Principles of European Insurance Contract Law (PEICL) [2nd rev. ed.] 9783504384753

Citation preview

Principles of European Insurance Contract Law (PEICL)

s |e| l | p

sellier european law publishers

Principles of European Insurance Contract Law (PEICL) 2nd Expanded Edition

Edited by

Jürgen Basedow • John Birds • Malcolm Clarke Herman Cousy • Helmut Heiss • Leander Loacker Prepared by the Project Group

Restatement of European Insurance Contract Law Chairman: Helmut Heiss

The Deutsche Nationalbibliothek lists this publication in the Deut­sche Na­tio­nalbibliografie; detailed bibliographic data are available on the Internet at http://dnb.dnb.de. Verlag Dr. Otto Schmidt KG Gustav-Heinemann-Ufer 58, 50968 Köln Tel. +49 221 / 9  37  38-01, Fax +49 221 / 9  37  38-943 [email protected], www.otto-schmidt.de ISBN (print)  978-3-504-08002-0 ISBN (eBook)  978-3-504-38475-3

© 2016 by Verlag Dr. Otto Schmidt KG, Köln All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior per­mis­sion of the publisher. The paper used is made from chlorine-free bleached materials, wood and acid free, age resistant and environmentally friendly. Typesetting: fidus Publikations-Ser­­­vice GmbH, Nördlingen Printing and binding: Friedrich Pustet, Re­gens­burg Printed in Germany.

Preface to the Second Edition This volume contains an expanded and partly updated version of the “Principles of European Insurance Contract Law (PEICL)” produced by the Project Group “Restatement of European Insurance Contract Law”. While the first edition published in 2009 essentially dealt with rules applicable to all classes of insurance, this edition also includes provisions on liability insurance, life insurance and group insurance. The overall draft of the PEICL is now ready for political consideration by the institutions of the European Union in view of eventual legislation. We owe thanks to the publisher, sellier european law publishers Munich, for high quality service in the production of the present book. We also want to express our gratitude to Ms. Mandeep Lakhan and Mr. Sascha Drobnjak for their valuable support. Finally, we want to thank the translators of the PEICL for their very helpful contribution to the further dissemination of our draft. Cambridge, Hamburg, Innsbruck, Leuven, Sheffield, Zurich December 2014

Jürgen Basedow John Birds Malcolm Clarke Herman Cousy Helmut Heiss Leander D. Loacker

v

Preface to the First Edition This volume contains the “Principles of European Insurance Contract Law (PEICL)” produced by the Project Group “Restatement of European Insurance Contract Law”. The Project Group started its work in September 1999. It joined the European Network of Excellence on European Contract Law (CoPECL), which was set up by the European Commission in 2005, and drafted its Principles as a contribution to the Common Frame of Reference of European Contract Law. However, the PEICL go beyond a Frame of Reference and are intended to provide a Draft Optional Instrument of European Insurance Contract Law. The founding father and first chairman of the Project Group, the late Professor Fritz Reichert-Facilides, University of Innsbruck, died in 2003. His academic life was strongly devoted to comparative and especially European insurance contract law. It is a source of great satisfaction to the Members of the Project Group to be able to present the completed Principles of European Insurance Contract Law as Fritz Reichert-Facilides would have wanted them to be. We owe thanks to the publisher, sellier.elp Munich, for high quality service in the production of the present book. The Project Group’s assistants have prepared the layout of the book. In this respect, we want to express our gratitude especially to Dr. Marlene Danzl, Ms. Mandeep Lakhan, Mr. Manuel Sacchetto and Mr. Golo Wiemer. Cambridge, Hamburg, Innsbruck/Zurich, Leuven, Manchester June 2009

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Table of Contents Preface to the Second Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Preface to the First Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Our Sponsors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxix Members of the Project Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xl Former Members of the Project Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xli Corresponding Members of the Project Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xli Members of the Drafting Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xli List of Rapporteurs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xlii List of Translators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xlv Publications on the PEICL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xlvii

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Principles of European Insurance Contract Law (PEICL): Rules . . . . . . . .

31

Part One: Provisions Common to All Contracts Included in the Principles of European Insurance Contract Law (PEICL) . . . . . . . . . . . . . .

32

Chapter One: Introductory Provisions Section One: Application of the PEICL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section Two: General Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section Three: Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Chapter Two: Initial Stage and Duration of the Insurance Contract Section One: Applicant’s Pre-contractual Information Duty . . . . . . . . . . . . . . . . Section Two: Insurer’s Pre-contractual Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Three: Conclusion of the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Four: Retroactive and Preliminary Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Five: Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Six: Duration of the Insurance Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Seven: Post-contractual Information Duties of the Insurer . . . . . . .

35 36 37 38 39 40 40

Chapter Three: Insurance Intermediaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Chapter Four: The Risk Insured Section One: Precautionary Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section Two: Aggravation of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section Three: Reduction of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

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Chapter Five: Insurance Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Chapter Six: Insured Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Chapter Seven: Prescription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Part Two: Provisions Common to Indemnity Insurance Chapter Eight: Sum Insured and Insured Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter Nine: Entitlement to Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter Ten: Rights of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter Eleven: Insured Persons other than the Policyholder . . . . . . . . . . . . . . Chapter Twelve: Insured Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46 46 47 47 48

Part Three: Provisions Common to Insurance of Fixed Sums Chapter Thirteen: Admissibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Part Four: Liability Insurance Chapter Fourteen: General Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Chapter Fifteen: Direct Claims and Direct Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Chapter Sixteen: Compulsory Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Part Five: Life Insurance Chapter Seventeen: Special Provisions for Life Insurance . . . . . . . . . . . . . . . . . . . Section One: Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Two: Initial Stage and Duration of the Contract . . . . . . . . . . . . . . . . . . . . . Section Three: Changes during the Contract Period . . . . . . . . . . . . . . . . . . . . . . . . . . Section Four: Relation to National Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Five: Insured Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Six: Conversion and Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51 51 52 54 55 55 56

Part Six: Group Insurance Chapter Eighteen: Special Provisions for Group Insurance . . . . . . . . . . . . . . . . . . Section One: Group Insurance in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Two: Accessory Group Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section Three: Elective Group Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Principles of European Insurance Contract Law (PEICL): Rules, Comments and Notes Part One: Provisions Common to All Contracts Included in the Principles of European Insurance Contract Law (PEICL) Chapter One: Introductory Provisions Section One: Application of the PEICL Article 1:101 Substantive Scope of Application

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Substantive Scope: Substantive Private Insurance Contract Law . . . . . . . . . . . . . . . . . . . . . Mutual Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Social Insurance Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Law of Insurance Supervision and Other Public Law on Insurance . . . . . . . . . . . . . . . . . . International Insurance Contract Law (Conflict of Laws) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Law of Insurance Intermediaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marine Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 60 60 60 60 61 61 61 62

Notes Application to Private Insurance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mutual Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marine Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Specific Branches of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62 62 62 63 63

Article 1:102 Optional Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Nature of Opting-in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Priority over Conflict Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Domestic Insurance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No Partial Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect on Intermediaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64 64 64 64 65 65 65

Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Article 1:103 Mandatory Character

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Focus on Mandatory Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Technique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mandatory Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Single Mandatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minimum Protection Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68 68 68 69

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Single Minimum Protection Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Beneficiaries of Mandatory and Minimum Protection Rules . . . . . . . . . . . . . . . . . . . . . . . . . 70 Article 1:104 Interpretation

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Textual Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Good Faith and Fair Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certainty in Contractual Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uniform Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Protection of Policyholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71 71 71 72 72 72 72 73 73

Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Article 1:105 National Law and General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mandatory National Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supervisory Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internationally Mandatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptional Recourse to Mandatory National Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . Filling Gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Principles of Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74 74 74 74 75 75 75 75

Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Section Two: General Rules Article 1:201 Insurance Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance Contract (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insured Event (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indemnity Insurance (para. 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance of Fixed Sums (para. 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liability Insurance (para. 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Life Insurance (para. 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76 76 77 77 78 78 78

Group Insurances: Accessory Group Insurance, Elective Group Insurance (paras. 7-9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Notes The Pros and Cons of Defining the Insurance Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Standard Elements of Definitions of the Insurance Contract . . . . . . . . . . . . . . . . . . . . . . . . . The Insurer’s Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uncertain Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Definitions of Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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79 80 80 80 81

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Article 1:202 Further Definitions

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insured (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Beneficiary (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person at Risk (para. 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Victim (para. 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance Agent (para. 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Premium (para. 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contract Period (para. 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance Period (para. 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liability Period (para. 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compulsory Insurance (para. 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81 81 82 82 82 82 83 83 83 83 84 84

Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Article 1:203 Language and Interpretation of Documents . . . . . . . . . . . . . . . . . . . . . . . . 84

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relationship to the Principles of European Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Language of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

85 85 85 85 86

Notes Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 In dubio contra stipulatorem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Article 1:204 Receipt of Documents: Proof

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Notes General Law of Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Specific Rules of Insurance Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Article 1:205 Form of Notice

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consensual and Formal Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Persons Favoured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No Particular Form Being Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notices by the Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

89 89 89 89 90 90 91

Notes Community Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 The Kind and Context of the Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

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General Principle: No Formal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 An Example: Notice of an Insured Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Article 1:206 Imputed Knowledge

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Imputation and Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Persons Whose Knowledge May Be Imputed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93 93 93 93

Notes General Law of Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specific Provisions for Insurance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Knowledge of the Policyholder’s Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . When Policyholder and Insured are Not Identical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

94 94 95 95

Article 1:207 Non-Discrimination

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance and Differentiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equal Treatment of Men and Women . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Discrimination on Grounds of Nationality, Racial or Ethnic Origin . . . . . . . . . . . . Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Burden of Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96 96 98 98 99 99

Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Article 1:208 Genetic Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subject of Prohibition (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100 100 100 100 100

Section Three: Enforcement Article 1:301 Injunctions

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Enforcement of Mandatory Rules by Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Measures by Qualified Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Note Background in Community Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Article 1:302 Out-of-court Complaint and Redress Mechanisms . . . . . . . . . . . . . . . . . 102

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Out-of-court Complaint and Redress Mechanisms under National Law . . . . . . . . . . . . 103 Relationship to the Principles of European Insurance Contract Law . . . . . . . . . . . . . . . . 103 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 xii

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Chapter Two: Initial Stage and Duration of the Insurance Contract Section One: Applicant’s Pre-contractual Information Duty Article 2:101 Duty of Disclosure

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Imbalance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Timing of the Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Questionnaires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relative Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inside Knowledge: the Alter Ego . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outside Knowledge: The Knowledge of Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enquiry or Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

104 104 104 105 105 105 105 106

Notes Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty of Spontaneous Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty to Answer the Insurer’s Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Approximation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106 107 107 108

Article 2:102 Breach

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Remedies Available to Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Termination (Article 2:102 paras. 2 (second sentence), 3 and 4) . . . . . . . . . . . . . . . . . . . . Variation (Article 2:102 para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notice (Article 2:102 para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discharge (Article 2:102 para. 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

109 109 109 109 109 110

Notes The All-or-Nothing Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Proportional Reduction of the Insurance Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Approximation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Innocent Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

110 111 112 112

Article 2:103 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unanswered Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Immaterial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Reasonable Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Known to Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effects of the Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

113 113 113 113 114 114 114

Notes Obvious Defects of the Policyholder’s Answer, Article 2:103(a) . . . . . . . . . . . . . . . . . . . . . 114 Immaterial Information, Article 2:103(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 The Insurer’s Knowledge and Behaviour, Article 2:103(c) and (d) . . . . . . . . . . . . . . . . . . . 115

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Article 2:104 Fraudulent Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Range of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Impact of Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Position of Policyholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

116 116 116 116 116

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Article 2:105 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 Article 2:106 Genetic Information

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 Section Two: Insurer’s Pre-contractual Duties Article 2:201 Provision of Pre-contractual Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pre-contractual Documents in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty to Provide an Applicant with a Pre-contractual Document . . . . . . . . . . . . . . . . . . . . Pre-contractual Documents in Special Branches of Insurance . . . . . . . . . . . . . . . . . . . . . . Right to a Copy of the Completed Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

119 119 119 120 120 120

Notes European Directives and their Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Kind of Information to Be Given . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stricter Requirements under National Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Duty Drafted in General Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Application Form Provided by the Insurer, Article 2:201 para. 3 . . . . . . . . . . . . . . . . . . . .

120 121 121 122 122

Article 2:202 Duty to Warn about Inconsistencies in the Cover

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty to Assist the Applicant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consequences of Failure to Assist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

122 122 123 124 124 124

Notes Community Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 National Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

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Article 2:203 Duty to Warn about Commencement of Cover . . . . . . . . . . . . . . . . . . . . . 126

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Problems of Commencement of Cover in Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Duty to Warn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Notes Community Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 The Sanction of Immediate Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Incomplete and Unclear Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Section Three: Conclusion of the Contract Article 2:301 Manner of Conclusion

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Principles of European Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ways of Concluding an Insurance Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mandatory Character . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

128 128 129 129 129 130 130

Notes A Matter of General Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Consensual Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Article 2:302 Revocation of an Application for Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 131

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . An Application for Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revocation by the Applicant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time for the Arrivals of Revocations and Acceptances Sent Electronically . . . . . . . . . . Effectiveness of Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

132 132 132 132 133

Notes The Roles of Offeror and Offeree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 The Binding Nature of an Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Article 2:303 Cooling-off Period

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Structure of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commencement of the Cooling-off Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Timeliness of Notice to Withdraw . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Exceptions to the General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

135 135 135 135 136 136 136

Notes Community Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Implementation for Life Assurance and Similar Products . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

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General Right of Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception for Short-Term Insurance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception for Prolongation of Pre-Existing Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception for Preliminary Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

138 138 139 139

Article 2:304 Abusive Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unfair Contract Terms Directive (93/13/EEC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Persons Protected under Article 2:304 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Core terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Individually Negotiated Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fairness Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Grey List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Burden of Proof: Unfairness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140 140 140 140 141 141 142 142 142

Notes Implementation of EU Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional and Broader Provisions on the Fairness of Insurance Terms . . . . . . . . . . . . . Non-Negotiated Contracts, Article 2:304 paras. 1 and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions from Judicial Review, Article 2:304 para. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consequences of Invalidity of a Clause, Article 2:304 para. 2 . . . . . . . . . . . . . . . . . . . . . . .

145 146 147 147 148

Section Four: Retroactive and Preliminary Cover Article 2:401 Retroactive Cover

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issues of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Knowledge of the Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Knowledge of the Policyholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

148 148 149 149

Notes General Permission for Retroactive Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 Sector-Specific Permission for Retroactive Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Article 2:402 Preliminary Cover

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preliminary Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evidencing the Preliminary Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exclusion of Articles 2:201 to 2:203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

151 151 152 152

Notes Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form and Information Requirements: Germany, Greece . . . . . . . . . . . . . . . . . . . . . . . . . . . France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Luxembourg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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152 152 153 153 154

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United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Terms of the Cover Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Article 2:403 Duration of Preliminary Cover

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Duration of the Preliminary Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Notes Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

Section Five: Insurance Policy Article 2:501 Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Parol Evidence Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preliminary Insurance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

156 157 157 157 157 157

Notes Issue of a Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information to Be Provided – Detailed Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mixture: General Provision with Some Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Means of Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Constitutive Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issue of General Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Written Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

158 158 158 159 159 159 160 160

Article 2:502 Effects of the Policy

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Presumption of Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term for Contradiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preconditions for Presumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signature as Means of Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Presumption of Contract in Accordance with Application . . . . . . . . . . . . . . . . . . . .

160 161 161 162 162 162 163

Section Six: Duration of the Insurance Contract Article 2:601 Duration of the Insurance Contract

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comparative Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Structure of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duration of the Contract Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effects of Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personal Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

163 163 164 164 164 165

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Notes Maximum Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Personal Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Article 2:602 Prolongation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Need for Prolongation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prolongation and Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

167 167 167 167 167 168

Notes Statutory and Contractual Prolongation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Period of Prolongation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Prolongation and Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Article 2:603 Alteration of Terms and Conditions

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Need for a Rule for Alteration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Need for a Special Rule for Insurance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Concept Underlying Article 2:603 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minimum Standards for an Alteration Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

170 170 170 170 171

Notes Article 2:603 para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 2:603 para. 1(a) – Commencement of Alteration . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 2:603 para. 1(b) – Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 2:603 para. 1(c) – Right of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

171 172 172 172

Article 2:604 Termination after the Occurrence of an Insured Event

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Need for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory and Contractual Rights to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Rights to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Application to Group Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

173 173 173 173 174 174

Notes Article 2:604 para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 2:604 para. 2 – Reasonableness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 2:604 para. 3 – Expiration of the Right of Termination . . . . . . . . . . . . . . . . . . . . . . Article 2:604 para. 4 – End of Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Section Seven: Post-contractual Information Duties of the Insurer Article 2:701 General Information Duty

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Need for Information During the Period of Insurance Cover . . . . . . . . . . . . . . . . . . . Information to Be Given in All Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information about Changes in the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Updating Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manner of Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

176 176 176 177 177 177

Notes Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Expenses Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Further Post-contractual Information Duties under National Law . . . . . . . . . . . . . . . . . .

177 178 178 179

Article 2:702 Further Information upon Request

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information on Changes in Standard Terms of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . Manner of Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

180 180 180 180 181 181

Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Chapter Three: Insurance Intermediaries Article 3:101 Powers of Insurance Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal and Contractual Authority of the Insurance Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . Minimum Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Imputation of the Agent’s Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liability of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

181 182 182 182 183 183

Notes First Sentence of Article 3:101 para. 1 – Statutory Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . Second and Third Sentences of Article 3:101 para. 1 – Contractual Limitations . . . . . Article 3:101 para. 2 – Minimum Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 3:101 para. 3 – Imputation of the Agent’s Knowledge . . . . . . . . . . . . . . . . . . . . . . . .

183 184 184 184

Article 3:102 Agents of Insurers Purporting to Be Independent

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actual Authority of “Pseudo-brokers” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

185 185 185 185

Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

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Chapter Four: The Risk Insured Section One: Precautionary Measures Article 4:101 Precautionary Measures: Meaning

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 The Concept of Precautionary Measure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 Notes General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finland and Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Austria, Germany, Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belgium, Luxembourg and the Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Greece . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

187 188 188 188 188 189 189 189 189

Article 4:102 Insurer’s Right to Terminate the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Termination and Non-Prolongation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Termination under Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manner of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Application to Group Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

190 190 190 190 190

Notes Ipso iure Avoidance or Declaration of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Termination ex tunc or ex nunc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Causation: France and United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Causation in Other Member State Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fault: France, the Netherlands and United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fault: Other European Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Written Notice and Time Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . End of Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Peculiarities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

190 191 191 192 192 192 192 193 193

Article 4:103 Discharge of the Insurer’s Liability

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Causation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

193 193 194 194

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Causation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

194 194 195 195 195

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Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belgium and Luxembourg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Austria and Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Further Objective Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belgium and Luxembourg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

195 196 196 196 196 196 197 197 197 197

Section Two: Aggravation of Risk Article 4:201 Clauses Concerning Aggravation of Risk

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allocation of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Need for Rules of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Aggravation of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

198 198 198 199 199

Notes Information Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Material Aggravation of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 Aggravation Specified in the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 Article 4:202 Duty to Give Notice of an Aggravation of Risk

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Need for Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Manner of Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200 200 201 201

Notes Notice in Reasonable Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 Insurer’s Duty to Pay Insurance Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Article 4:203 Termination and Discharge

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reconsideration of the Risk by Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time for Policyholders to Find Alternative Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Application to Group Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

202 202 203 203 203

Notes Expiry of Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

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Section Three: Reduction of Risk Article 4:301 Consequences of the Reduction of Risk

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purpose and Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Materiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Policyholder’s Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

204 204 205 205

Notes Reduction of the Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Termination of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Exceptions for Personal Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207

Chapter Five: Insurance Premium Article 5:101 First or Single Premium

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope of Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regulatory Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First and Single Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prerequisites for Giving Effect to a Condition which is Subject to Article 5:101 . . . . . Consequences of Payment or Non-Payment within the Two Week Period . . . . . . . . . .

207 207 207 208 209 209

Notes Postponement of Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Protection of the Applicant’s Expectations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Article 5:102 Subsequent Premium

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope of Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regulatory Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subsequent Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prerequisites for Giving Effect to a Clause which is Subject to Article 5:102 . . . . . . . . . Consequences of Payment or Non-Payment within the Period of Grace . . . . . . . . . . . .

211 211 211 212 212 212

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 Article 5:103 Termination of the Contract

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope of Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regulatory Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Termination in Case of Non-Payment of a First or Single Premium . . . . . . . . . . . . . . . . . Termination in Case of Non-Payment of a Subsequent Premium . . . . . . . . . . . . . . . . . . . Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effects of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Automatic Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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214 214 214 215 215 215 215 215

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Notes Article 5:103 para. 1: The Right to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 Form of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 Article 5:103 para. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 Article 5:104 Divisibility of Premium

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 The Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 Abolition of a Principle of Indivisibility of Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 Article 5:105 Right to Pay Premium

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Obligation of the Insurer to Accept Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consent of the Policyholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legitimate Interest of Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

219 219 219 219 220

Chapter Six: Insured Event Article 6:101 Notice of Insured Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Channels of Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balancing Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notice Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contents of the Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Breach of Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

221 221 221 222 222 222

Notes Article 6:101 para. 1: Duty to Notify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Who Owes The Duty to Notify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 6:101 para. 2: Time Allowed for Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contractual Derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 6:101 para. 3: Sanction – Reduction of Insurance Money . . . . . . . . . . . . . . . . . . . . Contractual Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

223 223 223 224 224 225

Article 6:102 Claims Cooperation

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information about the Occurrence of the Insured Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reasonable Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Breach of Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

226 226 226 226

Notes Article 6:102 para. 1: Duty to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Article 6:102 paras. 2 and 3: Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227

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Article 6:103 Acceptance of Claims

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 Prompt Settlement of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Article 6:104 Time of Performance

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Importance of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Undue Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Amount Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

229 229 230 230

Notes Article 6:104 paras. 1 and 3: Rules on the Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 230 Article 6:104 para. 2: Partial Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 Article 6:105 Late Performance

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Conceptual Basis of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assessment of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Instances of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

232 232 232 233 233 233

Notes General Rules on Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 Specific Interest Rules for Insurance Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 Punitive Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234

Chapter Seven: Prescription Article 7:101 Action for Payment of Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 Notes Community Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Rules for All Claims Arising from Insurance Contracts . . . . . . . . . . . . . . . . . . . . Specific Rules on Prescription of Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Rules of the Law of Prescription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comparison of Prescription Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

235 235 235 236 236

Article 7:102 Action for Payment of Insurance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 General Period of Prescription and its Commencement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 Absolute Period of Prescription and its Commencement . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

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Notes Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Single Rule without Any Requirement of Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Double Standard: Knowledge plus Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Insurer’s Decision on the Claim as Starting Point of Prescription . . . . . . . . . . . . . . . The Duration of the Prescription Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception for Life Assurance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

238 239 239 239 239 240

Article 7:103 Other Issues Relating to Prescription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prescription of Claims Not Covered by Articles 7:101 and 7:102 . . . . . . . . . . . . . . . . . . . . Unregulated Issues of Prescription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contractual Derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

241 241 241 241

Notes General Remark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contractual Derogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Suspension in Case of Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Suspension when Notice or Claim is Lodged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Reason for Suspension or Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

241 242 242 242 243

Part Two: Provisions Common to Indemnity Insurance Chapter Eight: Sum Insured and Insured Value Article 8:101 Maximum Sums Payable

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Indemnity Principle and the Sum Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mitigation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Sum Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Valued Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

243 243 244 244 244

Notes The Indemnity Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Value Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of Value Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fraud or Misrepresentation on the Part of the Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

244 245 245 246

Article 8:102 Underinsurance

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic Principle: First Loss Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permitted Derogation: Proportionate Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alternative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

246 246 246 247

Notes The Principle of Proportionate Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247

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Contractual Derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 Article 8:103 Adjustment of Terms in Case of Overinsurance

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic Principle: Adjustment of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overinsurance Caused by Multiple Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Determination of Insurance Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alternative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

248 248 249 249 249

Notes General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 The Claim for Reduction, Article 8:103 para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 Termination, Article 8:103 para. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 Article 8:104 Multiple Insurance

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Key Elements of Multiple Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Insured’s Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributions by Different Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

250 250 251 251 252

Notes General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indemnity Principle, Article 8:104 para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Full Liability of Each Insurer, Article 8:104 para. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recourse against Other Insurer(s), Article 8:104 para. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

252 253 253 254

Chapter Nine: Entitlement to Indemnity Article 9:101 Causation of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Limits on Recovery of Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recklessness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Failure to Avert or Mitigate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty and Causation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Persons Prohibited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

254 255 255 255 255 255 256 256

Notes Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intention and Gross Negligence, Article 9:101 para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intention and Recklessness of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contractual Derogations in Case of Negligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Failure to Avert and Mitigate Loss, Article 9:101 para. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

256 257 257 258 259

Article 9:102 The Costs of Mitigation

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 Establishment of a Right to Recover Certain Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 xxvi

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Scope of the Right of Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 Underinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

Notes General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 Reasonable Mitigation Costs, Article 9:102 para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 The Sum Insured as Limit, Article 9:102 para. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261

Chapter Ten: Rights of Subrogation Article 10:101 Subrogation

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Need for Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Protection for Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Protection of Third Parties in a Close Relationship with the Insured . . . . . . . . . . . . . . . .

