supreme Court, arguing that, among other things, the Commercial Court had wrongfully failed to apply the so-called 'unusualness rule' in relation to the GCI provision in question.
The respective GCI provision provided that in case of coverage denial, a claim for insurance benefits becomes forfeited if the insured fails to file legal action to assert its claim within two years from the occurrence of the insured event.
The Federal Supreme Court first repeated its previous judicial practice on the unusualness rule, according to which this rule applies only if, in addition to the absence of industry expertise (as a subjective requirement), a clause has content that is foreign to the (insurance) business from an objective point of view. This is affirmed if the clause leads to a substantial change of the contractual nature or if it falls considerably outside the legal framework of the contract type in question. The more a clause affects the legal position of the contracting party, the more likely is it to be qualified as unusual (Consideration 2.1).
In the present case, the Federal Supreme Court followed the previous instance and judged the GCI clause not to be unusual, given that a time limit in case of coverage declinature is customary in the insurance industry according to established case law. Likewise, the GCI clause which sets a time limit to assert an insurance claim does not become unusual if, in exceptional cases, the insurance claim could already be forfeited before it becomes due. In addition, the court pointed to the fact that a policyholder in default without fault is entitled under Article 45(3) of the Federal Insurance Contract Act to take the omitted action after immediately eliminating the respective obstacle (Consideration 2.3).
Further, the Federal Supreme Court found that a contractual forfeiture clause within the meaning of Article 46(2) of the Federal Insurance Contract Act and a statutory limitation period need not be mutually exclusive but may exist side by side and, therefore, must be distinguished from each another. The two-year period under the insurer's forfeiture clause therefore remained unaffected by the insurer's declaration to waive the plea of the statute of limitation for a certain period and continued to run. The claimant therefore had to:
A claim which is tied to a preclusion period lapses at the end of that period without further ado. Therefore, a court must dismiss such claim ex officio even without a party objection. Thus, the Federal Supreme Court confirmed the conclusion of the previous instance that a preclusion period cannot be interrupted and that the assertion of a forfeited claim cannot be validly waived. Further, the court held that a forfeiture clause based on a partial consensus must be distinguished from a statutory forfeiture period in the actual sense to the extent that the contractual clause could, in principle, be amended or deleted without replacement at any time by mutual agreement (Consideration 3.1).
The Federal Supreme Court's decision is to be welcomed. First, it reconfirms previous case law, according to which forfeiture clauses such as the one at issue are customary in the insurance industry. Second, it states clearly that the party entitled to insurance benefits must interrupt the statute of limitations and carry out the legal acts as contractually provided for in order to comply with the limitation period. The decision confirms that a contraction forfeiture clause may exist alongside the statutory limitation period.
For further information on this topic please contact Markus Dörig or Alexandra Bösch at Badertscher Attorneys at Law by telephone (+41 44 266 20 66) or email (email@example.com and firstname.lastname@example.org). The Badertscher Attorneys at Law website can be accessed at www.b-legal.ch.
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