New regulations recently came into force in Chile regarding insurance, as part of the Code of Commerce. While processing this law, Congress debated whether these regulations should make provision for legal action taken by the victims against liability insurers, but did not confirm the matter. However, it has been suggested that the existing code implicitly contemplates legal action against the insurer.
Amendments to the Commercial Code regarding insurance contracts recently entered into force, thereby modifying the duties of the insured to disclose information in relation to risk. If an insurance contract has been agreed without the insurer requesting a declaration on the status of the risk, the insurer cannot make a claim in relation to errors, reluctance or inaccuracies on the part of the contracting party.
For insurers, confidentiality is one of the main benefits of arbitration. Unlike in litigation, insurers that settle disputes through arbitration can avoid the creation of harmful precedents and ensure that settlements remain private. Until recently, insurers in Chile were assured of confidentiality by the country's two leading arbitration centres. However, this seems likely to change.
New regulations for the adjustment of insurance claims recently entered into force. These provide the insured with extended rights and the regulator with additional powers. Loss adjusters are required to expedite the adjustment procedure, comply with a clearer duty to inform all parties to the insurance contract and be accurate with respect to technical details. A timeframe has also been established for paying out claims.
Recent amendments to the Code of Commerce introduce new provisions on contracts of insurance, establishing that "the insurer is not bound to indemnify the loss originated by [intent to cause damage] or gross negligence". However, the provision adds that the insurer will nonetheless be bound to indemnify a loss originating from gross negligence if the parties have thus agreed.
The use of a funds provision clause has been common in Chilean insurance contracts for some time. Under this clause, a direct insurer is liable to pay the insurance indemnity to the insured only when it has received the corresponding funds from reinsurers. However, following the introduction of a new provision in the Code of Commerce, insurance contracts can no longer be affected by reinsurance in any way.
In a recent ruling a well-known arbitrator controversially decided that his vision of equity should take precedence over the wording of an insurance contract. Under the bank's insurance policy, rural risks of all kinds were subject to prior approval by the insurer, which the bank had failed to obtain. However, the arbitrator admitted the bank's claim, deciding that the policy was not to be construed literally.
The new regulations for loss insurance adjustments will come into force shortly and will take into account the impact on the insurance market of the February 2010 earthquake. The regulations have been updated in accordance with the increases in both the amount of insurance being taken out in the country and the amount of individual claims, and mainly refer to the duties of insurance companies and loss adjusters.
The highest court in Chile recently established that the claimant must prove that its loss was accidental. The decision referred to life insurance cover, but its doctrine is applicable to all types of insurance. In a second case, the Court of Appeal of Santiago ruled on a breach of the insured's duty to disclose fully to the insurer all of the relevant aspects for the assessment of the risk.
In cases of death or injury, it is common for the injured party or his or her relatives to claim compensation for 'moral damages' (ie, pain and suffering experienced due to the injury or death). However, for many years the calculation of such damages has been difficult to predict. This situation may be about to change, as a statistical table is being prepared for reference purposes in relation to compensation payable for such damages.
New legislation has been issued regarding corporate governance and risk management, and a draft bill on risk-based supervision sent to Congress. The draft includes new requirements of capital based on risk, which will correspond to the losses expected due to various risks, including insurance or technical risk, investment risk and operational risk. Corporate governance of insurance companies will also be strengthened.
A bill to amend the insurance provisions contained in the 1865 Commercial Code should be enacted in the near future. The bill will also amend the Criminal Code, as it will establish - for the first time - insurance fraud as a specific crime. The basis for this change is that since insurance fraud has no special classification at present, it is treated as a general type of fraud, which makes it difficult to pursue.
A recently enacted law contains new rules on mortgage insurance that is collectively offered by lending banks. The new provisions will become effective on July 1 2012, along with additional rules that the regulator has yet to issue. The regulator has provided a draft regulation to the insurance sector for comments.
A devastating earthquake and a number of resultant tsunamis recently affected several regions of Chile, causing damages that exposed the insurance industry and reinsurers to more than $7 billion in claims. One of the most affected areas was the Concepcion region; following the catastrophe, Concepcion's Third Civil Court has issued two first instance decisions that may be of significance for insurers.
Last year was an important one for the insurance industry. The earthquake and tsunami caused about $30 billion of damage, of which $8 billion was insured, and a new superintendent was appointed, bringing new regulations. More recently, the Insurance Regulator announced plans to grant greater protection for insureds under fire, earthquake and tsunami coverage associated with housing mortgage credit.
This update looks at two recent developments that are of relevance to the life and health insurance sectors. The first development was the insurance regulator's decision to delete a number of policy forms from the Register of Insurance Forms. The second was the Constitutional Court's decision in a case relating to private entities which provide healthcare coverage.
Although piracy is uncommon in Chilean waters, under Chilean law the courts have universal jurisdiction to try piracy cases. This update looks at Chilean law and a recent piracy case primarily from an insurance law standpoint. The case originated when criminal charges were filed against the prosecuted parties for their use of small boats to board fishing boats in Chilean territorial waters to appropriate the catch on board.
The strong earthquake and subsequent tsunami that recently hit Chile caused extensive and severe damage to both public and private property, including productive centres and infrastructure. Such damage had manifold legal consequences. With respect to insurance, the consequences are relevant for civil liability covers and possible subrogation actions by insurers of physical assets.
General Regulation 250, which recently entered into force, will regulate coverage exclusions or restrictions included in health, life and disability insurance policies regarding pre-existing diseases or health conditions. It is hoped that the regulation will reduce the high number of claims regarding insurers' refusals to reimburse expenses associated with undeclared pre-existing diseases.
A recent Santiago Civil Court decision confirmed the general practice of insurance subrogation. The insurance beneficiary sued the broker, arguing that the placement was not made according to the instructions given by the entity that contracted the insurance policy. Therefore, the broker should be liable for the insurance indemnity declined by the insurer.