262 262 263 263 264 264

Notes General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic Principle, Article 10:101 para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Protection of Subrogation Rights, Article 10:101 para. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Protection of the Insured’s Entourage, Article 10:101 para. 3 . . . . . . . . . . . . . . . . . . . . . . . . No Subrogation Rights against the Insured, Article 10:101 para. 4 . . . . . . . . . . . . . . . . . .

265 265 266 266 267

Chapter Eleven: Insured Persons other than the Policyholder Article 11:101 Entitlement of the Insured

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Protection of the Insured and Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revocation of Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effects of Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

267 267 268 268 268 268 269 269

Notes Article 11:101 para. 1: General Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Artikcle 11:101 para. 2: Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance for Whom It May Concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

269 270 270 271

Article 11:102 Knowledge of the Insured

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relation with Article 1:206 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Elements of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

271 271 272 272 272

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Notes Imputation to the Policyholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Direct Notification Duties of the Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Article 11:103 Breach of Duty by One Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale and Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope: the Policyholder as an Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope: Group Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relation to Article 1:206 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joint Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

274 274 274 275 275 275 276

Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276 Chapter Twelve: Insured Risk Article 12:101 Lack of Insured Risk

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Structure and Position of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Existence of Insured Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cessation of Insured Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

277 277 278 278 278

Notes General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 Initial Absence of Risk, Article 12:101 para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 Subsequent Cessation of Risk, Article 12:101 para. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280 Article 12:102 Transfer of Property

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Need for a Rule concerning Transfer of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Underlying Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Mandatory Character of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicability to Transfer of Title by Inheritance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Fiction of an Insurance Contract for the Benefit of a Third Party . . . . . . . . . . . . . . . Application to Group Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

280 280 281 281 281 281 282 282

Notes General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Termination Approach, Article 12:102 para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Substitution Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transferable Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passing of Insurance Cover, Article 12:102 para. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions, Article 12:102 para. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xxviii

282 283 283 283 284 284

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Part Three: Provisions Common to Insurance of Fixed Sums Chapter Thirteen: Admissibility Article 13:101 Insurance of Fixed Sums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284 Notes General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285 Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 Relationship to Personal Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

Part Four: Liability Insurance Chapter Fourteen: General Liability Insurance Article 14:101 Defence Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Underlying Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope of Defence Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reasonableness of Defence Costs (Article 9:102) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reasonableness and Sum Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Free Choice of Defence Lawyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costs of Criminal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Multiple Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

286 287 287 287 287 287 288 288 288

Article 14:102 Protection of the Victim

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Underlying Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Agreement on Defence Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

288 288 289 289

Article 14:103 Causation of Loss

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Underlying Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specific Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relation to Article 6:102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

289 289 290 290

Article 14:104 Acknowledgement of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 Acceptance of the Victim’s Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 Insurer’s Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 Article 14:105 Assignment

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 Interests Involved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292

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Article 14:106 No-Claims-Bonuses / Bonus-Malus-Systems

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer of Bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Claims Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

292 292 292 293

Article 14:107 Insured Event

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background: Triggers for the Insurer’s Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Arrangements for the Insurer’s Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Different National Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Basic Rule (Article 14:107 para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer Liability Insurance – Mandatory Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial and Professional Risks – Default Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Claims Made Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

293 293 294 295 296 297 297 298 298

Article 14:108 Claims Exceeding the Sum Insured

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proportionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Multiple Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Protection of the Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

299 299 299 300 300

Chapter Fifteen: Direct Claims and Direct Actions Article 15:101 Direct Claims and Defences

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compulsory Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liquidation or Winding up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personal Injury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Law Governing Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Limits to the Direct Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Defences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

301 301 302 302 303 303 303 303 304

Article 15:102 Information Duties

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Duty of the Policyholder and the Insured (para. 1) . . . . . . . . . . . . . . . . . . . . Information Duty of the Insurer (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Duty of the Policyholder (first sentence of para. 3) . . . . . . . . . . . . . . . . . . . . Information Duty of the Insured (second sentence of para. 3) . . . . . . . . . . . . . . . . . . . . . . Period for the Provision of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Analogous Application of para. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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304 304 305 305 305 306 306 306 306

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Article 15:103 Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

307 307 307 307

Article 15:104 Prescription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prescription Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exception: Defence Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Suspension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

308 308 308 308 308

Chapter Sixteen: Compulsory Insurance Article 16:101 Scope of Application

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The duty to insure and the applicable contract law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Origins of Duties to Insure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The priority of national requirements, para. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

309 309 310 310 311

Part Five: Life Insurance Chapter Seventeen: Special Provisions for Life Insurance Section One: Third Parties Article 17:101 Life Insurance on the Life of a Third Party

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consent requirement: General aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consent in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Informed Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time of Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Application to Substantial Changes and Other Situations . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

312 312 313 313 314 314 314 314

Article 17:102 Beneficiary of the Insurance Money

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Designation and Change of Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Designation (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Beneficiary in the Absence of Effective Designation (para. 3) . . . . . . . . . . . . . . . . . . . . . . . Death or Revocation of One of Multiple Beneficiaries (para. 4) . . . . . . . . . . . . . . . . . . . . . Effects of Insolvency Proceedings (para. 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discharge (para. 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

315 315 316 316 316 317 317 317 318

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Article 17:103 Beneficiary of the Surrender Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revocation and change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Default Rule (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cross-references (para. 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

319 319 319 319 320

Article 17:104 Assignment or Encumbrance

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Action of the Policyholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Action of the Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of Assignment and Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

320 320 320 321 321 321

Article 17:105 Renunciation of Estate

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rule of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relationship with Insolvency Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

321 321 322 322

Section Two: Initial Stage and Duration of the Contract Article 17:201 Applicant’s Pre-contractual Information Duties

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information about the Person at Risk (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indisputability (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

322 322 322 323

Article 17:202 Insurer’s Pre-contractual Information Duties

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Information Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information on Risks Underlying the Contract (para. 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Model Calculation (para. 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

324 324 325 325 326

Article 17:203 Cooling-off Period

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 Rationale and Object of para. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 Rationale and Object of para. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Article 17:204 Policyholder’s Right to Terminate the Contract

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unequal Regulation for Both Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The One-Year Waiting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Single Premium Insurance (second sentence of para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Exclusion of Termination Rights under National Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Form and Effect of Termination (third sentence of para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . 329 Article 17:205 Insurer’s Right to Terminate the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 329

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Termination for Breach of Pre-contractual Disclosure Duties . . . . . . . . . . . . . . . . . . . . . . . Termination for Aggravation of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Termination for Non-payment of Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Modalities and effect of termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

330 330 330 331 331 331

Section Three: Changes during the Contract Period Article 17:301 Insurer’s Post-contractual Information Duties

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

332 332 332 332

Article 17:302 Aggravation of Risk

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

333 333 333 333

Article 17:303 Adjustment of Premium and Benefits Payable

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Laws as Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope (paras. 1 and 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Requirements (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptions (para. 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form and Time of Effectiveness (para. 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Premium Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Premium Stability (para. 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

334 334 335 335 335 336 336 337 337 337

Article 17:304 Alteration of Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Requirements for Alteration Clauses (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Limited Reasons for Alterations (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alteration of Supervisory Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax Privileges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Replacement of Invalid Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Further Requirements for an Alteration (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

338 338 338 338 338 339 339 339 339 340

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Retroactive Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 Minimum Standards for Alteration Clauses in Life Insurance . . . . . . . . . . . . . . . . . . . . . . 340

Section Four: Relation to National Laws Article 17:401 Pension Plans

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Illustration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Precedence of National Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

340 340 341 342 342

Article 17:402 Tax Treatment and State Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

343 343 343 343

Section Five: Insured Event Article 17:501 Insurer’s Investigation and Information Duty

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty to Investigate the Occurrence of the Insured Event (para. 1) . . . . . . . . . . . . . . . . . . Duty to Investigate the Identity and Address of the Beneficiary (para. 2) . . . . . . . . . . . Duty to Inform the Beneficiary (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanctions (para. 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

344 344 344 345 345 346

Article 17:502 Suicide

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mental Incapacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

346 346 347 347 347 348

Article 17:503 Intentional Killing of the Person at Risk

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Self-Defence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mandatory Character . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

348 348 349 349 349 349 349

Section Six: Conversion and Surrender Article 17:601 Conversion of the Contract

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 xxxiv

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Policyholder’s Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 Information Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 Form of Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 Article 17:602 Surrender of the Contract

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Right of Surrender (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Termination by the Insurer (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurer’s Information Duty (para. 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . With-profits Policies (para. 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time of Payment (para. 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

351 351 352 352 352 352

Article 17:603 Conversion Value; Surrender Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Home Country Principle (first sentence of para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Established Actuarial Principles (second sentence of para. 1) . . . . . . . . . . . . . . . . . . . . . . . Deduction of Costs of Contract Conclusion (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deduction of Costs of Payment of the Surrender Value (para. 3) . . . . . . . . . . . . . . . . . . . .

353 353 353 353 354

Part Six: Group Insurance Chapter Eighteen: Special Provisions for Group Insurance Section One: Group Insurance in General Article 18:101 Applicability

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Applicability of the PEICL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

354 354 354 354 355

Article 18:102 General Duty of Care of the Group Organiser

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty of Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duty under Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

355 355 356 356 356

Section Two: Accessory Group Insurance Article 18:201 Application of the PEICL

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group Insurance and Protection of Group Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Straightforward Application of the PEICL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Application of the PEICL mutatis mutandis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contract Terms and the mutatis mutandis Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Need for Special Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

357 357 357 358 358 358

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Article 18:202 Information Duties

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Duty when a Person Joins a Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time when Information has to be Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Person Obliged to Provide Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Burden of Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information after Joining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

358 358 359 359 359 359 360 360

Article 18:203 Termination by the Insurer

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 Termination after Occurrence of the Insured Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Termination for Non-Compliance with Precautionary Measures or Aggravation of Risk (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Termination by Transfer of Property (para. 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Article 18:204 Right to Continue Cover – Group Life Insurance . . . . . . . . . . . . . . . . . . 361

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover in Transitional Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Right to Individual Cover (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contents of the Individual Insurance (paras. 1 and 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Individual Insurance as a New Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group Organiser’s Information Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanctions for Breach of the Information Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

362 362 362 363 363 363 363 364

Section Three: Elective Group Insurance Article 18:301 Elective Group Insurance: General

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 Elective Group Insurances as Framework Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 Applicability of the PEICL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 Article 18:302 Alteration of Terms and Conditions

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alteration of Terms and Conditions of the Framework Contract . . . . . . . . . . . . . . . . . . . Requirements of Article 2:603 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Requirements of Articles 17:303 and 17:304 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

365 365 365 365 365

Article 18:303 Continuation of Cover

Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Possible Consequences of the Termination of the Framework Contract . . . . . . . . . . . . . Comparison with Article 18:204 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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366 366 366 366

Table of Contents

Principles of European Insurance Contract Law (PEICL): Translations (non-authentic) Chinese version: 㶶㿁≬棸⚗⚛㽤☮⒨ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 Czech version: Zásady evropského pojišťovacího smluvního práva (ZEPSP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393

Dutch version: Principles of European Insurance Contract Law (PEICL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

420

French version: Principes du droit Européen du contrat d’assurance (PDECA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

451

German version: Grundregeln des Europäischen Versicherungsvertragsrecht (GEVVR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

480

Greek version: Αρχές Ευρωπαϊκού Δικαίου της Ασφαλιστικής Σύμβασης (ΑΕΔΑΣ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

512

Hungarian version: Az Európai biztosítási szerződési jog alapelvei . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544 Italian version: Principi di Diritto Europeo del Contratto di Assicurazione (PEICL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

573

Japanese version: ዅዙዊአኮ≬椉⯠侓㽤☮ⓖ(PEICL) 䶻捷: ዅዙዊአኮ≬椉⯠侓㽤☮ⓖ(PEICL) ቎⚺ቡቯቮሼቜ቉ቑ⯠侓቎␀抩ሼቮ尞⸩                                603 Korean version: Principles of European Insurance Contract Law (PEICL) 냕ꆲꚩ뾍陹꼲Ꙋ낅렎                                          631 Polish version: Zasady europejskiego prawa ubezpieczeń (ZEPU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

657

Portuguese version: Princípios do Direito Europeu do Contrato de Seguro (PEICL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 Serbian version: Principi Evropskog Ugovornog Prava Osiguranja (PEUPO) . . . . . . . . . . . . . . .

717

Slovak version: Princípy európskeho práva poistnej zmluvy (PEPPZ) . . . . . . . . . . . . . . . . . . . . . .

745

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Table of Contents

Spanish version: Principios de Derecho Europeo del Contrato de Seguro (PDECS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

774

Swedish version: Principer för en Europeisk Försäkringsavtalsrätt (PEICL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804

Turkish version: Avrupa Sigorta Sözleşmesi ukuku İlkeleri (ASSHİ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

833

Annexes Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table of National Statutes (including draft legislation and like sources) . . . . . . Table of EU Legislation (including draft legislation and like sources) . . . . . . . . . . Table of International Conventions and Model Laws . . . . . . . . . . . . . . . . . . . . . . . . . . Table of Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bibliography of Works Cited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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863 866 873 878 879 883

Our Sponsors The Project Group is very grateful for many years of essential financial support by the following institutions: Österreichischer Fonds zur Förderung der wissenschaftlichen Forschung (FWF) Deutsche Forschungsgemeinschaft (DFG) Being part of the CoPECL Network established by the European Commission the Group also acknowledges financial assistance granted by the Commission in the years 20052009. In addition, the Group is indebted to the many institutions whose support made possible 36 workshops across Europe.

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Members of the Project Group Prof. Dr. Dr. h.c. mult. Jürgen Basedow, LL.M. Max-Planck-Institut für ausländisches und internationales Privatrecht, Hamburg Prof. Dr. Juan Bataller Grau Universidad Politécnica de Valencia Prof. John Birds Universities of Manchester and Sheffield Prof. Dr. Diana Cerini Università degli Studi di Milano Bicocca Prof. Dr. Malcolm A. Clarke University of Cambridge, St. John’s College

Adv. Dr. Jorge Pegado Liz Lisboa/Bruxelles Prof. Dr. Jaana Norio-Timonen Helsingin yliopisto Prof. Dr. Ioannis Rokas Οικονομικό Πανεπιστήμιο Αθηνών Prof. Dr. Martin Schauer Universität Wien Prof. Dr. Anton K. Schnyder, LL.M. Universität Zürich

Prof. Dr. Herman Cousy Katholieke Universiteit Leuven

tit. Prof. Dr. Péter Takáts Eötvös Loránd Tudományegyetem, Budapest

Prof. Dr. Bill W. Dufwa Stockholms Universitet

Prof. Dr. Pedro Pais de Vasconcelos Universidade de Lisboa

Dr. Dariusz Fuchs Uniwersytet Kardynała S. Wyszyńskiego, Warszawa

Prof. Dr. Manfred Wandt Goethe-Universität Frankfurt a.M.

Prof. Dr. Helmut Heiss, LL.M. (Chairman) Universität Zürich Prof. Dr. Jérôme Kullmann Université Paris Dauphine

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Prof. Dr. J. Han Wansink Erasmus Universiteit Rotterdam, Universiteit van Leiden

Former Members of the Project Group Prof. Dr. Zdzisław Brodecki Uniwersytet Gdańsk [Member from April 2001– March 2007]

A. Prof. Dr. Bernhard Rudisch, LL.M. Universität Innsbruck [Member from September 1999 – April 2009]

Prof. Dr. Fritz Reichert-Facilides, LL.M. (†) Universität Innsbruck [Founder and Chairman from September 1999 – October 2003]

Corresponding Members of the Project Group JUDr. Petr Dobiáš, Ph.D. Právnická fakulta, Univerzita Karlova v Praze Dr. Yong Qiang Han, LL.M. Civil and Commercial Law School, Southwest University of Political Science and Law and NUS Faculty of Law, National University of Singapore Prof. Dr. Eun-Kyung Kim Hankuk University of Foreign Studies, Seoul

Prof. Dr. Souichirou Kozuka Gakushuin University, Tokyo Prof. Dr. Birgit Kuschke Department of Private Law, Law Faculty, University of Pretoria Anne McNaughton, LL.M. ANU College of Law, Australian National University, Canberra Prof. Dr. Ahmet Samim Ünan Galatasaray University, Istanbul

Members of the Drafting Committee Prof. Dr. Dr. h.c. mult. Jürgen Basedow, LL.M. Max-Planck-Institut für ausländisches und internationales Privatrecht, Hamburg Prof. Dr. Malcolm A. Clarke (Chair) University of Cambridge, St. John’s College Prof. Dr. Herman Cousy Katholieke Universiteit Leuven

Prof. John Birds University of Manchester Prof. Dr. Helmut Heiss, LL.M. Universität Zürich Dr. Leander D. Loacker, M.Phil. Universität Zürich

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List of Rapporteurs Article 1:101 Substantive Scope of Application Article 1:102 Optional Application Article 1:103 Mandatory Character Article 1:104 Interpretation Article 1:105 National Law and General Principles Article 1:201 Insurance Contract Article 1:202 Further Definitions Article 1:203 Language and Interpretation of Documents Article 1:204 Receipt of Documents: Proof Article 1:205 Form of Notice Article 1:206 Imputed Knowledge Article 1:207 Non-Discrimination Article 1:208 Genetic Tests Article 1:301 Injunctions Article 1:302 Out-of-court Complaint and Redress Mechanisms Article 2:101 Duty of Disclosure Article 2:102 Breach Article 2:103 Exceptions Article 2:104 Fraudulent Breach Article 2:105 Additional Information Article 2:106 Genetic Information Article 2:201 Provision of Pre-contractual Documents Article 2:202 Duty to Warn about Inconsistencies in the Cover Article 2:203 Duty to Warn about Commencement of Cover Article 2:301 Manner of Conclusion Article 2:302 Revocation of an Application for Insurance Article 2:303 Cooling-off Period Article 2:304 Abusive Clauses Article 2:401 Retroactive Cover Article 2:402 Preliminary Cover Article 2:403 Duration of Preliminary Cover Article 2:501 Contents Article 2:502 Effects of the Policy Article 2:601 Duration of the Insurance Contract Article 2:602 Prolongation Article 2:603 Alteration of Terms and Conditions Article 2:604 Termination after the Occurrence of an Insured Event Article 2:701 General Information Duty Article 2:702 Further Information upon Request Article 3:101 Powers of Insurance Agents

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Reichert-Facilides, Heiss Basedow Reichert-Facilides, Heiss Basedow Basedow Reichert-Facilides, Heiss, Norio-Timonen Group Basedow, Heiss Basedow Basedow Clarke Basedow Schauer Adelmann, Heiss Heiss Clarke, Rudisch Clarke, Rudisch Clarke, Rudisch Clarke, Rudisch Clarke, Rudisch Schauer Heiss Heiss Heiss Dufwa Dufwa Schnyder Adelmann, Dufwa Heiss Heiss Heiss Heiss Heiss Basedow Basedow Wandt Basedow Wandt Wandt Heiss, Lorenz

List of Rapporteurs

Article 3:102 Agents of Insurers Purporting to Be Independent Article 4:101 Precautionary Measures: Meaning Article 4:102 Insurer’s Right to Terminate the Insurance Contract Article 4:103 Discharge of the Insurer’s Liability Article 4:201 Clauses Concerning Aggravation of Risk Article 4:202 Duty to Give Notice of an Aggravation of Risk Article 4:203 Termination and Discharge Article 4:301 Consequences of the Reduction of Risk Article 5:101 First or Single Premium Article 5:102 Subsequent Premium Article 5:103 Termination of the Contract Article 5:104 Divisibility of Premium Article 5:105 Right to Pay Premium Article 6:101 Notice of Insured Event Article 6:102 Claims Cooperation Article 6:103 Acceptance of Claims Article 6:104 Time of Performance Article 6:105 Late Performance Article 7:101 Action for Payment of Premium Article 7:102 Action for Payment of Insurance Benefits Article 7:103 Other Issues Relating to Prescription Article 8:101 Maximum Sums Payable Article 8:102 Underinsurance Article 8:103 Adjustment of Terms in Case of Overinsurance Article 8:104 Multiple Insurance Article 9:101 Causation of Loss Article 9:102 The Costs of Mitigation Article 10:101 Subrogation Article 11:101 Entitlement of the Insured Article 11:102 Knowledge of the Insured Article 11:103 Breach of Duty by One Insured Article 12:101 Lack of Insured Risk Article 12:102 Transfer of Property Article 13:101 Insurance of Fixed Sums Article 14:101 Defence Costs Article 14:102 Protection of the Victim Article 14:103 Causation of Loss Article 14:104 Acknowledgement of Liability Article 14:105 Assignment Article 14:106 No-Claims-Bonuses / Bonus-Malus-Systems Article 14:107 Insured Event Article 14:108 Claims Exceeding the Sum Insured Article 15:101 Direct Claims and Defences Article 15:102 Information Duties Article 15:103 Discharge Article 15:104 Prescription Article 16:101 Scope of Application

Heiss, Lorenz Wansink, Basedow Wansink, Basedow Wansink, Basedow Clarke Clarke Clarke Clarke, Takáts Heiss Heiss Heiss Heiss Heiss Bataller Grau Bataller Grau Bataller Grau Bataller Grau Bataller Grau Kullmann, Rokas, Heiss Kullmann, Rokas, Heiss Kullmann, Rokas, Heiss Cerini, Clarke, Heiss Clarke, Takáts Clarke, Takáts Takáts, Wansink, Birds Clarke Clarke Birds Rokas, Basedow Rokas, Basedow Rokas, Basedow Heiss, Loacker Heiss, Loacker Heiss Birds Birds Clarke Clarke Clarke Birds Cousy Heiss Heiss Heiss Heiss Heiss Basedow

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List of Rapporteurs

Article 17:101 Life Insurance on the Life of a Third Party Article 17:102 Beneficiary of the Insurance Money Article 17:103 Beneficiary of the Surrender Value Article 17:104 Assignment or Encumbrance Article 17:105 Renunciation of Estate Article 17:201 Applicant’s Pre-contractual Information Duties Article 17:202 Insurer’s Pre-contractual Information Duties Article 17:203 Cooling-off Period Article 17:204 Policyholder’s Right to Terminate the Contract Article 17:205 Insurer’s Right to Terminate the Contract Article 17:301 Insurer’s Post-contractual Information Duties Article 17:302 Aggravation of Risk Article 17:303 Adjustment of Premium and Benefits Payable Article 17:304 Alteration of Terms and Conditions Article 17:401 Pension Plans Article 17:402 Tax Treatment and State Subsidies Article 17:501 Insurer’s Investigation and Information Duty Article 17:502 Suicide Article 17:503 Intentional Killing of the Person at Risk Article 17:601 Conversion of the Contract Article 17:602 Surrender of the Contract Article 17:603 Conversion Value; Surrender Value Article 18:101 Applicability Article 18:102 General Duty of Care of the Group Organiser Article 18:201 Application of the PEICL Article 18:202 Information Duties Article 18:203 Termination by the Insurer Article 18:204 Right to Continue Cover – Group Life Insurance Article 18:301 Elective Group Insurance: General Article 18:302 Alteration of Terms and Conditions Article 18:303 Continuation of Cover

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Heiss Cerini Basedow Rokas Schnyder, Heiss Cousy Cousy Cousy Basedow Basedow Rokas Clarke Wandt Wandt Schauer Schauer Heiss Schauer Schauer Schnyder Schnyder Schnyder Takáts Takáts Norio-Timonen Norio-Timonen Norio-Timonen, Basedow Norio-Timonen, Schauer Takáts Wandt Norio-Timonen, Takáts

List of Translators Chinese version Dr. Yong Qiang Han, LL.M. Civil and Commercial Law School, Southwest University of Political Science and Law and NUS Faculty of Law, National University of Singapore

Dr. Leander D. Loacker, M.Phil. Universität Zürich Andrea Stäubli Universität Zürich

Greek version Czech version

em. Prof. Dr. Ioannis Rokas Οικονομικό Πανεπιστήμιο Αθηνών

JUDr. Petr Dobiáš, Ph.D. Právnická fakulta, Univerzita Karlova v Praze

Eirini Sarri I.K. Rokas & Partners Law Firm, Athens

Dutch version

Marilena Sotirchou I.K. Rokas & Partners Law Firm, Athens

Prof. Dr. J. Han Wansink Erasmus Universiteit Rotterdam Universiteit van Leiden

Hungarian version

Mariëlle van Popering Hogan Lovells, Amsterdam

tit. Prof. Dr. Péter Takáts Eötvös Loránd Tudományegyetem, Budapest

French version

Dr. Emese Kaufmann-Mohi Universität Zürich

Prof. Dr. Jérôme Kullmann Université Paris Dauphine

Italian version

Dr. Emese Kaufmann-Mohi Universität Zürich

Prof. Dr. Diana Cerini Università degli Studi di Milano Bicocca

German version

Luca Semeraro Università degli Studi di Milano Bicocca

Dr. Nina Trunk-Adelmann (†) Universität Mannheim

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List of Translators

Japanese version

Serbian version

Prof. Kyoko Kaneoka Tokyo University of Marine Science and Technology

Mira Todorovic-Symeonides, LL.M. I.K. Rokas & Partners Law Firm, Athens

Prof. Dr. Souichirou Kozuka Gakushuin University, Tokyo

Slovak version

Prof. Satoshi Nakaide Waseda University

Korean version Prof. Dr. Eun-Kyung Kim Hankuk University of Foreign Studies, Seoul Dr. iur. Che-Oug Rim Hankuk University of Foreign Studies, Seoul

Polish version Dr. Dariusz Fuchs Uniwersytet Kardynała S. Wyszyńskiego, Warszawa

Dr. iur. Imrich Fekete, PhD. Univerzita Komenského, Bratislava Hana Hlavatovičová, BSBA, MBA Slovenska kancelaria poistovatelov, Bratislava

Spanish version Prof. Dr. Juan Bataller Grau Universidad Politécnica de Valencia Prof. Dr. Paola Rodas Paredes Universitat Rovira i Virgili, Tarragona Nuria Pastor Martorell, LL. M. Lawyer

Swedish version

Łukasz Szymański Uniwersytet Kardynała S. Wyszyńskiego, Warszawa

Prof. Dr. Bill W. Dufwa Stockholms Universitet

Magdalena Boguska Greenberg Traurig, LLP, Warszawa

Turkish version Prof. Dr. Ahmet Samim Ünan Galatasaray University, Istanbul

Portuguese version Prof. Dr. Pedro Pais de Vasconcelos Universidade de Lisboa

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Dr. Serap Amasya Galatasaray University, Istanbul

Publications on the PEICL A. General Publications 1. Editions of books and/or monographs Jürgen Basedow and Till Fock (eds.), Europäisches Versicherungsvertragsrecht, vols. I & II (Mohr Siebeck, Tübingen 2002); vol. III (Mohr Siebeck, Tübingen 2003) Petr Dobiáš, Zákon o mezinárodním právu soukromém (komentář) (Leges, Prague 2013) Petr Dobiáš, Mezinárodní pojistné právo se zřetelem křešení pojistných sporů v rozhodčím řízení (Vybrané kapitoly) (Nakladatelství Leges, s.r.o., Prague 2011) Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) Helmut Heiss, Insurance Contract Law between Business Law and Consumer Protection (Reports presented at the 18th International Congress on Comparative Law of the Académie internationale de droit comparé/ International Academy of Comparative Law – Washington 2010) (Dike, Zurich 2012) Helmut Heiss, ‘Stand und Perspektiven der Harmonisierung des Versicherungsvertragsrechts in der EG’ in Petra Pohlmann (ed.), Veröffentlichungen der Münsterischen Forschungsstelle für Versicherungswesen an der Westfälischen Wilhelms-Universität zu Münster (“Münsteraner Reihe”), Issue 99 (VVW, Karlsruhe 2005) Helmut Heiss (ed.), An Internal Insurance Market in an Enlarged European Union (VVW, Karlsruhe 2002) Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) Helmut Heiss and Anton K. Schnyder, ‘Versicherungsverträge’ in Herbert Kronke, Werner Melis and Anton K. Schnyder (eds.), Handbuch des Internationalen Wirtschaftsrechts (Schmidt, Cologne 2005) Leander D. Loacker, Informed Insurance Choice? (Edward Elgar, Cheltenham 2015) Fritz Reichert-Facilides (eds.), Aspekte des internationalen Versicherungsvertragsrechts im Europäischen Wirtschaftsraum (Mohr Siebeck, Tübingen 1994) Fritz Reichert-Facilides and Anton K. Schnyder (eds.), Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000) Fritz Reichert-Facilides and Hans Ulrich Jessurun d’Oliveira (eds.), International Insurance Contract Law in the EC (Kluwer, Deventer 1993) Ioannis Rokas (ed.), Commentary on Insurance Contract Act (Nomiki Bibliothiki, Athens 2014) Ioannis Rokas, Insurance Law, An Introduction (3rd edn Nomiki Bibliothiki, Athens 2014) Ioannis Rokas, Idiotiki Asfalisi (11th edn Ant. N. Sakkoulas, Athens 2006) 105 Anton K. Schnyder, Europäisches Banken- und Versicherungsrecht (Müller, Heidelberg 2005) Pedro Pais de Vasconcelos, D&O INSURANCE: O Seguro de Responsabilidade Civil dos Administradores e outros Dirigentes da Sociedade Anónima (Almedina 2007)

2. Contributions in academic journals and/or anthologies Nina Adelmann, ‘Unfair Terms in Insurance Contracts’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 133 Christian Armbrüster, ‘Das Versicherungsrecht im Common Frame of Reference’, Zeitschrift für Europäisches Privatrecht (2008) 775 Jürgen Basedow, ‘Versicherungsvertragsrecht als Markthindernis?’, Europäische Zeitschrift für Wirtschaftsrecht (2014) 1 Jürgen Basedow, ‘An optional instrument and the disincentives to opt in’, Contratto e impresa/Europa, Numero speciale – Trenta giuristi europei sull’idea di codice europeo del contratto (2012) 37

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Publications on the PEICL

Jürgen Basedow, ‘Internal Market (Insurance)’ in Jürgen Basedow, Klaus J. Hopt, Reinhard Zimmermann, with Andreas Stier (eds.), The Max Planck Encyclopedia of European Private Law, vol. I (Oxford University Press, Oxford 2012) 955 Jürgen Basedow, ‘An Optional European Contract Law and Insurance’ in Caroline Van Schoubroeck, Wouter Devroe, Koen Geens and Jules Stuyck (eds.), Over Grenzen – Liber amicorum Herman Cousy (Intersentia, Antwerp/Cambridge 2011) 19 Jürgen Basedow, ‘Closing remarks: Summary and outlook’ in Helmut Heiss, on behalf of the Project Group Restatement of European Insurance Contract Law (eds.), Principles of European Insurance Contract Law: A Model Optional Instrument (Sellier elp, Munich 2011) 95 Jürgen Basedow, ‘Das fakultative Unionsprivatrecht und das internationale Privatrecht’ in Herbert Kronke and Karsten Thorn (eds.), Grenzen überwinden – Prinzipien bewahren. Festschrift für Bernd von Hoffmann (Gieseking, Bielefeld 2011) 50 Jürgen Basedow, ‘European Contract Law – The case for a growing optional instrument’ in Reiner Schulze and Jules Stuyck (eds.), Towards a European Contract Law (Sellier elp, Munich 2011) 169 Jürgen Basedow, ‘Fakultatives Unionsprivatrecht oder: Grundlagen des 28. Modells’ in Detlev Joost, Hartmut Oetker and Marian Paschke (eds), Festschrift für Franz Jürgen Säcker zum 70. Geburtstag (Beck, Munich 2011) 29 Jürgen Basedow, ‘The case for a European Insurance Contract Act’ in Arthur Hartkamp, Martijn W. Hesselink, Ewoud Hondius, C. Mak and Edgar Du Perron (eds.), Towards a European Civil Code (4th edn, Wolters Kluwer, Alphen aan den Rijn 2011) 735 Jürgen Basedow, ‘Entwicklungslinien des Versicherungsvertragsrechts – Die schweizerische Gesamtrevision im Lichte der Rechtsvergleichung’ in Anton K. Schnyder (ed.), Internationales Forum zum Privatversicherungsrecht 2008 (Schulthess Juristische Medien, Zurich/Basle/Genf 2009) 11 Jürgen Basedow, ‘Versicherungsbinnenmarkt’ in Jürgen Basedow, Klaus J. Hopt and Reinhard Zimmermann (eds.), Handwörterbuch des Europäischen Privatrechts, vol. II (Mohr Siebeck, Tübingen 2009) 1654 Jürgen Basedow, ‘The Optional Application of the Principles of European Insurance Contract Law’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 111 Jürgen Basedow, ‘Die Laufzeit von Versicherungsverträgen als rechtsökonomisches Problem in Theodor Siegel, Andreas Klein, Dieter Schneider, and Hans-Peter Schwintowski (eds.), Unternehmungen, Versicherungen und Rechnungswesen. Festschrift zur Vollendung des 65. Lebensjahres von Dieter Rückle (Duncker & Humblot, Berlin 2006) 143 Jürgen Basedow, ‘Verso una disciplina europea dei contratti di assicurazione: ragioni, struttura e metodo’, Danno e Responsabilità (2006) 5; also published in Onofrio Troiano (ed.), Verso una disciplina europea dei contratti di assicurazione? (Giuffrè, Milan 2006) 11 Jürgen Basedow, ‘Der Versicherungsbinnenmarkt und ein optionales europäisches Vertragsgesetz’ in Manfred Wandt (ed.), Kontinuität und Wandel des Versicherungsrechts. Festschrift für Egon Lorenz zum 70. Geburtstag (VVW, Karlsruhe 2004) 93 Jürgen Basedow, ‘Insurance Contract Law as Part of an Optional European Contract Act’ [2003] Lloyd’s Maritime and Commercial Law Quarterly 498, abridged version in ERA Forum 2003 (ERA Forum scripta iuris europaei), vol. 4, issue 2 (Springer, Heidelberg 2003) 56 Jürgen Basedow, ‘Why insurance contract law in Europe should be harmonised’, Nordisk Försäkringstidskrift (2002) 31 Jürgen Basedow, ‘The European Insurance Market, Harmonisation of Insurance Contract Law, and Consumer Policy’, (2000-2001) 7 Connecticut Insurance Law Journal 495 Jürgen Basedow, ‘Die Gesetzgebung zum Versicherungsvertrag zwischen europäischer Integration und Verbraucherpolitik’ in Fritz Reichert-Facilides and Anton K. Schnyder (eds.), Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000) 13 Jürgen Basedow, ‘Transparenz als Prinzip des (Versicherungs-)Vertragsrechts’, Versicherungsrecht (1999) 1045 Jürgen Basedow, ‘Versicherungsvertragsrecht’ in European Parliament, Directorate-General for Research, Untersuchung der Privatrechtsordnungen der EU im Hinblick auf Diskriminierungen und die Schaff ung eines europäischen Zivilgesetzbuches (Luxembourg 1999) 29, 99, 159

xlviii

Publications on the PEICL

Jürgen Basedow, ‘Stand und Perspektiven der Deregulierung im Versicherungswesen’ in Schwintowski (ed.), Deregulierung, private Krankenversicherung, Kfz-Haftpflichtversicherung (Nomos-Verl.-Ges., Baden-Baden 1994) 23; in Portuguese published in: Revista trimestral de direito púbblico (São Paulo) 23 (1998) 141 Jürgen Basedow, ‘Das österreichische Bundesgesetz über internationales Versicherungsvertragsrecht – Eine rechtspolitische Würdigung’ in Fritz Reichert-Facilides (ed.), Aspekte des internationalen Versicherungsvertragsrechts im Europäischen Wirtschaftsraum (Mohr Siebeck, Tübingen 1994) 89 Jürgen Basedow and Wolfgang Drasch, ‘Das neue Internationale Versicherungsvertragsrecht’, Neue Juristische Wochenschrift (1991) 785 Jürgen Basedow and others, ‘Policy Options for Progress Towards a European Contract Law. Comments on the issues raised in the Green Paper from the Commission of 1 July 2010, COM (2010) 348 final’, Rabels Zeitschrift für ausländisches und internationales Privatrecht (2011) 371 Jürgen Basedow and Jens M. Scherpe, ‘Das internationale Versicherungsvertragsrecht und “Rom I”’ in Stephan Lorenz, Festschrift für Andreas Heldrich zum 70. Geburtstag (Beck, Munich 2005) 511 Juan Bataller Grau, ‘The Harmonization of European Contract Law: The Case of Insurance Contracts’, (2014) 21(1) Connecticut Insurance Law Journal 149 Juan Bataller Grau, ‘Un marco común de referencia para el contrato de seguro en la Unión Europea’, Revista española de seguros (2008) 669 Juan Bataller Grau, ‘Principios de Derecho Europeo del contrato de seguro (PEICL). Un paso importante hacia la integración de los mercados nacionales de seguros en la Unión Europea’, Revista española de seguros (October 2007) No. 132, 497 Juan Bataller Grau, ‘Hacia un mercado asegurador único: la solución del 26° régimen’, Revista española de seguros (2005) 401 Juan Bataller Grau, ‘Hacia la unificación de la normativa del contrato de seguro en Europa? Tópicos para un debate’ in Guillermo Palao Moreno, Lorenzo Prats Albentosa, and María José Reyes López (eds.), Derecho patrimonial europeo (Aranzadi, Cizur Menor (Navarra) 2003) 40 Juan Bataller Grau, ‘Un mercado europeo del seguro: Claves para una revisión’ in Camara Lapuente (ed.), Derecho privado europeo (Colex, Madrid 2003) 741 Juan Bataller Grau, ‘Constitución del grupo de trabajo Restatement of European Insurance Law’, Revista española de seguros (March 2000) No. 101, 13 Bertil Bengtsson, ‘Om europeisk och svensk försäkringsavtalsrätt’, Juridisk Tidskrift, vol. 24, issue 1 (2012-13) 3 Ferry Blom, ‘Principles of European Insurance Contract Law (PEICL): The risk insured (risicoverzwaring)’, Aansprakelijkheid, Verzekering & Schade (2009) 59 Christoph Brömmelmeyer, ‘Principles of European Insurance Contract Law’, European Review of Contract Law (2011) 445 Diana Cerini, ‘Diritto del contratto di assicurazione e diritto europeo: i “Principles of European Insurance Contract Law” (PEICL)’, Diritto ed economia dell’assicurazione (2008) 35 Diana Cerini, ‘Nuovo Parere del comitato economico e sociale europeo (doc. CESE 1626/2004): quale via per un contratto di assicurazione europeo?’ Diritto ed economia dell’assicurazione (2005) 675 Malcolm Clarke, ‘Aggravation of risk during the insurance period’ [2004] Lloyd’s Maritime and Commercial Law Quarterly 109 Malcolm Clarke and Helmut Heiss, ‘Towards a European Insurance Contract Law? Recent Developments in Brussels’ [2006] Journal of Business Law 600 Herman Cousy, ‘Les Principes du droit européen du contrat d’assurance: L’esprit des principes’, Revue Générale du Droit des Assurances; forthcoming. Herman Cousy, ‘The Principles of European Insurance Contract Law: the Duty of Disclosure and the Aggravation of Risk’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 119 Herman Cousy, ‘Komt er dan toch een Europese harmonisatie van het verzekeringscontractenrecht?’ Tijdschrift voor Belgisch Handelsrecht / Revue de Droit Commercial Belge (2007/8) 741 Petr Dobiáš, ‘Die Neuregelung des Versichrungsrechts im reformierten tschechischen ZGB’, Versicherungsrecht (2013) 5

xlix

Publications on the PEICL

Petr Dobiáš, ‘Právní úprava pojištění v novém občanském zákoníku ve srovnání se Zásadami evropského smluvního pojišťovacího práva’ (The Legal Regulation of Insurance in New Civil Code in Comparison with Principles of European Insurance Contract Law) in Naděžda Rozehnalová and Tereza Kyselovská (eds.), K některým vývojovým otázkám mezinárodního práva soukromého (Brno, Masarykova Univerzita 2013) 215 Petr Dobiáš, ‘Mezinárodně právní aspekty pojištění (International Legal Aspects of Insurance)’, Pojistné rozpravy, (2010) No. 26, 39 Petr Dobiáš, ‘Principles of European Insurance Contract Law in Comparison with Czech Law on Insurance Contracts’ in Alexander J. Belohlávek and Nadežda Rozehnalová (eds.), Czech Yearbook of International Law (Juris Publishing Inc., New York 2010) 111 Petr Dobiáš, ‘Zásady evropského pojišťovacího smluvního práva (Principles of European Insurance Contract Law)’ in Monika Pauknerová and Michal Tomášek (eds.), Nové jevy na počátku 21. století, Part IV (Proměny soukromého práva, Karolinum, Prague 2009) 210 Tjalling Dorhout Mees, ‘Principles of European Insurance Contract Law (PEICL): Insurers pre-contractual duties, the conclusions of the contract and the insurance policy (art. 2:201 t /m 2:203, 2:301 t /m 2:304, 2:501 en 2:502)’, Aansprakelijkheid, Verzekering & Schade (2008) 229 Tjalling Dorhout Mees, ‘Principles of European Insurance Contract Law (PEICL): Retroactive and Preliminary Cover, Duration of the Insurance Contract and Post-Contractual Information Duties of the Insurer (articles 2:401 t /m 2:403, 2:601 t /m 2:604 en 2:701 en 2:702)’, Aansprakelijkheid, Verzekering & Schade (2009) 3 Bill Dufwa, ‘Försäkringsavtalsrätten i den europeiska smältdegeln’ in Svensk Försäkrings Framtid (Stockholm 2000) 129 Bill Dufwa, ‘Integration genom fristående akademiska grupper’, Europarättslig Tidskrift (2006) 307 Bill Dufwa, ‘Principer för europeisk försäkringsavtalsrätt (PEICL)’, 2 Juridisk Tidskrift (2010-11) 351 Erich Erlenbach, ‘Auf dem Weg zum europäischen Versicherungsvertragsrecht’, Versicherungswirtschaft (2008) 2120 Imrich Fekete, ‘Princípy európskeho práva poistnej zmluvy’ (Principles of European Insurance Contract Law), Poistné rozhľady (2010) (XVI), No. 3, 3. Marcel Fontaine, ‘An Academic View’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) 29 Dariusz Fuchs, ‘Dopuszczalność umowy ubezpieczenia wstecznego w prawie polskim i wspólnotowym’ in W Sułkowska (ed.) Szanse i zagrożenia dla rynków ubezpieczeń w krajach Europy Środkowej i Wschodniej (Kraków 2009) 177 Dariusz Fuchs, ‘Insurance Restatement’, Rozprawy Ubezpieczeniowe nr 9 (2/2010) 134 Dariusz Fuchs, ‘Insurance Restatement jako europejski instrument opcjonalny służący regulacji umowy ubezpieczenia’, Rozprawy Ubezpieczeniowe nr 9 (2/2010) 126 Dariusz Fuchs, ‘Insurance Restatement jako przykład jednolitego prawa wspólnotowego o umowie ubezpieczenia’, Studia ubezpieczeniowe nr 127 (2009) 307 Dariusz Fuchs, ‘Nowelizacja Kodeksu Cywilnego w zakresie wybranych przepisów ogólnych o umowie ubezpieczenia w s´wietle prac Project Group on a Restatement of European Insurance Contract law’, Wiadomos´ci Ubezpieczeniowe No. 7/8 (2007) 32 Dariusz Fuchs, ‘Pojęcie ryzyka w unijnym prawie ubezpieczeń gospodarczych na przykładzie Polski a treść Principles of European Insurance Contract Law’ in M. Serwach (ed.), Ryzyko ubezpieczeniowe. Wybrane zagadnienia teorii i praktyki (Łódź 2013) 227 Dariusz Fuchs, ‘Restatement of European Insurance Contract Law a koncepcja polskiego kodeksu ubezpieczeń’ in E. Kowalewski (ed.) O potrzebie polskiego kodeksu ubezpieczeń (Toruń 2009) 125 Dariusz Fuchs, ‘The European Restatement Contract Law a grupowe ubezpieczenia na życie’ in E. Kowalewski (ed.), Ubezpieczenia grupowe na życie a prawo zamówień publicznych, wydawnictwo TNOiK (Toruń 2010), 185 Yong Q Han, ‘The Comparative-law Relevance of PEICL to the Making of Judicial Interpretation II to the Chinese Insurance Act 2009’ (2012) 1 Insurance Law Review 94 (Law Press, Beijing) David Harari, ‘The Role of the Intermediary’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) 75

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Publications on the PEICL

Helmut Heiss, ‘Anlegerschutz bei Versicherungsprodukten’ in Egon Lorenz (ed.), Karlsruher Forum 2014 (Verlag Versicherungswirtschaft, Karlsruhe 2015) 41 Helmut Heiss, ‘Gemeinsames Europäisches Kaufrecht – Ein Instrument auch des EU-Außenhandels? ’ in Normann Witzleb, Reinhard Ellger, Peter Mankowski, Hanno Merkt and Oliver Remine (eds.), Festschrift D. Martiny (Mohr, Tübingen 2014) 917 Helmut Heiss, ‘Das Gemeinsame Europäische Kaufrecht – Ein optionales Instrument’ in Stefan Perner, Daniel Rubin, Martin Spitzer and Andreas Vonkilch (eds.), Festschrift A. Fenyves (Verlag Österreich, Vienna 2013) 873 Helmut Heiss, ‘Angleichung als Legitimationsproblem – Stellt die Schaffung von „Parallelrecht“ einen geeigneten Ausweg dar?’ in Leander Loacker and Corinne Zellweger-Gutknecht (eds.), Differenzierung als Legitimationsproblem – APARIUZ (Heft 14 Dike, Zurich 2012) 4 Helmut Heiss, ‘General Report’ in Helmut Heiss (ed.), Insurance Contract Law between Commercial Law and Consumer Protection (Reports presented at the 18th International Congress on Comparative Law of the Académie internationale de droit comparé/International Academy of Comparative Law – Washington 2010) (Dike, Zurich 2012) 7 Helmut Heiss, ‘Optionales europäisches Versicherungsvertragsrecht’, Rabels Zeitschrift für ausländisches und internationales Privatrecht 76 (2012) 316 Helmut Heiss, ‘Pre-contractual information duties of insurers in EU insurance contract law’ (2012) 23 Insurance Law Journal (Australia) 86 Helmut Heiss, ‘Introduction’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law: A Model Optional Instrument (Sellier elp, Munich 2011) 7 Helmut Heiss, ‘Optionales europäisches Vertragsrecht als “2. Regime”’ in Holger Altmeppen and Hanns Fitz, Heinrich Honsell (eds.), Festschrift G. H. Roth (Beck, Munich 2011) 237 Helmut Heiss, ‘Principi di Diritto Europeo del Contratto di Assicurazione (PDECA)’, Responsabilitá Civile e Previdenza 1 (2011) 5 (= Italian translation of the ‘Introduction’ in Jürgen Basedow, John Birds, Malcolm Clarke, Herman Cousy and Helmut Heiss (eds.), Principles of European Insurance Contract (Sellier elp, Munich 2009)) Helmut Heiss, ‘Europäisches Versicherungsvertragsrecht: Vom Gemeinsamen Referenzrahmen zum optionalen Instrument?’ in Michael Ganner (ed.), Die soziale Funktion des Privatrechts. Festschrift Heinz Barta (Linde, Vienna 2009) 311 Helmut Heiss, ‘The Common Frame of Reference (CFR) of European Insurance Contract Law’, (2009) 1 European Journal of Commercial Contract Law 2 Helmut Heiss, ‘Insurance Contracts in Rome I: Another recent failure of the European legislature’ in Petar Sarcevic, Andrea Bonomi and Paul Volken (eds.), Yearbook of Private International Law, vol. X (Sellier elp, Munich 2008) 261 Helmut Heiss, ‘Insurance Premium’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 141 Helmut Heiss, ‘The Common Frame of Reference (CFR) of European Insurance Contract Law’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 95 Helmut Heiss, ‘The Common Frame of Reference (CFR) of European Insurance Contract Law’ in Reiner Schulze (ed.), Common Frame of Reference and Existing EC Contract Law (Sellier elp, Munich 2008) 229 Helmut Heiss, ‘Der Vorentwurf einer “Gesamtrevision des BG über den Versicherungsvertrag (VVG)” im Lichte der europäischen Entwicklungen’, Haftung und Versicherung (2007) 235 Helmut Heiss, ‘Die Direktklage vor dem EuGH’, Versicherungsrecht (2007) 327 Helmut Heiss, ‘Európai biztosítási jog felé: szabályrendszer – közös referenciakeret – választható eszköz?’ Bistosítási Szemle (2007) No. 2, 3 Helmut Heiss, ‘Principles of European Insurance Contract Law (PEICL)’ in Marc Hendrikse and Jac Rinkes (eds.), Insurance and Europe (Uitgeverij Paris, Zutphen 2007) 41 Helmut Heiss, ‘Reform des internationalen Versicherungsvertragsrechts’, Zeitschrift für die gesamte Versicherungswissenschaft (2007) 503 Helmut Heiss, ‘Das Kollisionsrecht der Versicherungsverträge nach Rom I und II’, Versicherungsrecht (2006) 185 Helmut Heiss, ‘Mobilität und Versicherung’, Versicherungsrecht (2006) 448

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Publications on the PEICL

Helmut Heiss, ‘Towards a European Insurance Contract Law: Restatement – Common Frame of Reference – Optional Instrument?’ Internationale Juristenvereinigung Osnabrück 13 (2006) 1 Helmut Heiss, ‘Europäischer Versicherungsvertrag – Initiativstellungnahme des Europäischen Wirtschaftsund Sozialausschusses verabschiedet’, Versicherungsrecht (2005) 1 Helmut Heiss, Malcolm Clarke and Mandeep Lakhan, ‘Europe: towards a harmonised European insurance contract law – the PEICL’ in Julian Burling and Kevin Lazarus (eds.), Research Handbook on International Insurance Law and Regulation (Elgar, Cheltenham 2011) 603 Helmut Heiss and Marlene Danzl, ‘Der Gemeinsame Referenzrahmen des europäischen Versicherungsvertragsrechts’, Versicherungsrundschau (2008) 20 Helmut Heiss and Noemi Downes, ‘Non-optional Elements in an Optional European Contract Law: Reflections from a Private International Law Perspective’ (2005) 13 European Review of Private Law 693 Helmut Heiss and Ariane Ernst, ‚Finanzinnovationen im Versicherungsrecht – ein Überblick‘ in Florian Möslein (ed.), Finanzinnovationen und Rechtsordnung (Schulthess, Zurich 2014) 336 Helmut Heiss and Olympia Kosma, ‘Die Direktklage des Geschädigten im europäischen Versicherungsrecht’ in Mop van Tiggele-van der Velde, Gerard Kamphuisen, and B. K. M. Lauwerier (eds.), De Wansink-bundel: van draden en daden (Liber amicorum Han Wansink) (Kluwer, Deventer 2006) 279 Helmut Heiss and Mandeep Lakhan, ‘An Optional Instrument for European Insurance Contract Law’, Merkourios 2010, Volume 27/Issue 71, 1 Helmut Heiss and Leander D. Loacker, ‘Neue Impulse für die Schaffung eines Europäischen Versicherungsvertragsrechts – Europäischer Wirtschafts- und Sozialausschuss präsentiert Initiativstellungnahme’, Versicherungsrundschau (2005) Issue 9, 245 Helmut Heiss and Ulrike Mönnich, ‘Versicherungsanlageprodukte im PRIPS-Vorschlag – Basisinformationsblatt statt information overload?’, Versicherungsrundschau 2013, 32 Helmut Heiss and Marielle van Popering, ‘Richting Europees Verzekeringsovereen- komstenrecht: Restatement – Common Frame of Reference – Optioneel instrument?’ Nederlands tijdschrift voor handelsrecht (2007) 189 Peter Hinchliffe, ‘Review of Principles of European Insurance Law’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 167 Gerard Kamphuisen, ‘PEICL en de tussenpersoon’, Aansprakelijkheid, Verzekering & Schade (2008) 291 Georg Kathrein, ‘Welcome Address’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) 3 Leander D. Loacker, ‘Europäisches Versicherungsvertragsrecht’ in Dirk Looschelders and Petra Pohlmann (eds.), Versicherungsvertragsgesetz – Kommentar (2nd edn Heymanns, Cologne 2011) 63 Leander D. Loacker, ‘Gleich und Gleich gesellt sich gern?’, Haftpflicht und Versicherung (2011) 351 Leander D. Loacker, ‘Insurance soft law? Die Idee eines europäischen Versicherungsvertragsrechts zwischen akademischer Pionierleistung, Gemeinsamem Referenzrahmen und optionalem Instrument’, Versicherungsrecht (2009) 289 Ulrike Mönnich, ‘Europäisierung des Privatversicherungsrechts’ in Roland Michael Beckmann and Annemarie Matusche-Beckmann (eds.), Versicherungsrechts-Handbuch (Beck, Munich 2009) 70 (§ 2) Andreas Müller, ‘Vers un droit européen du contrat d’assurance. Le “Project Group Restatement of European Insurance Contract Law”’, (2007) 1 European Review of Private Law 59 Jaana Norio-Timonen, ‘Harmonisaatio ja eurooppalaiset kuluttajavakuutusmarkkinat’ in Olli Mäenpää, Dan Frände and Päivi Korpisaari (eds.), Oikeuden historiasta tulevaisuuden Eurooppaan – Pia Letto-Vanamo 60 vuotta (Suomalainen Lakimiesyhdistys, Helsinki 2014) 261 Jaana Norio-Timonen, ‘Legal Coherence as a Prerequisite for a Single European Insurance Market’ in Pia Letto-Vanamo and Jan Smits (eds.), Coherence and Fragmentation in European Private Law (Sellier elp, Munich 2012) 43 Jaana Norio-Timonen, ‘Vakuutussopimuslainsäädännön harmonisoinnilla kohti eurooppalaisia kuluttajavakuutusmarkkinoita’ in Lena Sisula-Tulokas, Irene Luukkonen, and Marja Saario (eds.), Kuluttajien vakuutustoimisto ja Vakuutuslautakunta 35 vuotta (Kuluttajien vakuutustoimisto & Vakuutuslautakunta, Helsinki 2006) 69 Jorge Pegado Liz, ‘Developments at EESC Level’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) 25

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Publications on the PEICL

Fritz Reichert-Facilides, ‘Verbraucherschutz – Versicherungsnehmerschutz: Überlegungen im Blick auf das Projekt: “Restatement des Europäischen Versicherungsvertragsrechts”’ in Bernhard Eccher, Kristin Nemeth, and Astrid Tangl (eds.), Verbraucherschutz in Europa. Festgabe für em. o. Univ.-Prof. Dr. Heinrich Mayrhofer (Verl. Österreich, Vienna 2002) 179 Fritz Reichert-Facilides, ‘Gesetzgebung in Versicherungsvertragsrechtssachen: Stand und Ausblick’ in Fritz Reichert-Facilides and Anton K. Schnyder (eds.), Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000) 1 Fritz Reichert-Facilides, ‘Europäisches Versicherungsvertragsrecht?’ in Jürgen Basedow, Klaus J. Hopt, and Hein Kötz (eds.), Festschrift für Ulrich Drobnig zum siebzigsten Geburtstag (Mohr Siebeck, Tübingen 1998) 119 Ioannis Rokas, ‘De la création d’un cadre communautaire pour l’industrie de l’assurance à la création d’un cadre communautaire pour les produits d’assurance’, Revue Générale du Droit des Assurance, No. 4 (2010) 977 Ioannis Rokas, ‘The precontractual information duty of the policy holder as per the principles of the European insurance contract law (PEICL)’ in Serbian Insurance Law Association (eds.), Memoirs of the Serbian Insurance Law Association (11th Annual Conference at Palic, Serbia, April 2010, Radunic-Belgrade) Ioannis Rokas, ‘Future developments in the European Insurance structure of business’ in Ioannis Rokas (ed.), Poreia pros to syghrono asfalistiko dikaio (Ant. N. Sakkoulas, Athens 2007) 14 Martin Schauer, ‘Comments on Duration of Contract and Precautionary Measures’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 157 Frank Stadermann and Lisette de Haan, ‘Verzekerd voorval en verjaring in de PEICL’, Aansprakelijkheid, Verzekering & Schade (2009) 123 Mop van Tiggele-van der Velde, ‘Principles of European Insurance Contract Law (PEICL): Applicant’s Precontractual Information Duty (art. 2:101-105)’, Aansprakelijkheid, Verzekering & Schade (2008) 187 Abel B. Veiga Copo, Los principios de derecho europeo del contrato de seguro (Pontificia Universidad Javeriana, Bogota 2012) G.J.P. de Vries, ‘Principles of European Insurance Contract Law’, Nederlands Tijdschrift voor Handelsrecht (2009) 129 Diana Wallis, ‘Political Perspectives’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) 15 Manfred Wandt, ‘Entwicklungen des Versicherungsrechts: Vielfalt von Regelungszielen bei unterschiedlichen Regelungsebenen und -bereichen’, Versicherungsrundschau (2006) 159 Manfred Wandt, ‘Diskriminierung und Versicherung’ in Egon Lorenz (ed.), Karlsruher Forum 2004: Haftung wegen Diskriminierung nach derzeitigem und zukünftigem Recht (VVW, Karlsruhe 2005) 117 Manfred Wandt, ‘Internationales Privatrecht der Versicherungsverträge’ in Fritz Reichert-Facilides and Anton K. Schnyder (eds.), Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000) 85 Manfred Wandt and Hannah Ehlers, ‘Insurance Supervision in Germany – Equitable Life and Mannheimer Leben: Can the Germans rest assured of their assurance?’ in Festschrift für Prof. Dr. Hüseyin Ülgen, vol. I (Istanbul 2007) 981 Manfred Wandt and Hannah Ehlers, ‘Die geschlechtsabhängige Tarifierung von Versicherungsprämien im Lichte neuer Entwicklungen’ in Hugo Tiberg (ed.), Essays on tort, insurance, law and society in honour of Bill. W. Dufwa, vol. 2 (Jure, Stockholm 2006) 1201 Manfred Wandt and Jens Gal, ‘Transnationalisierungstendenzen im Versicherungsrecht’ in Fachbereich Rechtswissenschaft der Goethe-Universität Frankfurt am Main (ed.) 100 Jahre Rechtswissenschaft in Frankfurt – Erfahrungen, Herausforderungen, Erwartungen (2014) 629 Han Wansink, ‘Precautionary Measures: A Friendly or Hostile Tool of Limiting Insurance Coverage?’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 151 Han Wansink, ‘The Principles of European Insurance Contract Law (PEICL), een belangrijke stap voorwaarts op weg naar de integratie van de nationale verzekeringsmarkten in de Europese Unie’, Aansprakelijkheid, Verzekering & Schade (2008) 117

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Publications on the PEICL

Han Wansink, ‘The Restatement of European Insurance Contract Law: doelstellingen en verhouding tot Nederlands verzekeringsrecht’ in F.J.M. De Ly, K.F. Haak and W.H. van Boom, Eenvormig bedrijfsrecht: realiteit of utopie? (Boom Juridische Uitgevers, The Hague 2006) 24 Han Wansink, ‘The Restatement of European Insurance Contract Law: doelstellingen en verhouding tot Nederlands verzekeringsrecht’, Verzekeringsarchief (2006) 81 Felix Wieser, ‘The Perspective of the Insurance Industry’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) 51

B. Published Reports on the Restatement Mirjam Blaas, ‘Harmonisierung des europäischen Vertragsversicherungsrechts’, Zeitschrift für Europarecht, internationales Privatrecht und Rechtsvergleichung (2000) 229 Mirjam Blaas, Anna K. Pontiller and Peter Morandell, ‘Vorvertragliche Anzeigepflichten des Versicherungsnehmers im europäischen Vergleich’, Versicherungsrundschau (2001) 55 Malcom Clarke, ‘First Working Session of Project Group “Restatement of European Insurance Contract Law” on 10 September 1999 in Innsbruck, Austria’, (February 2000) No. 102, British Insurance Law Association Journal 31 Jens Gal, ‘Entwurf des Common Frame of Reference für Versicherungsverträge’, Versicherungsrecht (2009) 190 Daniel Jacobasch and Petra Zobel, ‘“A Common Insurance Market in an Enlarged European Union” und die 4. Tagung der Projektgruppe “Restatement of European Insurance Contract Law”’, Versicherungsrecht (2001) 1356 Joseph Legerer, ‘“Restatement of European Insurance Contract Law” – Bericht über ein Symposium in Innsbruck vom 9. und 10. 9. 1999’, Zeitschrift für Europarecht, Internationales Privatrecht und Rechtsvergleichung (2000) No. 9, 144 Joseph Legerer, ‘“Restatement of European Insurance Contract Law” – Tagungsbericht vom Innsbrucker Workshop am 9. /10. 9. 1999’, Neue Zeitschrift für Versicherung und Recht (2000) 16 Florian Marxer, ‘Restatement of European Insurance Contract Law – Erste Schritte zu einem vereinheitlichten Versicherungsvertragsrecht in Europa’, Liechtensteinische Juristen-Zeitung (2001) No. 3, 93 Florian Marxer, ‘Verso l’unificazione del diritto nel contratto di assicurazione in Europa. Il Restatement of European Insurance Contract Law’, Diritto ed Economia dell’Assicurazione (2002) No. 2, 315 Anna Pontiller, ‘Restatement des europäischen Versicherungsvertragsrechts: Erster Workshop in Innsbruck’, Versicherungsrundschau (2000) No. 9, 132 Bernhard Rudisch, ‘“Europäisches Versicherungsvertragsgesetz” im Werden?’ Versicherungswirtschaft (April 2000) 489 Bernhard Rudisch, ‘Restatement of European Insurance Contract Law – Workshop in Innsbruck am 9. und 10. 9. 1999’, Versicherungsrecht (2000) 827 Petra Zobel, ‘Ein Muster für ein europäisches Versicherungsvertragsgesetz? Von der 2. Tagung der Projektgruppe “Restatement of European Insurance Contract Law”’, Versicherungswirtschaft (2000) No. 14, 1065.

liv

Introduction Helmut Heiss Contents I. The Principles of European Insurance Contract Law as an Academic Endeavour 1. The Idea 2. Work Progress 3. The Approach a. Scope of Application b. Matters Not Regulated in the Principles of European Insurance Contract Law c. Mandatory Rules d. Adherence to the Existing Acquis Communautaire e. Language and Terminology f. Uniform Interpretation and Application g. Enforcement II. The Principles of European Insurance Contract Law as a Model Optional Common European Insurance Contract Law (CEICL) 1. The Need for a Common European Insurance Contract Law (CEICL) 2. Optional instead of a Non-optional CEICL 3. Main Features of the Proposed Optional Instrument

a. Optional Instrument as an EU Regulation b. The “Option” c. Optional Instrument and Mandatory Insurance Contract Law d. Comprehensive instead of Minimum Standard Regulation e. Option also Available for Purely Domestic Contracts f. Option and Third Parties to the Insurance Contract g. Comparison with the Proposed Common European Sales Law (CESL) III. Political Developments 1. Opinions of the European Economic and Social Committee (EESC) 2. Resolutions of the European Parliament 3. European Commission a. Establishment of a Common Frame of Reference of European Contract Law b. Commission Expert Group on European Insurance Contract Law IV. Final Remarks

I. The Principles of European Insurance Contract Law as an Academic Endeavour 1. The Idea I1.  The Project Group aiming at a “Restatement of European Insurance Contract Law”1 started its work in 1999. By then, Community legislation in the field of insurance supervisory law had established a system of single licensing and the conflict of laws issues had been partly unified and partly harmonised through the Brussels Convention2 , the Rome Conven-

1

This Group has been called by various names such as “Project Group”, “Innsbruck Group”, “Insurance Group” or “Restatement Group”; for the purposes of this article the Group shall be called “Project Group”. 2 The Brussels Convention was initially transformed into the Brussels I Regulation (44/2001), which has now been replaced by Brussels Ibis Regulation (1215/2012).

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Principles of European Insurance Contract Law (PEICL): Introduction

tion (80/934/EEC)3 and the Directives on insurance law4 . However, in contrast with these achievements in supervisory and private international law, an earlier attempt to harmonise substantive insurance contract law had failed.5 In view of this shortcoming of Community legislation in the field of insurance law, the Project Group decided to undertake to elaborate “Principles of European Insurance Contract Law” (PEICL) in order to reactivate the unification process. I2.  The reasons for this undertaking have been extensively chronicled in the research works of the late Professor Fritz Reichert-Facilides and of Professor Jürgen Basedow which were first presented at an international conference hosted by Professor Anton K. Schnyder in Basle in 1998.6 In the course of this conference both argued that the attempts to complete the internal insurance market within the EU had failed so far. Reichert-Facilides pointed out that the harmonisation of private international law had failed to bring about the expected or at least aspired effects for the internal market.7 The analysis provided by Jürgen Basedow showed that the private international law of insurance contracts was in fact an inadequate means for the creation of an internal insurance market.8 For the sake of policyholder protection, which is considered a “general good” by the European Court of Justice,9 the applicable rules of private international law are to a large extent mandatory. Pursuant to art. 11 para. 1(b) of the Brussels Ibis Regulation (1215/2012), a policyholder, insured or beneficiary may bring an action against an insurer at the court where the plaintiff is domiciled. Under the relevant rules of private international law as laid down in art. 7 of the Rome I Regulation 3

As to the application of the Rome Convention (80/934/EEC) to certain insurance contracts, see art. 1 paras. 3 and 4 of the Rome Convention (80/934/EEC); the Rome Convention (80/934/EEC) has meanwhile been replaced by the Rome I Regulation (593/2008). 4 See – for non-life insurance – the Second Non-Life Insurance Directive (88/357/EEC); Third NonLife Insurance Directive (92/49/EEC); for life assurance the Life Assurance Consolidation Directive (2002/83/EC); the Directives’ rules on the conflict of laws have meanwhile been replaced by the Rome I Regulation (593/2008), in particular its art. 7; as far as insurance contracts are concerned, the Rome I Regulation applies also in EEA Contracting States, see art. 187 of the Solvency II Directive (2009/138/ EC). 5 The Amended Proposal for a Council Directive on Insurance Contract Law [1979] OJ C190/2 (as amended by [1980] OJ C355/30) was withdrawn by the Commission on 4 August 2003. With regard to earlier attempts of harmonisation of insurance contract law, see Jürgen Basedow, ‘The Optional Application of the Principles of European Insurance Contract Law’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 111. 6 See the conference volume edited by Fritz Reichert-Facilides and Anton K. Schnyder, Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000). 7 Fritz Reichert-Facilides, ‘Gesetzgebung in Versicherungsvertragsrechtssachen: Stand und Ausblick’ in Fritz Reichert-Facilides and Anton K. Schnyder, Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000) 1, 10; id., ‘Europäisches Versicherungsvertragsrecht?’ in Jürgen Basedow, Klaus J. Hopt and Hein Kötz (eds.), Festschrift für Ulrich Drobnig zum siebzigsten Geburtstag (Mohr Siebeck, Tübingen 1998) 119. 8 Jürgen Basedow, ‘Die Gesetzgebung zum Versicherungsvertrag zwischen europäischer Integration und Verbraucherpolitik’ in Fritz Reichert-Facilides and Anton K. Schnyder, Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000) 13. 9 Case 205/84 Commission v Federal Republic of Germany [1986] ECR 3755.

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Principles of European Insurance Contract Law (PEICL): Introduction

(593/2008), the law applicable to the insurance contract will regularly be the law of the Member State in which the policyholder has his habitual residence. It follows that litigation in matters relating to insurance will usually take place in the home country of the policyholder and be subjected to the law of this country as well.10 As a consequence, insurers must be and actually are aware of the fact that any product they sell cross-border will be subjected to a law different to the law in their home country. I3.  The impact of a new legal environment on an insurance product can be very great.11 If, for example, an insurance product which is lawfully marketed in England is sold cross-border to a German customer, a particular exception contained in the contract terms which is, in principle, not subject to the English Unfair Terms in Consumer Contracts Regulations 199912 may be subject to regulation under German law and could be held to be void under s. 307 German CC. If so, the scope of cover provided by one and the same particular insurance product will turn out to be broader in Germany than in England due to the differences in the law applicable. It follows that insurers will be reluctant to provide cross-border services.13 I4.  In fact, statistics show that cross-border provision of insurance services plays a minor role in the internal European market.14 The European Commission has repeatedly acknowledged this fact.15 Insurers carry on their international business predominantly through subsidiaries or branch offices. Despite the fact that such international activities are widespread in the European market they are insufficient to establish an internal market for insurance products. The products sold by foreign subsidiaries or branch offices are not the same as the products sold by the insurer in the country where it is domiciled. Products offered in the country of the subsidiary or branch office are either developed independently of the products sold in the home market of the insurer or at least adapted to the legal regime of the state where the insurance product is sold.

10

See, for example, Helmut Heiss, ‘Stand und Perspektiven der Harmonisierung des Versicherungsvertragsrechts in der EG’ in Petra Pohlmann (ed.), Veröffentlichungen der Münsterischen Forschungsstelle für Versicherungswesen an der Westfälischen Wilhelms-Universität zu Münster (“Münsteraner Reihe”), Issue 99 (VVW, Karlsruhe 2005) 8 f. 11 Jürgen Basedow, ‘Insurance Contract Law as Part of an Optional European Contract Act’ [2003] Lloyd’s Maritime and Commercial Law Quarterly 498, 500 (abridged version in ERA Forum 2003 (ERA Forum scripta iuris europaei), vol. 4, issue 2 (Springer, Heidelberg 2003) 56); as to examples of obstacles, see the CEA Policy Report as well as the Final Report of the Commission Expert Group on European Insurance Contract Law. 12 For details see Malcolm Clarke, The Law of Insurance Contracts (5th edn Informa, London 2006) 19-5. 13 For further examples Helmut Heiss, ‘Mobilität und Versicherung’, Versicherungsrecht (2006) 448. 14 See Jürgen Basedow, ‘Die Gesetzgebung zum Versicherungsvertrag zwischen europäischer Integration und Verbraucherpolitik’ in Fritz Reichert-Facilides and Anton K. Schnyder, Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000) 17 referring to data provided by EUROSTAT; Final Report of the Commission Expert Group on European Insurance Contract Law, nos. 4 ff. (in particular no. 6). 15 See para. I61 below.

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Principles of European Insurance Contract Law (PEICL): Introduction

I5.  To give a relatively simple example, in Germany foreign insurance companies primarily sell insurance products through subsidiaries or branch offices.16 There are, however, no foreign (mass) insurance products sold in Germany in the same way they are sold at the place of origin. As a result, competition between insurance products throughout Europe remains rather restricted. Insurance enterprises are not in a position to compete across Europe with any innovative products they introduce, nor are customers in a position to gain full access to various national insurance products. The internal market for insurance products has not been completed. I6.  It may be argued that the shortcomings of the internal insurance market in its current condition could be overcome by a shift in European international insurance contract law allowing parties to choose the law of the insurer’s domicile as the law applicable to the insurance contract. However, the argument turns out to be mistaken. First of all, the approach would deprive the policyholder of protection by private international law, which does not appear to be acceptable as a matter of legal policy. Secondly, the shift in the rules of private international law would be followed by a switch in behaviour on the part of insurers and policyholders. Whereas under the current private international law regime, it is chiefly the insurer who hesitates to provide cross-border services, it would be the policyholder who would be reluctant to acquire foreign insurance products in the absence of protection under private international law. The internal market would remain incomplete.17 I7.  In the light of this analysis, the Project Group adopted the view that “the law of insurance [in Europe] must be one”.18 However, the Project Group thought that the European Commission could hardly be expected to resume its efforts to harmonise insurance contract law unless the circumstances which had led to the failure of the earlier proposal for a directive had changed or would change in the future. In fact, several factors had indeed changed by 1999. The European Court of Justice had opened the door to a system of single licensing in its decision of 4 December 1986,19 and the system was finally introduced by the Third Generation of Insurance Directives20 some years later. Some members of the Project Group reported talks with representatives of insurance companies and their impression 16

See, for example, Leander D. Loacker, ‘Insurance soft law?’ Versicherungsrecht (2009) 289; for Europe in general Final Report of the Commission Expert Group on European Insurance Contract Law, no. 4 ff. 17 See in more detail Jürgen Basedow, ‘Die Gesetzgebung zum Versicherungsvertrag zwischen europäischer Integration und Verbraucherpolitik’ in Fritz Reichert-Facilides and Anton K. Schnyder, Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000) 20 f.; Helmut Heiss, ‘Stand und Perspektiven der Harmonisierung des Versicherungsvertragsrechts in der EG’ in Petra Pohlmann (ed.), Veröffentlichungen der Münsterischen Forschungsstelle für Versicherungswesen an der Westfälischen Wilhelms-Universität zu Münster (“Münsteraner Reihe”), Issue 99 (VVW, Karlsruhe 2005) 13 f. 18 Hans Möller as quoted by Fritz Reichert-Facilides, ‘Rechtsvereinheitlichung oder Rechtsvielfalt? Überlegungen vor dem Modell des Versicherungsvertragsrechts’ in Fritz Schwind (ed.), Europarecht, IPR, Rechtsvergleichung (Verlag der Österreichischen Akademie der Wissenschaften, Vienna 1988) 155. 19 Case 205/84 Commission v Federal Republic of Germany [1986] ECR 3755. 20 See (what is today) art. 15 para. 1 of the Solvency II Directive (2009/138/EC); Ulrike Mönnich, ‘Europäisierung des Privatversicherungsrechts’ in Roland Michael Beckmann and Annemarie Matusche-Beckmann (eds.), Versicherungsrechts-Handbuch (3rd edn Beck, Munich 2015) § 2 paras. 49 ff.; Helmut Heiss

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Principles of European Insurance Contract Law (PEICL): Introduction

that the insurance industry was actually rather keen to provide its services cross-border but could not do so for the reasons given. Last but not least, an ever increasing number of European citizens, “euro-mobile citizens”, were moving and living in Member States other than their home country.21 Without any doubt, these “euro-mobile citizens” had created a strong demand for Europe-wide insurance solutions, namely the availability of insurance policies which they could bring along without facing legal barriers whenever they moved from one Member State to another.22 What was still missing was a comparative analysis of the various insurance contract laws in Europe and a text stating the Principles of European Insurance Contract Law which could be considered a set of rules amounting to a common understanding of insurance contract law throughout Europe. I8.  The requisite comparative analysis of insurance contract law in Europe was presented shortly afterwards by Jürgen Basedow, a founding member of the Project Group, and his research team at the Hamburg Max Planck Institute. The work was published as “­Europäisches Versicherungsvertragsrecht”23 in three volumes in 2002 and 2003.24 The Hamburg team did not, however, elaborate a model law for Europe, leaving this task to the Project Group which was established by Fritz Reichert-Facilides25 and chaired by him until his death on 23 October 2003. Following his death, Helmut Heiss, who was then vice-chairman of the Project Group, took over as interim chairman and was appointed as the new chairman by the Project Group on 15 April 2004. The overall purpose of the work done by the Project Group is to provide the European legislature with a model law designed to overcome the existing barriers to an integrated European insurance market.

21



22



23



24 25



and Anton K. Schnyder, ‘Versicherungsverträge’ in Herbert Kronke, Werner Melis and Anton K. Schnyder (eds.), Handbuch des Internationalen Wirtschaftsrechts (Schmidt, Cologne 2005) 142. The image of a “euro-mobile citizen” was first created by Jürgen Basedow, ‘Das österreichische Bundesgesetz über internationales Versicherungsvertragsrecht – Eine rechtspolitische Würdigung’ in Reichert-Facilides (ed.), Aspekte des internationalen Versicherungsvertragsrechts im Europäischen Wirtschaftsraum (Mohr Siebeck, Tübingen 1994) 89. See, inter alia, the exemplifications in Helmut Heiss, ‘Mobilität und Versicherung’, Versicherungsrecht (2006) 448. European Insurance Contract Law. Jürgen Basedow and Till Fock (eds.), Europäisches Versicherungsvertragsrecht, vols. I & II (Mohr Siebeck, Tübingen 2002); vol. III (Mohr Siebeck, Tübingen 2003). As to the basic concepts of the project see Fritz Reichert-Facilides, ‘Gesetzgebung in Versicherungsvertragsrechtssachen: Stand und Ausblick’ in Fritz Reichert-Facilides and Anton K. Schnyder, Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000); id., ‘Europäisches Versicherungsvertragsrecht?’ in Jürgen Basedow, Klaus J. Hopt and Hein Kötz (eds.), Festschrift für Ulrich Drobnig zum siebzigsten Geburtstag (Mohr Siebeck, Tübingen 1998) 119; id., ‘Verbraucherschutz – Versicherungsnehmerschutz: Überlegungen im Blick auf das Projekt: “Restatement des Europäischen Versicherungsvertragsrechts”’ in Bernhard Eccher, Kristin Nemeth and Astrid Tangl (eds.), Verbraucherschutz in Europa. Festgabe für em. o. Univ.-Prof. Dr. Heinrich Mayrhofer (Verl. Österreich, Vienna 2002) 179, 180; as to his role as the founding father of the Project Group see Helmut Heiss, ‘Introduction’, in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier, Munich 2011) 7, 8 ff.

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Principles of European Insurance Contract Law (PEICL): Introduction

2. Work Progress I9.  Since its establishment in 1999, the Project Group has drafted Principles of European Insurance Contract Law modelled on American Restatements of the Law,26 in a manner which had previously been adopted by the so-called Lando Commission on European Contract Law in the course of drafting its Principles of European Contract Law (PECL).27 Accordingly, the Principles of European Insurance Contract Law are drafted as Rules, followed by Comments presenting the reasons for the rule and illustrating how it should be applied by giving examples, and Notes28 reproducing the status quo of insurance contract law in each Member State and the acquis communautaire on the point in question. The entire text was linguistically revised by the Drafting Committee of the Project Group, headed by Professor Malcolm A. Clarke. I10.  The first part of the Project Group’s work, comprising the general part of insurance contract law including general rules for all types of indemnity insurance and for all types of insurance of fixed sums, was completed and published as the first edition to the present volume in 2009. The first edition of the PEICL consisted of three Parts comprising a total of 13 Chapters.29 I11.  The Project Group’s work of course did not stop at this point. In 2008, the Group started drafting special rules for individual branches of insurance, namely liability insurance, life insurance and group insurance. The Project Group chose these branches because it thought them to be at the forefront of transborder provision of services in the insurance sector. The Commission Expert Group on European Insurance Contract Law30 evidently

26

With regard to the American Restatement of the Law, see www.ali.org (The American Law Institute’s website). 27 See Ole Lando and Hugh Beale (eds.), Principles of European Contract Law, Parts I and II (Kluwer Law International, The Hague 2000) and Ole Lando, Eric Clive, André Prüm and Reinhard Zimmermann (eds.), Principles of European Contract Law, Part III (Kluwer Law International, The Hague 2003). 28 The method of presenting these “Notes” has, however, changed in the new parts of the 2nd expanded edition; as to this change para. I12 below. 29 As to the 1st edition of the PEICL, see the contributions of experts representing a political and academic view as well as the stakeholders’ views of insurers, intermediaries and consumers, in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier, Munich 2011); for further reviews of the PEICL see Alessandra Zanobetti, Uniform Law Review (2010) 611; Mario Pérez Garrigues (2010) Revista de Derecho Mercantil 797; Gerhard Köbler, Zeitschrift der Savigny-Stiftung für Rechtsgeschichte, Germanistische Abteilung (2011) No. 128; Andrea Uber and Inga Krebs, ‘Neuerscheinungen versicherungswissenschaftlicher Bücher’ Zeitschrift für die gesamte Versicherungswissenschaft 99 (2010) 237; Martin Ebers, European Review of Private Law (2010) 1037 ff.; Jacquetta Castle, ‘Book Review’ (March 2012) British Insurance Law Association No. 124, 84 ff.; Christian Armbrüster, ‘PEICL – The Project of a European Insurance Contract Law’ (2013-2014) 20(1) Connecticut Insurance Law Journal 119 ff. 30 This Expert Group was set up by Commission Decision of 17 January 2013 on setting up the Commission Expert Group on a European Insurance Contract Law [2013] OJ C16/6; as to the Expert Group and its work section III.3.b. below.

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Principles of European Insurance Contract Law (PEICL): Introduction

shared this view since it chose in its Final Report of January 2014 for liability insurance (including motor insurance) and life insurance as branches specifically to be dealt with.31 I12.  As a consequence, the present volume as compared with the first edition is enlarged by Parts Four (Liability Insurance), Five (Life Insurance) and Six (Group Insurance). The way the new Rules are presented is basically in line with the presentation of the Rules on general issues (Parts One, Two and Three). However, the Project Group decided not to produce separate Notes on special branch insurance rules, but instead to annotate the Comments to such rules by way of footnotes, giving references to the status quo of insurance contract law on the specific branches in national law. One of the main reasons for this change in style was that there are substantially less statutory rules on branches in national laws than on the general issues of insurance contract law.

3. The Approach a. Scope of Application I13.  Despite the fact that the 2nd expanded edition of the PEICL provides for both general rules of insurance contract law and rules on specific branches, it does not mean that its scope of application is restricted to those branches regulated. Rather, the substantive scope of application of the Principles of European Insurance Contract Law encompasses all types of insurance32 except reinsurance.33 Insurance of special risks (for example marine and aviation insurance) and large risk insurance are covered by the Principles of European Insurance Contract Law, notwithstanding the fact that the second sentence of Article 1:103 para. 2 grants parties unfettered freedom of contract in those cases.34

b. Matters Not Regulated in the Principles of European Insurance Contract Law I14.  In spite of their broad scope of application, the Principles of European Insurance Contract Law do not govern every aspect which may become relevant in matters concerning insurance contracts. Quite the contrary, the Principles of European Insurance Contract Law abstain, in principle, from regulating issues of general contract law. The resulting gap must be filled in a way which allows as little recourse to national law as possible. Consequently, the first sentence of Article 1:105 para. 1 prohibits any recourse to national law when applying the Principles of European Insurance Contract Law. Instead, Article 1:105 para. 2 provides for the application of the Principles of European Contract Law in their most recent edition

31

As to this Report para. I63 below. As to the application of national rules to specific branches which are not regulated by the PEICL, paras. I17 f. below. 33 See Article 1:101 PEICL. 34 See Monika Stahl, ‘The Principles of European Insurance Contract Law (PEICL) and Their Application to Insurance Contracts for Large Risks’, Veröffentlichungen aus dem LL.M.-Studiengang Internationales Wirtschaftsrecht der Universität Zürich und des Europa Instituts an der Universität Zürich, vol. 71 (Schulthess, Zurich 2013). 32

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Principles of European Insurance Contract Law (PEICL): Introduction

drafted by the Lando Commission.35 By virtue of this reference, the Principles of European Contract Law become the lex generalis of the Principles of European Insurance Contract Law. Furthermore, the Project Group consistently drafted the Principles of European Insurance Contract Law with the Principles of European Contract Law in mind, not only as far as terminology is concerned but also in order to avoid any duplication in the provisions. Whenever a rule of the Principles of European Contract Law also appeared to be appropriate in the context of insurance, the Project Group abstained from regulating the matter in the Principles of European Insurance Contract Law. Nevertheless, some provisions were more or less “copied” from the Principles of European Contract Law to the Principles of European Insurance Contract Law, and for a simple reason: The provisions of the Principles of European Contract Law are, in principle, non-mandatory. However, the Project Group thought that some of these non-mandatory provisions should be mandatory in the context of insurance. This goal was achieved by copying these provisions into the Principles of European Insurance Contract Law and thereby making them mandatory in accordance with Article 1:103 para. 2 PEICL.36 I15.  The choice in favour of referring to the Principles of European Contract Law had already been made by the Project Group for its first edition of the PEICL. This is mainly because the General Part of the Draft Common Frame of Reference (DCFR)37 had not been finished at the time the Project Group was drafting its Rules, and the CESL Regulation Proposal,38 which also provides for general rules, did not exist at that stage. Considering that the DCFR has never been adopted as an “official” CFR by the European Commission and that the fate of the proposal on a CESL appears to be unclear39, the Project Group decided to retain a reference to the PECL as the lex generalis to its PEICL. The future developments on a CFR (if any) and a CESL will show whether it will be advisable to change from the PECL to another instrument in the future. This will, of course, not be possible without making adaptations to the PEICL. I16.  Whenever an issue is neither regulated in the Principles of European Insurance Contract Law nor in the Principles of European Contract Law, Article 1:105 para. 2 PEICL refers to the principles common to the laws of the Member States. Article 1:105 para. 2 PEICL clearly prescribes methods of comparative law to fill gaps. I17.  As has been mentioned, the Principles of European Insurance Contract Law only regulate some, but not all individual branches of insurance. However, there are mandatory 35

Ole Lando and Hugh Beale (eds.), Principles of European Contract Law, Parts I and II (Kluwer Law International, The Hague 2000) and Ole Lando, Eric Clive, André Prüm and Reinhard Zimmermann (eds.), Principles of European Contract Law, Part III (Kluwer Law International, The Hague 2003). 36 See, for example, Jürgen Basedow, ‘The Optional Application of the Principles of European Insurance Contract Law’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 111, 114 f. 37 The Draft Common Frame of Reference in its “Full Edition”, including Comments and Notes, only became available at the end of 2009. 38 Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, COM (2011) 635 final, as amended. 39 The proposal for a CESL has recently been withdrawn and a modified proposal has been announced; see para. I45 below.

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Principles of European Insurance Contract Law (PEICL): Introduction

provisions in national laws on the other branches not governed by the PEICL. It therefore seems inconceivable to apply the Principles of European Insurance Contract Law to such branches without recourse to the (otherwise applicable) national rules of law as the protection of the policyholder would be undermined. Hence, the second sentence of Article 1:105 para. 1 provides for the application of the mandatory rules of the national law applicable to the special types of insurance contracts. Such application of national law is, however, limited to “branches of insurance which are not covered by special rules contained in the PEICL”.40 Since the 2nd edition now regulates liability, life and group insurance, the second sentence of Article 1:105 para. 1 no longer plays a role for these branches. I18.  Special mention has to be made of compulsory liability insurance. While the PEICL apply to compulsory liability insurances (see Article 16:101), they do not unify rules on specific types of compulsory liability insurance. The reason is obvious: A large number of compulsory insurance contracts is regulated by national laws, EU law or other sources.41 This is why Article 16:101 para. 2 in line with art. 7 para. 4(a) of the Rome I Regulation (593/2008/EC) provides that such insurance contracts must comply with the “specific provisions imposing the obligation” even if the PEICL have been chosen as the law governing a liability insurance contract. Thus, any rules making liability insurance compulsory, whether at the level of national law or EU law, will ultimately take priority over the PEICL.

c. Mandatory Rules I19.  As indicated earlier, it is the mandatory rules of national insurance contract law which form a barrier to the proper functioning of the internal insurance market. For this reason, the Project Group restricted its work to drafting European principles which are mandatory and therefore capable of substituting national mandatory law. I20.  The mandatory character of the Principles of European Insurance Contract Law can be seen in two manners. On the one hand, there are rules which must not be derogated from by parties’ agreement at all. Such “absolutely” mandatory rules are mentioned in Article 1:103 para. 1, where the relevant rules are listed in the first sentence. Moreover, the second sentence of the same provision provides in a general manner that “sanctions for fraudulent behaviour” must not be derogated from by agreement. A good example of a rule containing a sanction for fraudulent behaviour is Article 2:104, for instance. I21.  The mandatory character of most provisions of the Principles of European Insurance Contract Law, however, is of a different kind and may be described as “semi-mandatory”. The first sentence of Article 1:103 para. 2 PEICL states: “The contract may derogate from all other provisions of the PEICL as long as such derogation is not to the detriment of the policyholder, the insured or beneficiary.” 40

See the second sentence of Article 1:105 para. 1 PEICL. As to this point the Final Report of the Commission Expert Group on European Insurance Contract Law (see para. I63 below) states at no. 31: “The number and type of compulsory insurance requirements differ substantially from country to country. In Spain there are around 400 cases of compulsory insurance, for example liability for bullfighting and for owners of dangerous dogs, while in France there are around 100, in Poland 40 and in Germany, at the federal level, only around 30.”

41

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Principles of European Insurance Contract Law (PEICL): Introduction

I22.  The semi-mandatory character of the Principles of European Insurance Contract Law is limited to mass risk insurance. Since semi-mandatory rules of insurance law purport to ensure the protection of the policyholder, insured and beneficiary as the weaker parties, their mandatory character must be removed when there is no need for protection, as is the case with insurance covering large risks. Mass risks are distinguished from large risks by a statutory definition42 in line with the existing acquis communautaire, which defines the term in art. 13 no. 27 of the Solvency II Directive (2009/138/EC) in line with its predecessor, art. 5 of the First Non-Life Insurance Directive (73/239/EEC). Art. 16 no. 5 of the Brussels Ibis Regulation (1215/2012) and art. 7 para. 2 of the Rome I Regulation (593/2008) also refer to the same definition. The protection granted to the policyholder, insured and beneficiary under the Principles of European Insurance Contract Law is consequently not restricted to consumer contracts, applying instead to all mass risks, including insurance contracts concluded by small or medium-size enterprises.

d. Adherence to the Existing Acquis Communautaire I23.  As has been mentioned, the definition of large risks in the second sentence of Article 1:103 para. 2 follows the one found in the existing insurance acquis. This shows that the Group endeavoured to adhere to the existing acquis communautaire as closely as possible unless shortcomings in it indicated a deviation from it. In addition to the insurance acquis,43 several directives on consumer contract law44 outlining the information duties of the entrepreneur and withdrawal rights of the consumer,45 the judicial control of unfair contract terms46 as well as injunctions47 have been employed by the Principles of European Insurance Contract Law. I24.  The Principles of European Insurance Contract Law also include an adapted reference to the Gender Directive (2004/113/EC), which contains a special provision for insurance contracts.48 While Article 1:207 in the first edition of the PEICL allowed differences in premiums and conditions in line with art. 5 para. 2 of the Gender Directive (2004/113/EC), 42

See the definition given by the second sentence of Article 1:103 para. 2 PEICL. An overview on the existing insurance acquis is presented by Robert Purves, ‘Europe: the architecture and content of EU insurance regulation’ in Julian Burling and Kevin Lazarus (eds.), Research Handbook on International Insurance Regulation (Elgar, Cheltenham 2011) 621; Ulrike Mönnich, ‘Europäisierung des Privatversicherungsrechts’ in Roland Michael Beckmann and Annemarie Matusche-Beckmann (eds.), Versicherungsrechts-Handbuch (3rd edn Beck, Munich 2015) § 2 paras. 23 ff., Dirk Looschelders and Lothar Michael, ‘§ 11 Europäisches Versicherungsrecht’ in Armin Hatje and Peter-ChristianMüller-Graff (eds.), Enzyklopädie Europarecht, vol. V, Europäisches Sektorales Wirtschaftsrecht (ed. by Ruffert) (Nomos, Baden-Baden 2013) paras. 144 ff.; and Leander D. Loacker, ‘Vorbemerkung C.’ in Dirk Looschelders and Petra Pohlmann (eds.), VVG-Kommentar (2nd edn Wolters Kluwer Deutschland, Cologne 2011) paras. 14 ff. 44 As to the relevance of the consumer acquis in the field of insurance see Helmut Heiss and Anton K. Schnyder, ‘Versicherungsverträge’ in Herbert Kronke, Werner Melis and Anton K. Schnyder (eds.), Handbuch des Internationalen Wirtschaftsrechts (Schmidt, Cologne 2005) 195. 45 See in particular the Distance Marketing Directive (2002/65/EC) as amended. 46 See the Unfair Contract Terms Directive (93/13/EEC). 47 See the Injunctions Directive (2009/22/EC). 48 See art. 5 of the Gender Directive (2004/113/EC). 43

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the article had to be redrafted in light of the findings of the ECJ in its judgment of 1 March 2011, C-236/09 (‘Test-Achats’).49 Article 1:207 as amended prohibits the use of gender as a factor “resulting in differences in individuals’ premiums and benefits”. I25.  The Principles of European Insurance Contract Law do not transpose the Insurance Mediation Directive (2002/92/EC)50 as the PEICL do not deal with the professional duties of intermediaries at all.51 However, the Directive was considered by the Group and was a source of inspiration for regulating the pre-contractual information and advice duties of the insurer.52 I26.  In the aftermath of the financial crisis of 2008, the European legislature has endeavoured to intensify regulation of financial markets including insurance. Art. 91 of the MiFID2 (2014/65/EU) has already brought about substantial changes to the Insurance Mediation Directive (2002/92/EC) and a new Proposal for an IDD, which is intended to replace the Insurance Mediation Directive (2002/92/EC), has been published.53 Moreover, the PRIIP Regulation (1286/2014)54 has been adopted. While these new/forthcoming regulations influence insurance law, they have not been adopted by the 2nd expanded edition of the PEICL. As far as the changes to the Insurance Mediation Directive (2002/92/EC) are concerned, the reasons for not transposing the new provisions are the same as set above in view of the original version of the Insurance Mediation Directive (2002/92/EC).55 As far as the Proposal for an IDD and the PRIIP Regulation (1286/2014) are concerned, the main reason for not considering them is that when the Project Group held its last plenary workshop at the end of January 2014, it was very much unclear as to whether the proposed rules would ever be enacted and, more so, what would be their contents. In any event, as far as the PRIIP Regulation (1286/2014) is concerned, it will produce EU and thus uniform law throughout the Member States. Thus, at least in principle, the regulation could be applied in addition to the PEICL without impacting their purpose to provide a European insurance market with uniform rules of insurance contract law. Exceptions must, however, be noted: Art. 11 paras. 2, 3 and 4 of the PRIIP Regulation (1286/2014) all refer to the national law applicable for determining details of the investors claim for damages in case of any breach 49

Case C-236/09 Association Belge des Consommateurs Test-Achats ASBL and Others v Conseil des ministres [2011] ECR I-773; Ulrike Mönnich, ‘Unisex: Die EuGH-Entscheidung vom 1.3.2011 und die möglichen Folgen’ Versicherungsrecht 2011, 1092 ff.; Leander D. Loacker, ‘Gleich und Gleich gesellt sich gern? Überlegungen zur Einführung verpflichtender Einheitstarife im europäisierten Versicherungsvertragsrecht’ Haftung & Versicherung 2011, 351 ff. 50 As amended by MiFID2 (2014/65/EU), see art. 91. 51 As to the reason for not regulating the professional duties of the intermediaries, see para. I44 below. 52 For a comparative analysis, see, for example, Leander D. Loacker, Informed Insurance Choice? (Elgar, Cheltenham 2015). 53 On 16 July 2015, the Presidency / ​General Secretariat of the Council confirmed the ‘final compromise text with a view to agreement’ concerning the Proposal for a Directive of the European Parliament and of the Council on insurance mediation (recast) (IMD), Doc. No. 10747 / 15 of 16 July 2015, Interinstitutional File: 2012 / 0175 (COD); the Directive has, however, not yet been adopted. 54 Regulation (EU) No. 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIP) [2014] OJ L352/1. 55 See para. I25 above

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Principles of European Insurance Contract Law (PEICL): Introduction

of the insurer’s duty to draft and publish a key information document. As far as a future IDD is concerned, the proposal as it stands covers areas regulated within the PEICL mainly because the proposed IDD is also intended to apply to insurers in case of direct sales. Thus, adaptations of the PEICL may be necessary in the future in order to keep them in line with the other insurance acquis communautaire. e. Language and Terminology I27.  Notwithstanding the availability of translations into several other languages,56 the Principles of European Insurance Contract Law were drafted in English as the working language of the Project Group. Accordingly, English terminology was used in the Principles of European Insurance Contract Law. However, this does not necessarily mean that the Project Group used national English legal terminology. Quite the contrary, in order to avoid giving the impression that a particular provision merely codifies a concept of English common law, the Project Group departed from English legal terminology on many occasions. For example, the Principles of European Insurance Contract Law do not refer to “promissory warranties” but to “precautionary measures”57 in order to avoid giving the mistaken impression that the Principles of European Insurance Contract Law have implemented the English concept of “warranties” At the same time, the Project Group attempted to use as much international legal terminology as was available. First of all, the Group adhered as far as possible to the terminology of the Principles of European Contract Law as well as the existing acquis communautaire. Secondly, it had recourse to terminology found in international transport conventions, for example to the phrase “with intent to cause the loss or recklessly and with knowledge that the loss would probably result”, which is taken from the Montreal Convention 1999 and used on several occasions throughout the Principles of European Insurance Contract Law to identify an especially serious form of fault.

f. Uniform Interpretation and Application I28.  The effectiveness of a European insurance contract law cannot be guaranteed by the uniform text of the Principles of European Insurance Contract Law alone, but instead depends to a large degree on uniform application of the law by national courts. Article 1:104, therefore, states general considerations according to which the Principles of European Insurance Contract Law should be interpreted. Among these, “uniformity of application” plays a significant role.58 In spite of the existence of Article 1:104, it would clearly be desirable, for the sake of uniform application of the Principles of European Insurance Contract Law, for the European Court of Justice to give preliminary rulings on the interpretation of the Principles of European Insurance Contract Law. Under art. 267 TFEU, however, this would require the European legislature to enact the Principles of European Insurance Contract Law as (secondary) EU law.

56

See the private translations in this book below. See the heading of Section One of Chapter Four of the Principles of European Insurance Contract Law. 58 A similar rule can be found in art. 7 CISG. 57

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Principles of European Insurance Contract Law (PEICL): Introduction

g. Enforcement I29.  In principle, the policyholder, insured and beneficiary have to enforce their rights by bringing an action in court. The Principles of European Insurance Contract Law themselves do not provide for an out-of-court complaint and redress mechanism. They do not, however, interfere with existing mechanisms of alternative dispute resolution, such as ombudsmen.59 In fact, the insurer is under a duty to inform the policyholder about such mechanisms in accordance with Articles 2:201 para. 1(k) and 2:501(k). I30.  Moreover, the Principles of European Insurance Contract Law allow “qualified entities”, such as consumer associations, to seize a competent national court or authority and seek an order prohibiting or requiring the cessation of infringements of the Principles of European Insurance Contract Law.60 The term “qualified entity” is defined by reference to the list drawn up by the European Commission in pursuance of art. 4 para. 3 of the Injunctions Directive (2009/22/EC).61

II. The Principles of European Insurance Contract Law as a Model Optional Common European Insurance Contract Law (CEICL) 1. The Need for a Common European Insurance Contract Law (CEICL) I31. The PEICL have been characterised in section I of this Introduction as an academic endeavour with a practical aim, namely to provide the European insurance market with a set of uniform rules allowing parties to conclude “European” insurance contracts, which can be sold cross-border by insurers and carried along by euro-mobile citizens without a need to adapt them to any national insurance contract law. However, the PEICL cannot achieve this goal as long as they remain a non-binding set of rules (“soft law”). Non-binding rules obviously do not replace national law and they are commonly not considered eligible for the parties through a choice of law within the meaning of the Rome I Regulation (593/2008).62 While Recital 13 of the Rome I Regulation (593/2008) empowers the parties to “incorporate by reference into their contract a non-State body of law”, such incorporation would trans59

EU law is regulating out-of-court redress mechanisms in its Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22 [2013] OJ L165/63; see also Regulation (EU) 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation 2006/2004 and Directive 2009/22/ EC (Regulation on Consumer ODR), as well as Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters. 60 Article 1:301 para. 1 PEICL. 61 See Article 1:301 para. 2 PEICL referring to the Injunctions Directive (2009/22/EC); the list was published on 15 April 2014 by the Commission, ‘Communication concerning Article 4(3) of Directive 2009/22/EC of the European Parliament and of the Council on injunctions for the protection of consumers’ interests, which codifies Directive 98/27/EC, concerning the entities qualified to bring an action under Article 2 of this Directive’ [2014] OJ C115/1. 62 This would be different if parties would submit their contract to arbitration; however, arbitration is usually not considered an adequate form of dispute resolution for mass risk insurances.

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Principles of European Insurance Contract Law (PEICL): Introduction

form the PEICL into contract terms subject to the law applicable and all its mandatory rules. Thus, a choice by contracting parties in favour of the PEICL would not provide parties with uniform rules. I32. In order to give parties a set of uniform rules, the European legislature would have to enact the PEICL as EU law. The proper legislative instrument would be an EU Regulation. Regulations are directly applicable in every Member State and enjoy priority over national law under art. 288 para. 2 TFEU. Thus, the PEICL serve as a model EU Regulation. I33.  Providing a uniform set of rules is not the only advantage of using an EU Regulation. Procedural advantages would follow as well, because an EU regulation would, technically speaking, be secondary EU law. Thus, the European Court of Justice, using the preliminary ruling procedure, would be accorded the authority to interpret the instrument in order to guarantee legal uniformity in Europe.63 In contrast, as long as non-binding rules, such as the PEICL, are not enacted as an EU Regulation, they will not give access to the European Court of Justice, even if they were available as the lex contractus by a choice of the parties. Furthermore, again from a procedural point of view, an EU Regulation would, in several respects, be applied like domestic law by courts of Member States and by national supervisory authorities. In contrast, the determination and application of general principles of law would, in various Member States, be subject to special rules, for instance the parties would be obliged to assert and prove non-domestic law. As non-domestic law, its application by courts of first or second instance would only be subject to limited review by supreme courts in some Member States. Finally, the various establishments for insurance ombudsmen provide that they may not, or at times even must not accept cases, which are subject to foreign law.64 Therefore, on choosing general principles of contract law, customers’ access to these alternative mechanisms for dispute settlement could remain barred. In comparison, the application of an EU Regulation would be put on a par with the application of domestic law so as to guarantee its application ex officio, its revision by national supreme courts and its application by national ombudsmen bureaus.

2. Optional instead of a Non-optional CEICL I34.  If enacted as an EU Regulation (‘CEICL Regulation’), the PEICL could become a non-optional instrument and, thus, replace national (insurance) contract law due to the direct effect of EU Regulations. Alternatively, the PEICL could become an optional instrument and, thus, replace national law only for those contracts which the parties have by agreement submitted to the CEICL (PEICL). For that purpose, the EU Regulation enacting the PEICL would have to restrain its own direct effect by providing for its application to a particular contract only upon a choice by the parties. Thus, it would provide the parties with an alter-

63

See art. 267 TFEU. See, for example, s. 8 para. 3 of the German Code of Procedure for the Insurance Ombudsman, according to which the ombudsman can reject dealing with complaints at every level of the procedure if the claim is to be determined decisively according to foreign law.

64

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native to national law.65 In this way, it may be compared to the United Nations Convention on Contracts for the International Sale of Goods (CISG), under art. 6 of which parties may opt out, namely agree that the Convention will not apply to their contract.66 I35.  Both approaches, optional as well as non-optional legislation, would serve the need of the internal insurance market for uniform rules. Both would offer advantages particularly to “multiple players”, such as insurers doing business in the European internal market, who would not have to be concerned with the impact of different national contract law regimes on their insurance products. The costs of legal research and adaptation of contracts as well as its administration to each national system of contract law would disappear. Moreover, a uniform European insurance contract law would allow for efficient cross-border use of the Internet in order to sell standard policies. For euro-mobile policyholders a uniform European insurance contract law would provide a stable contractual framework which is not subject to the changing national law of their domiciles. Cross-border commuters could benefit from the continuous access they have to two different insurance markets. However, non-mobile policyholders would profit as well because a uniform insurance contract law would give them better access to foreign products. I36.  There are compelling reasons for why an optional instrument would be preferable. First of all, an optional instrument has far better chances of finding political approval than a non-optional instrument. National legislatures, encouraged by national representatives of the legal profession, would be more inclined to resist an instrument which replaced national contract law. This is true in particular for those Member States which have enacted comprehensive legislation on insurance contracts more recently, very often after lengthy debates at national level. They would, however, have no reason to refuse an optional instrument which left national law untouched.67 Secondly, an optional instrument appears to be economically more efficient because it does not force parties to alter their traditional ways of doing business; it merely provides them with an additional option. Insurers acting internationally will be more inclined to take advantage of the opportunity than others acting only locally; they can continue to use their traditional contract forms and procedures inspired by national law, and, therefore, would not be burdened with costs of adapting their contracts to a new legal environment.

65

Helmut Heiss and Noemi Downes, ‘Non-optional Elements in an Optional European Contract Law: Reflections from a Private International Law Perspective’ (2005) 13 European Review of Private Law 693, 695; see Dirk Staudenmayer, ‘Ein optionelles Instrument im Europäischen Vertragsrecht?’ Zeitschrift für Europäisches Privatrecht (2003) 828, 832. 66 Peter Schlechtriem, Internationales UN-Kaufrecht (Mohr Siebeck, Tübingen 2005) 15 f. 67 Helmut Heiss, ‘Stand und Perspektiven der Harmonisierung des Versicherungsvertragsrechts in der EG’ in Petra Pohlmann (ed.), Veröffentlichungen der Münsterischen Forschungsstelle für Versicherungswesen an der Westfälischen Wilhelms-Universität zu Münster (“Münsteraner Reihe”), Issue 99 (VVW, Karlsruhe 2005) 36; as to the aspect of competition between legal orders see Helmut Heiss and Noemi Downes, ‘Non-optional Elements in an Optional European Contract Law: Reflections from a Private International Law Perspective’ (2005) 13 European Review of Private Law 696 and n 11.

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Principles of European Insurance Contract Law (PEICL): Introduction

I37.  Due to these considerations, the PEICL were drafted as a model optional instrument.68 Thus, they are only to be applied if they are chosen by the parties to the contract. The pertinent provision, Article 1:102 PEICL, reads as follows:

Article 1:102 Optional Application The PEICL shall apply when the parties, notwithstanding any limitations of choice of law rules under private international law, have agreed that their contract shall be governed by it. In that event, subject to Article 1:103, the parties shall apply the PEICL as a whole and shall not exclude the application of particular provisions.

3. Main Features of the Proposed Optional Instrument a. Optional Instrument as an EU Regulation I38.  Using an EU Regulation in order to create an optional instrument on European insurance contract law is in line with the approach taken for existing optional instruments. Notably, the European forms of business association, such as the European Company (SE) and the European Economic Interest Grouping (EEIG), were incorporated into the laws of all the Member States by means of EC Regulations.69 In this way, a founder of such an association can choose between the national and European models. These European entities quite simply augment the numerus clausus of company forms available in a single Member State. In a similar manner, the Community Trademark Regulation (207/2009) provides for an option to register a Community trademark instead of a national one. The approach presented here is, therefore, in line with such optional instrument models.

b. The “Option” I39.  The option of the parties is modelled on the assumption that the PEICL will become an EU Regulation, thereby opening the choice to the parties. Thus, the choice is not a choice of law under the Rome I Regulation (593/2008). Indeed, a choice of law under the Rome I Regulation (593/2008) would not be sufficient to provide parties with a set of uniform rules on insurance contract law because such choice would always be restricted by protective provisions such as art. 7 (Insurance contracts)70 and art. 9 (Overriding mandatory provisions) of the Rome I Regulation (593/2008). I40.  Article 1:102 grants parties the option of choosing the PEICL “notwithstanding any limitations of choice of law rules under private international law”. Indeed, submission of the contract to the PEICL does not require protection of either party by means of private international law for a simple reason: an EU Regulation would have direct effect in every Member State. Choice of a (supranational) law which is applicable in the Member State 68

See Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier, Munich 2011). 69 SE Regulation (2157/2001) and EEIG Regulation (2137/85). 70 In particular, art. 7 para. 3 of the Rome I Regulation (593/2008) limits the scope of party autonomy for mass risk insurance covering risks in the Member States.

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Principles of European Insurance Contract Law (PEICL): Introduction

where both parties have their habitual residence is not to be considered a choice of a foreign law and, thus, will not justify any restrictions imposed by art. 7 of the Rome I Regulation (593/2008).71 I41.  Irrespective of the fact that there is no reason for protecting parties, in particular the policyholder, against a choice of the PEICL by means of private international law, such choice must not have a detrimental effect on the policyholder. This is why an optional Common European Insurance Contract Law must provide a high level of consumer protection.72 I42.  The situation is different where parties from third states are involved. Since an EU Regulation does not apply in third states, a choice in favour of the PEICL amounts to a choice of a foreign law. It follows that parties from third states must be protected against a choice in favour of the PEICL in the same way they are protected against the choice of any other law which is foreign to them.73 I43.  A solution for both situations is offered by the so-called “2nd regime” model.74 Under this model, an optional European (insurance) contract law is considered to be a “2nd regime” of contract law within each Member State. Due to the enactment of an optional EU Regulation on insurance contract law, there would be two parallel regimes, the national and the supranational, in every Member State. Thus the choice between the two of them is, first, a substantive choice between two sets of contract law applicable in the same Member State and, second, such choice will be available to the extent that the law of a Member State applies to the contract in accordance with the conflict rules as set out in the Rome I Regulation (593/2008). I44.  It follows from the “2nd regime” model that a choice in favour of the PEICL will always be available in cases which are exclusively connected with one or more Member State(s).75 The choice will not be limited by rules of private international law in such case because Article 1:102 allows an unrestricted choice in each and every member States concerned. I45.  If, however, a contract has relevant connections with a third state, no choice will be available where the law of a third country is applicable. If, for instance, a consumer insurance contract is concluded with a consumer resident in a third country concerning a risk 71

In more detail, Helmut Heiss, ‘Optionales europäisches Versicherungsvertragsrecht’, Rabels Zeit­ schrift für ausländisches und internationales Privatrecht 76 (2012) 316, 330 f. 72 In more detail, Helmut Heiss, ‘Optionales europäisches Versicherungsvertragsrecht’, Rabels Zeitschrift für ausländisches und internationales Privatrecht 76 (2012) 331 f.; as to the consumer’s view in general, see Peter Hinchliffe, ‘The Consumer‘s View’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) 59. 73 In more detail, Helmut Heiss, ‘Optionales europäisches Versicherungsvertragsrecht’, Rabels Zeitschrift für ausländisches und internationales Privatrecht 76 (2012) 334 f. 74 As proposed by Helmut Heiss and Noemi Downes, ‘Non-optional Elements in an Optional European Contract Law: Reflections from a Private International Law Perspective’ (2005) 13 European Review of Private Law 707 ff.; this model is followed, in principle, by the CESL Regulation Proposal. 75 Unless, of course, the parties validly opt out of it by a choice of law under private international law, which they will not do if they intend to choose the CEICL (PEICL).

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Principles of European Insurance Contract Law (PEICL): Introduction

also located in a third state (which is regularly the case when the policyholder resides in a third state), the law of the consumer will govern the insurance contract in accordance with art. 6 para. 1 of the Rome I Regulation (593/2008)76 and, thus, no choice in favour of the PEICL will be available to the parties under that law. Of course, parties may choose the law of a Member State, which grants them the option in favour of the PEICL, in accordance with the first sentence of art. 6 para. 2 of the Rome I Regulation (593/2008). However, such choice and the option exercised in favour of an application of the PEICL will be restricted by the application of more favourable mandatory rules of the consumer law in accordance with the second sentence of art. 6 para. 2 of the Rome I Regulation (593/2008). This is in line with the legal policy underlying art. 6 of the Rome I Regulation (593/2008). c. Optional Instrument and Mandatory Insurance Contract Law I46.  In order to achieve its aims, the optional instrument allows parties to opt out not only of non-mandatory but also of mandatory rules of national insurance contract law. The choice is free of any restrictions imposed by current private international law. It follows that the optional instrument must provide appropriate mandatory rules of insurance contract law, effectively replacing the protection of the policyholder offered under national law, thereby applying a high level of protection in the optional instrument, just as other Union acts must do under art. 114 para. 3 TFEU.77 I47.  It may appear contradictory to propose an optional instrument which would only be applicable if parties opt into it, and at the same time present a comprehensive regulation of mandatory rules on insurance contract law in the optional instrument.78 However, the contradiction disappears when looking at the fact that the option of the parties is restricted to choosing the instrument as a whole or not at all.79 A national system with a high degree of protection for the policyholder will therefore be replaced by a European system offering a different kind of protection, yet protection at an equivalent level.80 Since a partial choice is excluded, the insurers are not allowed to pick and choose parts of each system for their own benefit. This approach tends to ensure that the insurer’s reason for opting into the European contract law regime is not to avail itself of a more relaxed standard of policyholder protection, but to be able to base its business on one and the same set of rules throughout Europe. 76

Art. 7 of the Rome I Regulation (593/2008) is not applicable in such situations due to the limitation of its scope of application in para. 1. 77 See the Opinion of the European Economic and Social Committee on ‘The European Insurance Contract Law’ [2005] OJ C157/1, no. 6.2. 78 As to mandatory rules in optional contract law in general, see Helmut Heiss and Noemi Downes, ‘Non-optional Elements in an Optional European Contract Law: Reflections from a Private International Law Perspective’ (2005) 13 European Review of Private Law 697 and 699. 79 Jürgen Basedow, ‘Der Versicherungsbinnenmarkt und ein optionales europäisches Vertragsgesetz’ in Manfred Wandt (ed.), Kontinuität und Wandel des Versicherungsrechts. Festschrift für Egon Lorenz zum 70. Geburtstag (VVW, Karlsruhe 2004) 93, 105; Helmut Heiss and Noemi Downes, ‘Non-optional Elements in an Optional European Contract Law: Reflections from a Private International Law Perspective’ (2005) 13 European Review of Private Law 709 f. 80 Helmut Heiss and Noemi Downes, ‘Non-optional Elements in an Optional European Contract Law: Reflections from a Private International Law Perspective’ (2005) 13 European Review of Private Law 699.

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Principles of European Insurance Contract Law (PEICL): Introduction

d. Comprehensive instead of Minimum Standard Regulation I48.  Mandatory insurance contract law is similar to consumer law in that it protects the weaker party.81 Several EU directives have been enacted in the field of consumer contract law and many of them contain so-called minimum standard clauses allowing national legislatures to provide consumers with a higher standard of protection than required, as long as such national rules do not violate the fundamental economic freedoms of the TFEU.82 It is to be noted, however, that more recent directives no longer contain minimum standard clauses83 or at least restrict the rights of the Member States to provide for more protective rules on certain issues such as, for instance, the information to be provided to consumers.84 The latter is also the approach taken in art. 4 of the Consumer Rights Directive (2011/83/ EU) stating: “Member States shall not maintain or introduce, in their national law, provisions diverging from those laid down in this Directive, including more or less stringent provisions to ensure a different level of consumer protection, unless otherwise provided for in this Directive”. I49.  In the case of an optional instrument in the insurance sector, a general or even a restricted minimum standard clause would seriously jeopardise its fundamental purpose, namely to allow the insurer to sell and the policyholder to buy insurance anywhere in Europe, based solely on one legal regime. This objective would be frustrated if national legislatures could impose higher levels of policyholder protection.85 The optional instrument must govern the insurance contract comprehensively.86 This is not to say that a partial or minimum standard regulation would not help at all. It simply would not be sufficient to achieve the completion of the internal insurance market, which is, after all, the ultimate objective of the exercise. This is why the PEICL form a comprehensive regulation and, under the first sentence of Article 1:105 para. 1, do not permit references to national law.

81

Fritz Reichert-Facilides, ‘Gesetzgebung in Versicherungsvertragsrechtssachen: Stand und Ausblick’ in Fritz Reichert-Facilides and Anton K. Schnyder, Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (Helbing und Lichtenhahn, Basel 2000) 6 f. 82 See art. 8 of the Unfair Contract Terms Directive (93/13/EEC); art. 8 para. 2 of the Directive on Sale of Consumer Goods and Guarantees (1999/44/EC). 83 Consumer Credit Directive (2008/48/EC), as amended, and Timeshare Directive (2008/122/EC) 84 Distance Marketing Directive (2002/65/EC), as amended. 85 See Helmut Heiss, ‘Stand und Perspektiven der Harmonisierung des Versicherungsvertragsrechts in der EG’ in Petra Pohlmann (ed.), Veröffentlichungen der Münsterischen Forschungsstelle für Versicherungswesen an der Westfälischen Wilhelms-Universität zu Münster (“Münsteraner Reihe”), Issue 99 (VVW, Karlsruhe 2005) 32 f; Daniela Weber-Rey, ‘Harmonisation of European Insurance Contract Law’ in Stefan Vogenauer and Stephen Weatherill (eds.), The harmonisation of European contract law: implications for European private laws, business and legal practice (Hart Publishing, Oxford 2006) 207, 220; Leander D. Loacker, ‘Insurance soft law?’ Versicherungsrecht (2009) 295; European Commission, Green Paper on Financial Services Policy (2005-2010), COM (2005) 177 final; Opinion of the European Economic and Social Committee on ‘The European Insurance Contract Law’ [2005] OJ C157/1, no. 6.3.1. 86 Jürgen Basedow, ‘Der Versicherungsbinnenmarkt und ein optionales europäisches Vertragsgesetz’ in Manfred Wandt (ed.), Kontinuität und Wandel des Versicherungsrechts. Festschrift für Egon Lorenz zum 70. Geburtstag (VVW, Karlsruhe 2004) 104.

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e. Option also Available for Purely Domestic Contracts I50.  The facilitation of insurance transactions in the single European market will only take full effect if all the contracts of a particular insurer can be submitted to the optional instrument. Parties must, therefore, also be given that option for purely domestic contracts, namely insurance contracts between policyholders and insurers from the same Member State and concerning a risk also situated in this Member State.87 Otherwise, domestic insurance contracts, which usually represent the biggest share of an insurer’s business, would have to be drawn up in accordance with national law and only cross-border insurance products could be subject to the optional instrument. As a consequence, the pooling of risks would be more burdensome and many insurers would probably still not enter into cross-border transactions. Equally, a policyholder may want to provide for a future change of place of residence by buying a policy in his/her home market based on the European optional instrument of insurance contract law. For these reasons, as far as insurance is concerned, any restriction on the scope of application of an optional instrument on European contract law to cross-border transactions should be rejected.88

f. Option and Third Parties to the Insurance Contract I51.  The optional character of the Principles of European Insurance Contract Law also has an impact on their content. Since the option is given to the parties to the insurance contract, namely the insurer and the policyholder, its effects are restricted to the parties themselves but nonetheless include the beneficiary and the insured, because their rights depend on the parties’ agreement. I52.  Third parties must not, however, be adversely affected by the parties’ choice. This applies, inter alia, to intermediaries, who are not parties to the insurance contract. The legal position of intermediaries will not be affected by the parties’ choice in favour of the Principles of European Insurance Contract Law. As a consequence, the Principles of European Insurance Contract Law do not govern the duties of the insurance intermediaries, but only the liability of the insurer for its agents, including agents purporting to be independent.89

87

Helmut Heiss and Noemi Downes, ‘Non-optional Elements in an Optional European Contract Law: Reflections from a Private International Law Perspective’ (2005) 13 European Review of Private Law 702 f; Jürgen Basedow, ‘The Optional Application of the Principles of European Insurance Contract Law’ in Angelika Fuchs (ed.), European Contract Law – ERA Forum Special Issue 2008 (ERA Forum scripta iuris europaei), vol. 9 (Springer, Heidelberg 2008) 116. 88 See Jürgen Basedow, ‘Der Versicherungsbinnenmarkt und ein optionales europäisches Vertragsgesetz’ in Manfred Wandt (ed.), Kontinuität und Wandel des Versicherungsrechts. Festschrift für Egon Lorenz zum 70. Geburtstag (VVW, Karlsruhe 2004) 108 f; likewise Leander D. Loacker, ‘Insurance soft law?’ Versicherungsrecht (2009) 296. 89 See Articles 3:101 and 3:102 PEICL; as to the factual significance of the PEICL to insurance intermediaries see David Harari, ‘The Role of the Intermediary’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) 75.

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Principles of European Insurance Contract Law (PEICL): Introduction

g. Comparison with the Proposed Common European Sales Law (CESL) I53.  Having previously announced the possibility of creating optional instruments for European contract law in recital 14 of the Rome I Regulation (593/2008), the European legislature now appears to be aiming at creating its first optional instrument covering sales law. On 11 October 2011, the Commission proposed a Regulation of the European Parliament and of the Council on a Common European Sales Law (CESL).90 Amendments were made to this proposal by the European Parliament in its first reading on 26 February 2014.91 While the current proposal has most recently been withdrawn by the European Commission, a modified proposal “in order to fully unleash the potential of ecommerce in the Digital Single Market” is announced.92 The following statements still relate to the original proposal as amended by the European Parliament. I54.  The CESL Regulation Proposal in principle adopts the “2nd regime” model of optional European contract law. It clearly points out that the choice available to the parties is of a substantive and not of private international law nature. Thus, the conflict rules set out in the Rome I Regulation (593/2008) must be applied first and the choice will be available to the extent that the law of a Member State, but not to the extent that the law of a third state, is applicable. I55.  There are, however, a number of additional restrictions to the scope of application of the CESL Regulation Proposal. It is proposed that it should apply to distance contracts93 and cross-border contracts94 only. As far as the latter are concerned, Member States may stretch the scope of application to contracts with no foreign element.95 Such restrictions are not in line with the optional instrument proposed here.

III. Political Developments 1. Opinions of the European Economic and Social Committee (EESC) I56.  The EESC has decided on and published two own-initiative opinions relevant for an optional Common European Insurance Contract Law. The first Opinion on “The European Insurance Contract” which was delivered on 15 December 2004,96 considered the 90

COM (2011) 635 final. European Parliament legislative resolution of 26 February 2014 on the proposal for a regulation of the European Parliament and of the Council on a Common European Sales Law (COM(2011)0635 – C7-0329/2011-2011/0284(COD)) (Ordinary legislative procedure: first reading), doc. no. P7_TAPROV(2014)0159. 92 Annex to the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Commission Work Programme 2015, A New Start, COM (2014) 910 final, no. 60. 93 Art. 4 para. 1 and art. 5 of the CESL Regulation Proposal (no. 87) as amended by the EP (no. 88). 94 Art. 1 para. 1, art. 3 and art. 4 of the CESL Regulation Proposal (no. 87) as amended by the EP (no. 88). 95 Art. 13(a) of the CESL Regulation Proposal (no. 87) as amended by the EP (no. 88). 96 [2005] OJ C157/1 (Rapporteuer: Jorge Pegado Liz; Experts: Fritz Reichert-Facilides and Helmut Heiss); with regard to this Opinion, Helmut Heiss, ‘Europäischer Versicherungsvertrag – Initiativstellung91

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Principles of European Insurance Contract Law (PEICL): Introduction

shortcomings of the existing internal insurance market. It confirmed the view that some kind of European insurance contract law must be available in order to allow a cross-border provision of insurance services. Therefore, the EESC encouraged the Commission to take steps towards unifying insurance contract law in the EU. I57.  The second Opinion of 27 May 2010 on the “28th Regime”97 does not specifically deal with insurance contract law, but it is mentioned. This Opinion favours the creation of uniform European private law using optional instruments and adopts the “2nd regime” model. In its no. 1.8 it lists requirements to be met by such optional instrument:

1.8 The optional regime should therefore: a) be conceived as a “2nd Regime” in each Member State, thus providing parties with an option between two regimes of domestic contract law; b) be defined at EU level and enacted by EU regulations; c) facilitate interaction between parties in the drafting process; d) contain provisions of mandatory law ensuring a high level of protection for the weaker party, at least similar to those granted by the EU or national mandatory rules, applicable whenever necessary; e) limit the option of the parties to a choice of the entire instrument thus avoiding the possibility of “cherry-picking”.

2. Resolutions of the European Parliament I58.  In its Resolution of 3 September 2008,98 the European Parliament pointed to the possibility of creating optional instruments in the future. This is stressed again in a second Resolution of the European Parliament of 8 June 2011.99 In its second resolution, the European Parliament also

(…) reiterate[d] its earlier call to include insurance contracts within the scope of the OI,100 believing that such an instrument could be particularly useful for small-scale insurance contracts; stresses that, in the field of insurance contract law, preliminary work has already been performed with the Principles of European Insurance Contract Law (PEICL), which should be integrated into a body of European contract law and should be revised and pursued further; (…)

nahme des Europäischen Wirtschafts- und Sozialausschusses verabschiedet’, Versicherungsrecht (2005) 1. 97 [2005] OJ C21/26 (Rapporteuer: Jorge Pegado Liz; Expert: Helmut Heiss). 98 European Parliament resolution of 3 September 2008 on the common frame of reference for European contract law, P6_TA(2008)0397; as to the CFR paras. I54 ff. below. 99 European Parliament resolution of 8 June 2011 on policy options for progress towards a European Contract Law for consumers and businesses (2011/2013(INI)), P7_TA-PROV(2011)0262, no. 25. 100 “OI” stands for “Optional Instrument”.

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Principles of European Insurance Contract Law (PEICL): Introduction

3. European Commission a. Establishment of a Common Frame of Reference of European Contract Law I59.  In its 2003 Action Plan on European Contract Law101 of 12 February 2003 and its 2004 Communication on European Contract Law, the European Commission announced the establishment of a Common Frame of Reference of European Contract Law. According to the Commission’s 2003 Action Plan on European Contract Law, the Common Frame of Reference should comprise Definitions and Rules and both should be accompanied by Comments and Notes. The Comments would contain explanations and illustrations of the proposed Rules. The Notes would give reference to the status quo of contract law in the Member States and the existing acquis communautaire. I60.  The Commission wanted the Common Frame of Reference to be drafted in order to establish a set of rules which provided the definitions, structure and contents of European contract law developed through comparative legal analysis of national contract laws.102 Strictly speaking, these definitions and principles would not be of a binding nature since they would not be enacted as a regulation or directive.103 The Commission announced, however, that it was determined to adhere to the terminology and system of the Common Frame of Reference in any later legislation concerning contracts.104 Furthermore, the Common Frame of Reference was expected to become an important aid for the European Court of Justice in preliminary rulings procedures105 on the meaning of legal provisions, 101

In more detail Reiner Schulze, ‘Gemeinsamer Referenzrahmen und acquis communautaire’, Zeitschrift für Europäisches Privatrecht (2007) 130. 102 Communication from the Commission to the European Parliament and the Council, ‘European Contract Law and the revision of the acquis: the way forward’, COM (2004) 651 final, 11 October 2004, no. 2.2.1 and 3.1.; see also Reiner Schulze, ‘Gemeinsamer Referenzrahmen und acquis communautaire’, Zeitschrift für Europäisches Privatrecht (2007) 135. 103 Communication from the Commission to the European Parliament and the Council, ‘European Contract Law and the revision of the acquis: the way forward’, COM (2004) 651 final, 11 October 2004, no. 2.1.3. 104 Communication from the Commission to the European Parliament and the Council, ‘European Contract Law and the revision of the acquis: the way forward’, COM (2004) 651 final, 11 October 2004, no. 2.1.2. 105 Verica Trstenjak, ‘Die Auslegung privatrechtlicher Richtlinien durch den EuGH: Ein Rechtsprechungsbericht unter Berücksichtigung des Common Frame of Reference’, Zeitschrift für Europäisches Privatrecht (2007) 145; following their publication, the Principles of European Contract Law and the Draft Common Frame of Reference have been cited by Advocate-Generals in their opinions either in support of their interpretation of Community law (M. Poiares Maduro, opinion of 21 November 2007 on Case C-412/06 Annelore Hamilton v Volksbank Filder eG [2008] ECR I-2383; Trstenjak, opinion of 11 September 2008 on Case C-180/06 Renate Ilsinger v Martin Dreschers [2009] ECR I-3961; Trstenjak, opinion of 6 March 2007 on Case C-1/06 Bonn Fleisch Ex- und Import GmbH v Hauptzollamt Hamburg-Jonas [2007] ECR I-5609; etc.) or to provide an overview of other proposals for arrangements which are different to some extent (Trstenjak, opinion of 18 February 2009 on Case C-489/07 Pia Messner v Firma Steffen Krüger [2009] ECR I-7315; Trstenjak, opinion of 11 June 2008 on Case C-275/07 Commission of the European Communities v Italian Republic [2009] ECR I-2005; Trstenjak, opinion of 4 September 2008 on Case C-445/06 Danske Slagterier v Bundesrepublik Deutschland [2009] ECR I-2119, Trstenjak, opinion of 15 November 2007 on Case C-404/06 Quelle

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Principles of European Insurance Contract Law (PEICL): Introduction

and also for national courts with regard to their own interpretation of the existing acquis communautaire. Not least, international academic discussion in Europe could be based on the common rules provided by the Common Frame of Reference. This instrument would, to some extent, provide Europe with a common legal language, as was the case with Latin until national codifications replaced the ius commune. It would allow law faculties to teach contract law with a European and comparative perspective. National legislatures might also contribute to harmonisation by adopting the rules of the Common Frame of Reference in future reforms of national contract law. Ultimately, one might regard the Common Frame of Reference as a European lex mercatoria106 and as such it may find application in arbitration proceedings.107 I61.  Insurance contract law played an important role in the 2003 Action Plan on European Contract Law. The plan repeatedly referred to the necessity of harmonising the law on insurance contracts. The Commission argued that “firms are unable to offer, or are deterred from offering, financial services across borders, because products are designed in accordance with local legal requirements”108 and pointed out that “the same problems occur particularly with insurance contracts”.109 In view of this relevance of insurance contract law, the European Commission in its 2004 Communication on European Contract Law stated with regard to the structure of a Common Frame of Reference: “[…] two types of contracts which were mentioned specifically were consumer and insurance contracts. The Commission expects the preparation of the Common Frame of Reference to pay specific attention to these two areas.”110 I62.  The task of drafting the CFR was assigned to a “CoPECL Network of Excellence” which was founded in May 2005 upon an initiative by the European Commission.111 The CoPECL Network comprised universities, institutions and other organisations with more than 150 researchers operating in all of the EU Member States. The following groups parAG v Bundesverband der Verbraucherzentralen und Verbraucherverbände [2008] ECR I-2685; in the joined Cases T-8/95 and T-9/95 the applicants maintained, in accordance with the Principles of European Contract Law, that the Community cannot plead limitation; see the judgment of the Court of First Instance of 27 September 2007 Cases T-8/95 and T-9/95 Wilhelm Pelle and Ernst-Reinhard Konrad v Council of the European Union and Commission of the European Communities [2007] ECR II-4117; etc.). 106 See Uwe Blaurock, ‘Lex mercatoria und Common Frame of Reference’, Zeitschrift für Europäisches Privatrecht (2007) 118; cf. also Leander D. Loacker, ‘Insurance soft law?’ Versicherungsrecht (2009) 292 who refers to its ‚soft law‘ characteristics. 107 See also Article 1:101 PECL (Application of the Principles): “(…) (3) These Principles may be applied when the parties: (a) have agreed that their contract is to be governed by “general principles of law”, the “lex mercatoria” or the like; …” 108 Communication from the Commission to the European Parliament and the Council, ‘A more coherent European contract law – An action plan’, COM (2003) 68 final, 12 February 2003, no. 47. 109 Communication from the Commission to the European Parliament and the Council, ‘A more coherent European contract law – An action plan’, COM (2003) 68 final, 12 February 2003, no. 48. 110 Communication from the Commission to the European Parliament and the Council, ‘European Contract Law and the revision of the acquis: the way forward’, COM (2004) 651 final, 11 October 2004, no. 3.1.3. 111 Joint Network on European Private Law (COPECL), see www.copecl.org.

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ticipated in the Network: The Study Group on a European Civil Code; The Research Group on the Existing EC Private Law, or “Acquis Group”; The Project Group on a Restatement of European Insurance Contract Law, known as the “Insurance Group” within the CoPECL Network; The Association Henri Capitant together with the Société de Législation Comparée and the Conseil Supérieur du Notariat; The Common Core Group; The Research Group on the Economic Assessment of Contract Law Rules, or “Economic Impact Group” (TILEC – Tilburg Law and Economics Center); The “Database Group”; and The Academy of European Law (ERA). The first draft of the Common Frame of Reference was presented to the European Commission at the end of 2007.112 The final draft was submitted at the end of 2008. I63.  As part of the CoPECL Network, the Project Group on a “Restatement of European Insurance Contract Law” (the “Project Group”) was in charge of drafting the Common Frame of Reference of Insurance Contract Law. It delivered its share of the Draft Common Frame of Reference to the Commission at the end of 2008 and published it as “Principles of European Insurance Contract Law”, the first edition to the present volume, in 2009. I64.  Drafting a Common Frame of Reference was an ambitious project which had the potential to considerably boost the development of European contract law in general and insurance contract law in particular. However the Common Frame of Reference by itself would never have been sufficient to complete the internal insurance market.113 Since it would only provide non-binding rules, the Common Frame of Reference would not be available to the parties as the choice of the applicable insurance law and insurance contracts would still be submitted to mandatory rules of national law. The obstacles to the functioning of the internal insurance market presented by the diversity of national mandatory insurance contract law would not be removed and cross-border sales would remain an exception. For this reason, it has been argued that a functioning internal insurance market will require more, namely an optional instrument of European insurance contract law.114 I65.  While the Draft Common Frame of Reference was published by the CoPECL Network,115 the European Commission never adopted a “political” CFR. Rather, the Commission went on to draft optional instruments, beginning with a Common European Sales Law (CESL).

112

See www.copecl.org; the draft on insurance contracts is available at www.restatement.info. See Jürgen Basedow, ‘Der Gemeinsame Referenzrahmen und das Versicherungsvertragsrecht’, Zeitschrift für Europäisches Privatrecht (2007) 280, 283; likewise Leander D. Loacker, ‘Insurance soft law?’ Versicherungsrecht (2009) 292. 114 See Jürgen Basedow, ‘Der Gemeinsame Referenzrahmen und das Versicherungsvertragsrecht’, Zeitschrift für Europäisches Privatrecht (2007) 285; concerning the relationship of the Common Frame of Reference to a possible future optional instrument, see Alex Flessner, ‘Der Gemeinsame Referenzrahmen im Verhältnis zu anderen Regelwerken’, Zeitschrift für Europäisches Privatrecht (2007) 112 and Leander D. Loacker, ‘Insurance soft law?’ Versicherungsrecht (2009) 293. 115 Study Group on a European Civil Code and Research Group on the Existing EC Private Law (Acquis Group) (eds.), Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR) (Full edition Sellier European Law Publishers, Munich 2009). 113

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b. Commission Expert Group on European Insurance Contract Law I66.  On 17 January 2013, the Commission decided to set up an “Expert Group on European Insurance Contract Law”.116 Art. 2 para. 1 of this decision describes the Expert Group’s purpose as follows: “The Expert Group’s task shall be to carry out an analysis in order to assist the Commission in examining whether differences in contract laws pose an obstacle to cross-border trade in insurance products.” Pursuant to para. 3 of the same provision, the Expert Group was to deliver a report on its findings by the end of 2013. This report was published in English at the beginning of 2014 and is now available to the public on the Commission’s website.117 I67.  The setting up of the Expert Group must be viewed against the background of broad-ranging efforts towards the creation of a European contract law in general (especially the Common European Sales Law) and European insurance contract law in particular. In respect of contract law in general, the European Commission presented a Green Paper on Options for a European Contract Law in 2010, in which it presented various avenues for action. The ensuing consultation received responses in particular from the insurance industry, according to which the differences in the Member States’ contract laws presented an obstacle to the cross-border provision of insurance services.118 For example, CEA (Comité Européen des Assurances) – Insurance Europe’s predecessor – represented the following position during the consultation:

(…) it is currently not possible for insurance companies to offer uniform insurance products across Europe, based on a European uniform legal framework. Today’s differences in national laws mean that insurers willing to provide services across borders still need to tailor the wordings of their policies to meet local requirements, and this entails significant costs and legal uncertainty.119 Such statements confirmed an analysis conducted by the European Economic and Social Committee for the purposes of its own-initiative Opinion on “The European Insurance Contract” in 2004,120 and lend insurance contract law a particular urgency.

116

European Commission, ‘Commission decision of 17 January 2013 on setting up the Commission Expert Group on a European Insurance Contract Law’ [2013] OJ C16/6. 117 Final Report of the Commission Expert Group on European Insurance Contract Law (General Rapporteur: Jürgen Basedow): http://ec.europa.eu/justice/contract/files/expert_groups/insurance/final_ report.pdf. 118 See also Jürgen Basedow, ‘Versicherungsvertragsrecht als Markthindernis?’, Europäische Zeitschrift für Wirtschaftsrecht 2014, 1. 119 See CEA, ‘Position Paper: CEA views on the European Commission’s Green Paper on policy options for progress towards an EU contract law for consumers and businesses’ (2011): http://ec.europa.eu/ justice/news/consulting_public/0052/contributions/56_en.pdf; for a more detailed analysis see Felix Wieser, ‘The Perspective of the Insurance Industry’ in Helmut Heiss and Mandeep Lakhan (eds.), Principles of European Insurance Contract Law (PEICL): A Model Optional Instrument (Sellier elp, Munich 2011) 51. 120 [2005] OJ C157/1; see para. I48 above.

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Principles of European Insurance Contract Law (PEICL): Introduction

I68.  The fact that the decision on setting up an Expert Group was ultimately aimed at creating a legislative instrument is expressly stated in at least one place: Recital 2 of the Commission decision expressly refers to the European Parliament’s call for an optional instrument to include insurance contract law. I69.  The Commission decision also suggests a substantive focus for the report. It namely refers to the White Paper “An Agenda for Adequate, Safe and Sustainable Pensions” of 16 February 2012,121 in which there is a call for an examination of the extent to which contract-law related obstacles prevent the design and distribution of life assurance products as pension products. In addition to liability insurance (including motor liability insurance), life assurance is therefore given particular importance for good reasons in the Expert Group’s report. I70.  The establishment and work of the Expert Group must therefore be regarded as an intermediate step towards the creation of a Common European Insurance Contract Law. Much depends on it. The European Commission may initiate legislation only if the differences between insurance contract laws represent an obstacle to the internal insurance market. It is not important whether the appropriate basis for competence for the creation of an optional instrument can be found in art. 114 TFEU (competence for the approximation of laws), art. 352 (contingency competence) or in another provision governing competence. The task of the Expert Group was restricted to analysing the question as to whether the difference in the insurance contract laws of the Member States could be deemed obstacles. The experts were not required to formulate a proposal for a future Common European Insurance Contract Law. I71.  It is not possible to deal with substantive details in this Introduction. In lieu of a substantive discussion, the executive summary of the Final Report is presented below:

Executive Summary 1. This report examines the impact of differences between national contract laws on cross-border insurance business under the freedom to provide services and the freedom of establishment. The mandate of the Expert Group is to carry out an analysis in order to assist the Commission in examining whether differences in contract laws pose an obstacle to cross-border trade in insurance products. It does not relate to other differences which may influence cross-border insurance business. Nevertheless, the report recognises the significance of such other differences; some of them are of a factual, economic and social nature, others relate to areas of the law different from contract law, in particular to prudential regulation and taxation. These differences include: ‘knowing your customer’, understanding the true risk proposed for cover, language, culture, including expectations of the local policyholder, the need for local claims handling, the form and prevalence of frauds, the tax and labour law environment, the legal, regulatory and supervisory environment, and cross-border redress options. The members of the Group were drawing on their professional knowledge and expertise and were not considering statistical evidence except where explicitly mentioned. 121

COM (2012) 55 final.

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Principles of European Insurance Contract Law (PEICL): Introduction

2. Two approaches to handle this task have been adopted: The first starting from the differences in insurance contract law in general, i.e. without specifying any classes of insurance; the second focusing on particular classes: life insurance, liability insurance, and motor insurance. 3. With regard to large risks, the cross-border provision of insurance cover is already now a common occurrence; it rarely encounters obstacles arising from differences in insurance contract law since the parties are free to choose the applicable law. 4. By contrast, the law applicable to mass risk insurance can be chosen only in limited situations. Rome I calls for the application of the law of the Member State in which the risk is situated which in most cases of mass risk insurance is the Member State in which the policyholder is habitually resident. The legislator has adopted this system in order to protect the weaker party. 5. Where the law applicable to the contract differs from that of the insurer’s country of origin which has served as the basis for the design of the contract and is mandatory, the contract, its marketing, and/or its administration by IT, call centres and legal departments will need adaptation. Differences in national mandatory rules may restrict the freedom of the insurer to provide its services cross border (and may thus form obstacles); such rules are important to protect European citizens as consumers or for example as victims of road accidents. These differences raise the costs of cross-border trade in insurance. These effects have been highlighted with regard to a number of rules governing several aspects of cross-border insurance contracts, for example pre-contractual duties, formalities of contracting, precautionary measures, the unfairness control of standard contract terms, and duration and renewal of policies. 6. Life insurance displays a great variety of types and functions. For some of them, especially pensions, tax law and social security regulations supersede insurance contract law as the principal source of regulation. Other life insurances are similar to financial instruments. In this context, divergent rules on pre-contractual information duties (which are particularly important for consumers’ confidence in cross-border trade) and on the calculation of surrender values were identified as highly relevant for cross-border life insurance. Differences in other rules relate to the withdrawal period, the consequences of cancellation, the drafting of questionnaires, the payment of premium and the insurance money, and to termination. They have the effect of increasing legal uncertainty and complexity, and of raising costs of cross-border activities. How insurers manage these requirements is a business decision driven by their commercial approach and attitude to risk. 7. The legal framework of liability insurance is particularly complex due to the involvement of third parties, the interrelation with liability law, and the variety of duties to insure imposed by national legislation or regulation. While it is not easy to isolate issues of pure insurance contract law, a number of legal divergences have been identified as causing costs and uncertainty. This notably applies to the various differences concerning compulsory insurances, to rules on the mitigation of loss, in particular on the cover of legal expenses incurred for the defence and on the time-span of the insurer’s liability. The applicable rules on insurance contract law are only one element in the decision to offer cross-border liability cover alongside others; they do not appear to be the main element. 8. Motor liability insurance is compulsory under Dir. 2009/103/EC and one of the most widely spread insurances in Europe. Various specific features such as driving habits or 28

Principles of European Insurance Contract Law (PEICL): Introduction

liability regimes exist. Despite a basic harmonisation, differences between the relevant national contract laws subsist and raise the costs of entering a foreign market. These differences concern in particular specific punitive interest rates in the case of non-payment by the insurer, the reimbursement of legal expenses, the compulsory nature of Bonus/ Malus systems in a few Member States, certain requirements as to the form and proof of motor liability insurance, the duty to accept risks and to submit offers to applicants, and the review of premium adjustment clauses under standards of unfairness.

IV. Final Remarks I72.  The presentation of this volume marks the end of a research project conducted by scholars from all over Europe for more than 15 years. Its result is unique in that it provides for the first time Common Principles of European Insurance Contract Law including rules on the most significant branches of insurance. Thereby, the PEICL give the European legislature the opportunity to enact an optional Common European Insurance Contract Law as well as to national legislatures in Member and non-Member States to consider the principles in the course of national law reforms. Equally, academics will have the opportunity to use a common European understanding of insurance contract law as a basis for farther reaching, not the least inter-continental comparative research work. As such, the finalisation of the project marks a new starting point.

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Principles of European Insurance Contract Law (PEICL): Rules Part One: Provisions Common to All ­Contracts Included in the Principles of ­European Insurance Contract Law (PEICL) Chapter One: Introductory Provisions Section One: Application of the PEICL Section Two: General Rules Section Three: Enforcement

Chapter Two: Initial Stage and Duration of the Insurance Contract Section One: Applicant’s Pre-contractual Information Duty Section Two: Insurer’s Pre-contractual Duties Section Three: Conclusion of the Contract Section Four: Retroactive and Preliminary Cover Section Five: Insurance Policy Section Six: Duration of the Insurance Contract Section Seven: Post-contractual Information Duties of the Insurer

Chapter Three: Insurance Intermediaries Chapter Four: The Risk Insured Section One: Precautionary Measures Section Two: Aggravation of Risk Section Three: Reduction of Risk

Chapter Five: Insurance Premium Chapter Six: Insured Event Chapter Seven: Prescription Part Two: Provisions Common to Indemnity Insurance Chapter Eight: Sum Insured and Insured Value Chapter Nine: Entitlement to Indemnity

Chapter Ten: Rights of Subrogation Chapter Eleven: Insured Persons Other than the Policyholder Chapter Twelve: Insured Risk Part Three: Provisions Common to Insurance of Fixed Sums Chapter Thirteen: Admissibility Part Four: Liability Insurance Chapter Fourteen: General Liability Insurance Chapter Fifteen: Direct Claims and Direct Actions Chapter Sixteen: Compulsory Insurance Part Five: Life Insurance Chapter Seventeen: Special Provisions for Life Insurance Section One: Third Parties Section Two: Initial Stage and Duration of the ­Contract Section Three: Changes during the Contract Period Section Four: Relation to National Laws Section Five: Insured Event Section Six: Conversion and Surrender

Part Six: Group Insurance Chapter Eighteen: Special Provisions for Group Insurance Section One: Group Insurance in General Section Two: Accessory Group Insurance Section Three: Elective Group Insurance

31

Chapter One: Introductory Provisions

Part One: Provisions Common to All Contracts Included in the Principles of European Insurance Contract Law (PEICL) Chapter One: Introductory Provisions Section One: Application of the PEICL

Article 1:101 Substantive Scope of Application (1) The PEICL shall apply to private insurance in general, including mutual insurance. (2) The PEICL shall not apply to reinsurance.

Article 1:102 Optional Application The PEICL shall apply when the parties, notwithstanding any limitations of choice of law under private international law, have agreed that their contract shall be governed by them. Subject to Article 1:103, the PEICL shall apply as a whole and no exclusion of particular provisions shall be allowed.

Article 1:103 Mandatory Character (1) Articles 1:102 second sentence, 2:104, 2:304, 13:101, 17:101 and 17:503 are mandatory. Other Articles are mandatory in so far as sanctions for fraudulent behaviour are concerned. (2) The contract may derogate from all other provisions as long as such derogation is not to the detriment of the policyholder, the insured or beneficiary. (3) Derogation in the sense of para. 2 shall be allowed to the benefit of any party in contracts covering large risks within the meaning of Article 13 para. 27 Directive 2009/138/EC. In group insurance a derogation shall only be held against an individual insured who fulfills the personal characteristics mentioned in Article 13 para. 27(b) or (c) Directive 2009/138/EC, where applicable.

Article 1:104 Interpretation The PEICL shall be interpreted in the light of their text, context, purpose and comparative background. In particular, regard should be had to the need to promote good faith and fair dealing in the insurance sector, certainty in contractual relationships, uniformity of application and the adequate protection of policyholders.

Article 1:105 National Law and General Principles (1) No recourse to national law, whether to restrict or to supplement the PEICL, shall be permitted. This does not apply to mandatory national laws specifically enacted for branches of insurance which are not covered by special rules contained in the PEICL. (2) Questions arising from the insurance contract, which are not expressly settled in the PEICL, are to be settled in conformity with the Principles of European Contract Law (PECL)1 and, in the absence of relevant rules in that instrument, in accordance with the general principles common to the laws of the Member States.

1

Cf. Lando/Beale (eds.), Principles of European Contract Law, Parts I and II (Kluwer Law International, The Hague 2000); Lando/Clive/Prüm/Zimmermann (eds.), Principles of European Contract Law, Part III (Kluwer Law International, The Hague 2003).

32

Article 1:202 Further Definitions

Section Two: General Rules Article 1:201 Insurance Contract (1) “Insurance contract” means a contract under which one party, the insurer, promises another party, the policyholder, cover against a specified risk in exchange for a premium; (2) “Insured event” means the materialisation of the risk specified in the insurance contract; (3) “Indemnity insurance” means insurance under which the insurer is obliged to indemnify against loss suffered on the occurrence of an insured event; (4) “Insurance of fixed sums” means insurance under which the insurer is bound to pay a fixed sum of money on the occurrence of an insured event. (5) “Liability insurance” means insurance under which the risk is the exposure of the insured to legal liability towards the victim. (6) “Life insurance” is an insurance in which the obligation of the insurer or the payment of premium depends upon an insured event that is defined exclusively by reference to the death or survival of the person at risk. (7) “Contracts for group insurance” are contracts between an insurer and a group organiser for the benefit of group members with a common link to the group organiser. A contract for group insurance may cover also family of the group members. (8) “Accessory group insurance” means group insurance under which group members are automatically insured by belonging to the group and without being able to refuse the insurance. (9) “Elective group insurance” means group insurance under which group members are insured as a result of personal application or because they have not refused the insurance.

Article 1:202 Further Definitions (1) “Insured” means the person whose interest is protected against loss under indemnity insurance; (2) “Beneficiary” means the person in whose favour the insurance money is payable under insurance of fixed sums; (3) “Person at risk” means the person on whose life, health, integrity or status insurance is taken; (4) “Victim”, in liability insurance, means the person for whose death, injury or loss the insured is liable; (5) “Insurance agent” means an insurance intermediary employed by an insurer for marketing, selling or managing insurance contracts; (6) “Premium” means the payment due to the insurer on the part of the policyholder in return for cover; (7) “Contract period” means the period of contractual commitment starting at the conclusion of the contract and ending when the agreed term of duration elapses; (8) “Insurance period” means the period for which the premium is due in accordance with the parties’ agreement; (9) “Liability period” means the period of cover; (10) “Compulsory insurance” means an insurance which is taken out in pursuance of an obligation to insure imposed by laws or regulations.

33

Chapter One: Introductory Provisions

Article 1:203 Language and Interpretation of Documents2 (1) All documents provided by the insurer shall be plain and intelligible and in the language in which the contract is negotiated. (2) When there is doubt about the meaning of the wording of any document or information provided by the insurer, the interpretation most favourable to the policyholder, insured or beneficiary, as appropriate, shall prevail.

Article 1:204 Receipt of Documents: Proof The burden of proving that the policyholder has received documents to be provided by the insurer shall lie with the insurer.

Article 1:205 Form of Notice Subject to specific rules contained in the PEICL, notice by the applicant, policyholder, insured or beneficiary in relation to the insurance contract shall not be required to take any particular form.

Article 1:206 Imputed Knowledge If any person is entrusted by the policyholder, the insured or the beneficiary with responsibilities essential to the conclusion or performance of the contract, relevant knowledge which that person has or ought to have in the course of fulfilling his responsibilities shall be deemed to be the knowledge of the policyholder, the insured or the beneficiary, as the case may be.

Article 1:207 Non-Discrimination3 (1) Gender, pregnancy, maternity, nationality and racial or ethnic origin shall not be factors resulting in differences in individuals’ premiums and benefits. (2) Terms in breach of para. 1, including terms as to premium, shall not be binding on the policyholder or the insured. Subject to para. 3, the contract shall continue to bind the parties on the basis of non-discriminatory terms. (3) In the case of breach of para. 1, the policyholder shall be entitled to terminate the contract. Notice of termination shall be given to the insurer in writing within two months after the breach becomes known to the policyholder.

Article 1:208 Genetic Tests (1) The insurer shall not ask the applicant, the policyholder or the person at risk to undergo a genetic test or to disclose the results of such a test, nor shall such information be used by the insurer for the purpose of rating risks. (2) Para. 1 does not apply to personal insurance where the person at risk is 18 years of age or more and the sum insured for this person exceeds EUR 300,000 or the money payable under the policy exceeds EUR 30,000 per year.

2

Article 1:203 para. 2 is modelled on art. 5 of the Unfair Contract Terms Directive (93/13/EEC). This Article is modelled on the Gender Directive (2004/113/EC) and on Case C-236/09 Association Belge des Consommateurs Test-Achats ASBL and Others v Conseil des ministres [2011] ECR I-773.

3

34

Article 2:102 Breach

Section Three: Enforcement Article 1:301 Injunctions4 (1) A qualified entity, as defined in para. 2, is entitled to seize a competent national court or authority and seek an order prohibiting or requiring the cessation of infringements of the PEICL, if applicable in accordance with Article 1:102. (2) A qualified entity means any body or organisation on the list drawn up by the European Commission in pursuance of Article 4 of the Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers’ interests, as amended.

Article 1:302 Out-of-court Complaint and Redress Mechanisms Application of the PEICL does not preclude access to out-of-court complaint and redress mechanisms otherwise available to the policyholder, insured or beneficiary.

Chapter Two: Initial Stage and Duration of the Insurance Contract Section One: Applicant’s Pre-contractual Information Duty Article 2:101 Duty of Disclosure (1) When concluding the contract, the applicant shall inform the insurer of circumstances of which he is or ought to be aware, and which are the subject of clear and precise questions put to him by the insurer. (2) The circumstances referred to in para. 1 include those of which the person to be insured was or should have been aware.

Article 2:102 Breach (1) When the policyholder is in breach of Article 2:101, subject to paras. 2 to 5, the insurer shall be entitled to propose a reasonable variation of the contract or to terminate the contract. To this end the insurer shall give written notice of its intention, accompanied by information on the legal consequences of its decision, within one month after the breach of Article 2:101 becomes known or apparent to it. (2) If the insurer proposes a reasonable variation, the contract shall continue on the basis of the variation proposed, unless the policyholder rejects the proposal within one month of receipt of the notice referred to in para. 1. In that case, the insurer shall be entitled to terminate the contract within one month of receipt of written notice of the policyholder’s rejection. (3) The insurer shall not be entitled to terminate the contract if the policyholder is in innocent breach of Article 2:101, unless the insurer proves that it would not have concluded the contract, had it known the information concerned. (4) Termination of the contract shall take effect one month after the written notice referred to in para. 1 has been received by the policyholder. Variation shall take effect in accordance with the agreement of the parties. (5) If an insured event is caused by an element of the risk, which is the subject of negligent non-disclosure or misrepresentation by the policyholder, and occurs before termination or variation takes effect, no insurance money shall be payable if the insurer would not have con4

This Article is modelled on the Injunctions Directive (2009/22/EC).

35

Chapter Two: Initial Stage and Duration of the Insurance Contract

cluded the contract had it known the information concerned. If, however, the insurer would have concluded the contract at a higher premium or on different terms, the insurance money shall be payable proportionately or in accordance with such terms.

Article 2:103 Exceptions The sanctions provided for in Article 2:102 shall not apply in respect of (a) a question which was unanswered, or information supplied which was obviously incomplete or incorrect; (b) information which should have been disclosed or information inaccurately supplied, which was not material to a reasonable insurer’s decision to enter into the contract at all, or to do so on the agreed terms; (c) information which the insurer led the policyholder to believe did not have to be disclosed; or (d) information of which the insurer was or should have been aware.

Article 2:104 Fraudulent Breach Without prejudice to the sanctions provided for in Article 2:102, the insurer shall be entitled to avoid the contract and retain the right to any premium due, if it has been led to conclude the contract by the policyholder’s fraudulent breach of Article 2:101. Notice of avoidance shall be given to the policyholder in writing within two months after the fraud becomes known to the insurer.

Article 2:105 Additional Information Articles 2:102-2:104 shall also apply to any information supplied by a policyholder at the time of concluding the contract in addition to that required by Article 2:101.

Article 2:106 Genetic Information This Section shall not apply to the results of genetic tests which are subject to Article 1:208 para. 1.

Section Two: Insurer’s Pre-contractual Duties Article 2:201 Provision of Pre-contractual Documents5 (1) The insurer shall provide the applicant with a copy of the proposed contract terms as well as a document which includes the following information if relevant: (a) the name and address of the contracting parties, in particular of the head office and the legal form of the insurer and, where appropriate, of the branch concluding the contract or granting the cover; (b) the name and address of the insured and, in the case of life insurance, the beneficiary and the person at risk; (c) the name and address of the insurance agent; (d) the subject matter of the insurance and the risks covered; (e) the sum insured and any deductibles; (f) the amount of the premium and the method of calculating it; (g) when the premium falls due as well as the place and mode of payment; (h) the contract period, including the method of terminating the contract, and the liability period;

5

This provision is modelled on arts. 183 to 189 of the Solvency II Directive (2009/138/EC).

36

Article 2:303 Cooling-off Period

(i) the right to revoke the application or avoid the contract in accordance with Article 2:303 in the case of non-life insurance and with Article 17:203 in the case of life insurance; (j) that the contract is subject to the PEICL; (k) the existence of an out-of-court complaint and redress mechanism for the applicant and the methods of having access to it; (l) the existence of guarantee funds or other compensation arrangements. (2) If possible, this information shall be provided in sufficient time to enable the applicant to consider whether or not to conclude the contract. (3) When the applicant applies for insurance cover on the basis of an application form and/or a questionnaire provided by the insurer, the insurer shall supply the applicant with a copy of the completed documents.

Article 2:202 Duty to Warn about Inconsistencies in the Cover (1) When concluding the contract, the insurer shall warn the applicant of any inconsistencies between the cover offered and the applicant’s requirements of which the insurer is or ought to be aware, taking into consideration the circumstances and mode of contracting and, in particular, whether the applicant was assisted by an independent intermediary. (2) In the event of a breach of para. 1 (a) the insurer shall indemnify the policyholder against all losses resulting from the breach of this duty to warn unless the insurer acted without fault, and (b) the policyholder shall be entitled to terminate the contract by written notice given within two months after the breach becomes known to the policyholder.

Article 2:203 Duty to Warn about Commencement of Cover If the applicant reasonably but mistakenly believes that the cover commences at the time the application is submitted, and the insurer is or ought to be aware of this belief, the insurer shall warn the applicant immediately that cover will not begin until the contract is concluded and, if applicable, the first premium is paid, unless preliminary cover is granted. If the insurer is in breach of the duty to warn it shall be liable in accordance with Article 2:202 para. 2(a).

Section Three: Conclusion of the Contract Article 2:301 Manner of Conclusion An insurance contract shall not be required to be concluded or evidenced in writing nor subject to any other requirement as to form. The contract may be proved by any means, including oral testimony.

Article 2:302 Revocation of an Application for Insurance An application for insurance may be revoked by the applicant if his revocation reaches the insurer before the applicant receives an acceptance from the insurer.

Article 2:303 Cooling-off Period6 (1) The policyholder shall be entitled to avoid the contract by giving written notice within two weeks after receipt of acceptance or delivery of the documents referred to in Article 2:501, whichever is the later. 6

This Article is modelled on the Distance Marketing Directive (2002/65/EC).

37

Chapter Two: Initial Stage and Duration of the Insurance Contract

(2) The policyholder shall not be entitled to avoid the contract when (a) the duration of the contract is less than one month; (b) the contract is prolonged under Article 2:602; (c) it is a case of preliminary insurance, liability insurance or group insurance.

Article 2:304 Abusive Clauses7 (1) A term which has not been individually negotiated shall not be binding on the policyholder, the insured or the beneficiary if, contrary to the requirements of good faith and fair dealing, it causes a significant imbalance in his rights and obligations arising under the contract to his detriment, taking into account the nature of the insurance contract, all the other terms of the contract and the circumstances at the time the contract was concluded. (2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term. If not, the unfair term shall be substituted by a term which reasonable parties would have agreed upon had they known the unfairness of the term. (3) This Article applies to terms that restrict or modify cover but it applies neither to (a) the adequacy in value of the cover and the premium, nor to (b) terms that state the essential description of the cover granted or the premium agreed, provided the terms are in plain and intelligible language. (4) A term shall always be regarded as not individually negotiated when it has been drafted in advance and the policyholder has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract. The fact that certain aspects of a term or one specific term have been individually negotiated shall not exclude the application of this Article to the rest of a contract if an overall assessment of the contract indicates that it is nevertheless a pre-formulated standard contract. When an insurer claims that a standard term has been individually negotiated, the burden of proof in this respect shall be incumbent on the insurer.

Section Four: Retroactive and Preliminary Cover Article 2:401 Retroactive Cover (1) If, in the case of cover granted for a period before the contract was concluded (retroactive cover), the insurer knows at the time of the conclusion of the contract that no insured risk has occurred, the policyholder shall owe premiums only for the period after the time of conclusion. (2) If, in the case of retroactive cover, the policyholder knows at the time of the conclusion of the contract that the insured event has occurred, the insurer shall, subject to Article 2:104, provide cover only for the period after the time of the conclusion of the contract.

Article 2:402 Preliminary Cover (1) When concluding a preliminary insurance contract, the insurer shall issue a cover note containing the information specified in Article 2:501(a), (b), (d), (e) and (h) if relevant. (2) Articles 2:201-2:203 and, subject to para. 1 above, Article 2:501 do not apply to preliminary cover.

7

This Article is modelled on the Unfair Contract Terms Directive (93/13/EEC).

38

Article 2:502 Effects of the Policy

Article 2:403 Duration of Preliminary Cover (1) When an applicant for an insurance contract is granted preliminary cover, that cover shall end no sooner than at the time when the cover under the insurance contract is agreed to begin or at the time the applicant receives notice from the insurer definitively rejecting the application, as the case may be. (2) When preliminary cover is granted to a person who does not apply for an insurance contract with the same insurer, the cover may be granted for a period less than that stated in Article 2:601 para. 1. Such cover may be cancelled by either party giving two weeks notice.

Section Five: Insurance Policy Article 2:501 Contents When concluding the insurance contract, the insurer shall issue an insurance policy, together with the general contract terms as far as they are not included in the policy, containing the following information if relevant: (a) the name and address of the contracting parties, in particular of the head office and the legal form of the insurer and, where appropriate, of the branch concluding the contract or granting the cover; (b) the name and address of the insured and, in the case of life insurance, the beneficiary and the person at risk; (c) the name and address of the intermediary; (d) the subject matter of the insurance and the risks covered; (e) the sum insured and any deductibles; (f) the amount of the premium and the method of calculating it; (g) when the premium falls due as well as the place and mode of payment; (h) the contract period, including the method of terminating the contract, and the liability period; (i) the right to revoke the application or avoid the contract in accordance with Article 2:303 in the case of non-life insurance and with Article 17:203 in the case of life insurance; (j) that the contract is subject to the PEICL; (k) the existence of an out-of-court complaint and redress mechanism for the applicant and the methods of having access to it; (l) the existence of guarantee funds or other compensation arrangements.

Article 2:502 Effects of the Policy (1) If the terms of the insurance policy differ from those in the policyholder’s application or any prior agreement between the parties, such differences as have been highlighted in the policy shall be deemed to have been assented to by the policyholder unless he objects within one month of receipt of the policy. The insurer shall give the policyholder notice in bold print of the right to object to the differences highlighted in the policy. (2) If the insurer fails to comply with para. 1, the contract shall be deemed to have been agreed on the terms in the policyholder’s application or the prior agreement of the parties, as the case may be.

39

Chapter Two: Initial Stage and Duration of the Insurance Contract

Section Six: Duration of the Insurance Contract Article 2:601 Duration of the Insurance Contract (1) The duration of the insurance contract shall be one year. The parties may agree on a different period if indicated by the nature of the risk. (2) Para. 1 does not apply to personal insurance.

Article 2:602 Prolongation (1) After the one-year period referred to in Article 2:601 has expired the contract shall be prolonged unless (a) the insurer has given written notice to the contrary at least one month before the expiry of the contract period stating the reasons for its decision; or (b) the policyholder has given written notice to the contrary at the latest by the day the contract period expires or within one month after having received the insurer’s premium invoice whichever date is later. In the latter case, the one month period shall only start to run if it has been clearly stated on the invoice in bold print. (2) For the purposes of para. 1(b) notice shall be deemed to be given as soon as it is dispatched.

Article 2:603 Alteration of Terms and Conditions (1) In an insurance contract liable to prolongation under Article 2:602, a clause which allows the insurer to alter the premium or any other term or condition of the contract shall be invalid unless the clause provides that (a) any alteration shall not take effect before the next prolongation, (b) the insurer shall send written notice of alteration to the policyholder no later than one month before the expiry of the current contract period, and (c) the notice shall inform the policyholder about his right of termination and the consequences if the right is not exercised. (2) Para. 1 shall apply without prejudice to other requirements for the validity of alteration clauses.

Article 2:604 Termination after the Occurrence of an Insured Event (1) A clause providing for termination of the contract after an insured event has occurred shall not be valid unless (a) it grants the right to terminate to both parties and (b) the policy is not one of personal insurance. (2) Both the provision for termination and the exercise of any right to terminate must be reasonable. (3) Any right to terminate shall expire if the party in question has not given written notice of termination to the other party within two months after becoming aware of the insured event. (4) The insurance cover shall terminate two weeks after notice in accordance with para. 3.

Section Seven: Post-contractual Information Duties of the Insurer Article 2:701 General Information Duty Throughout the contract period the insurer shall provide the policyholder without undue delay with information in writing on any change concerning its name and address, its legal form, the address of its head office and of the agency or branch which concluded the contract.

40

Article 4:102 Insurer’s Right to Terminate the Contract

Article 2:702 Further Information upon Request (1) On the policyholder’s request, the insurer shall provide the policyholder without undue delay with information concerning (a) as far as can reasonably be expected of the insurer, all matters relevant to the performance of the contract; (b) new standard terms offered by the insurer for insurance contracts of the same type as the one concluded with the policyholder. (2) Both the policyholder’s request and the insurer’s response shall be in writing.

Chapter Three: Insurance Intermediaries Article 3:101 Powers of Insurance Agents (1) An insurance agent is authorised to perform all acts on behalf of the insurer that according to current insurance industry practice are within the scope of his employment. Any restriction of the agent’s authority shall be clearly notified to the policyholder in a separate document. However, the authority of the insurance agent shall at least cover the actual scope of his employment. (2) In any event the authority of the insurance agent shall include the power: (a) to inform and advise the policyholder, and (b) to receive notices from the policyholder. (3) Relevant knowledge which the insurance agent has or ought to have in the course of his employment shall be deemed to be the knowledge of the insurer.

Article 3:102 Agents of Insurers Purporting to Be Independent If an agent of the insurer purports to be an independent intermediary and acts in breach of duties imposed on such an intermediary by law, the insurer shall be liable for such breach.

Chapter Four: The Risk Insured

Section One: Precautionary Measures Article 4:101 Precautionary Measures: Meaning A precautionary measure means a clause in the insurance contract, whether or not described as a condition precedent to the liability of the insurer, requiring the policyholder or the insured, before the insured event occurs, to perform or not to perform certain acts.

Article 4:102 Insurer’s Right to Terminate the Contract (1) A clause which provides that in the event of non-compliance with a precautionary measure the insurer shall be entitled to terminate the contract, shall be without effect unless the policyholder or the insured has breached his obligation with intent to cause the loss or recklessly and with knowledge that the loss would probably result. (2) The right to terminate shall be exercised by written notice to the policyholder within one month of the time when the non-compliance with a precautionary measure becomes known or apparent to the insurer. Cover shall come to an end at the time of termination.

41

Chapter Four: The Risk Insured

Article 4:103 Discharge of the Insurer’s Liability (1) A clause that non-compliance with a precautionary measure totally or partially exempts the insurer from liability, shall only have effect to the extent that the loss was caused by the non-compliance of the policyholder or insured with intent to cause the loss or recklessly and with knowledge that the loss would probably result. (2) Subject to a clear clause providing for reduction of the insurance money according to the degree of fault, the policyholder or insured, as the case may be, shall be entitled to insurance money in respect of any loss caused by negligent non-compliance with a precautionary measure.

Section Two: Aggravation of Risk Article 4:201 Clauses Concerning Aggravation of Risk If the insurance contract contains a clause concerning aggravation of the risk insured, the clause shall be without effect unless the aggravation of risk in question is material and of a kind specified in the insurance contact.

Article 4:202 Duty to Give Notice of an Aggravation of Risk (1) If a clause concerning aggravation of the risk insured requires notification of an aggravation, notification shall be given by the policyholder, the insured or the beneficiary, as appropriate, provided that the person obliged to give notice was or should have been aware of the existence of the insurance cover and of the aggravation of the risk. Notice by another person shall be effective. (2) If the clause requires notice to be given within a stated period of time, such time shall be reasonable. Notice shall be effective on dispatch. (3) In the event of breach of the duty of notification, the insurer shall not on that ground be entitled to refuse to pay any subsequent loss resulting from an event within the scope of the cover unless the loss was a consequence of the failure to notify the aggravated risk.

Article 4:203 Termination and Discharge (1) If the contract provides that, in the event of an aggravation of the risk insured the insurer shall be entitled to terminate the contract, such right shall be exercised by written notice to the policyholder within one month of the time when the aggravation becomes known or apparent to the insurer. (2) Cover shall expire one month after termination or, if the policyholder is in intentional breach of the duty under Article 4:202, at the time of termination. (3) If an insured event is caused by an aggravated risk, of which the policyholder is or ought to be aware, before cover has expired, no insurance money shall be payable if the insurer would not have insured the aggravated risk at all. If, however, the insurer would have insured the aggravated risk at a higher premium or on different terms, the insurance money shall be payable proportionately or in accordance with such terms.

42

Article 5:103 Termination of the Contract

Section Three: Reduction of Risk Article 4:301 Consequences of the Reduction of Risk (1) If there is a material reduction of risk, the policyholder shall be entitled to request a proportionate reduction of the premium for the remaining contract period. (2) If the parties do not agree on a proportionate reduction within one month of the request, the policyholder shall be entitled to terminate the contract by written notice given within two months of the request.

Chapter Five: Insurance Premium Article 5:101 First or Single Premium When the insurer makes payment of the first or single premium a condition of formation of the contract or of the beginning of cover, that condition shall be without effect unless (a) the condition is communicated to the applicant in writing using clear language and warning the applicant that he lacks cover until the premium is paid, and (b) a period of two weeks has expired after receipt of an invoice which complies with requirement (a) without payment having been made.

Article 5:102 Subsequent Premium (1) A clause, providing for the insurer to be relieved of its obligation to cover the risk in the event of non-payment of a subsequent premium, shall be without effect unless (a) the policyholder receives an invoice stating the precise amount of premium due as well as the date of payment; (b) after the premium falls due, the insurer sends a reminder to the policyholder of the precise amount of premium due, granting an additional period of payment of at least two weeks, and warning the policyholder of the imminent suspension of cover if payment is not made; and (c) the additional period in requirement (b) has expired without payment having been made. (2) The insurer will be relieved of liability after the additional period in para. 1(b) has expired. Cover will be resumed for the future as soon as the policyholder pays the amount due unless the contract has been terminated in accordance with Article 5:103.

Article 5:103 Termination of the Contract (1) On expiry of the period referred to in Article 5:101(b) or Article 5:102 para. 1(b), without payment of the premium being made, the insurer shall be entitled to terminate the contract by written notice, provided that the invoice required by Article 5:101(b) or the reminder required by Article 5:102 para. 1(b), as the case may be, states the right of the insurer to terminate the contract. (2) The contract shall be deemed to be terminated if, as the case may be, the insurer does not bring an action for payment (a) of the first premium within two months after expiry of the period mentioned in Article 5:101(b); or (b) of a subsequent premium within two months of expiry of the period mentioned in Article 5:102 para. 1(b).

43

Chapter Six: Insured Event

Article 5:104 Divisibility of Premium If an insurance contract is terminated before the contract period has expired, the insurer shall only be entitled to premium in respect of the period prior to termination.

Article 5:105 Right to Pay Premium The insurer shall not be entitled to refuse payment by a third party if (a) the third party acts with the assent of the policyholder; or (b) the third party has a legitimate interest in maintaining the cover and the policyholder has failed to pay or it is clear that he will not pay at the time payment is due.

Chapter Six: Insured Event Article 6:101 Notice of Insured Event (1) The occurrence of an insured event shall be notified to the insurer by the policyholder, the insured or the beneficiary, as appropriate, provided that the person obliged to give notice was or should have been aware of the existence of the insurance cover and of the occurrence of the insured event. Notice by another person shall be effective. (2) Such notice shall be given without undue delay. It shall be effective on dispatch. If the contract requires notice to be given within a stated period of time, such time shall be reasonable and in any event no shorter than five days. (3) The insurance money payable shall be reduced to the extent that the insurer proves that it has been prejudiced by undue delay.

Article 6:102 Claims Cooperation (1) The policyholder, insured or beneficiary, as appropriate, shall cooperate with the insurer in the investigation of the insured event by responding to reasonable requests, in particular for – information about the causes and effects of the insured event; – documentary or other evidence of the insured event; – access to premises related thereto. (2) In the event of any breach of para. 1 and subject to para. 3, the insurance money payable shall be reduced to the extent that the insurer proves that it has been prejudiced by the breach. (3) In the event of any breach of para. 1 committed with intent to cause prejudice or recklessly and with knowledge that such prejudice would probably result, the insurer shall not be obliged to pay the insurance money.

Article 6:103 Acceptance of Claims (1) The insurer shall take all reasonable steps to settle a claim promptly. (2) Unless the insurer rejects a claim or defers acceptance of a claim by written notice giving reasons for its decision within one month after receipt of the relevant documents and other information, the claim shall be deemed to have been accepted.

Article 6:104 Time of Performance (1) When a claim has been accepted the insurer shall pay or provide the services promised, as the case may be, without undue delay.

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Article 7:103 Other Issues Relating to Prescription

(2) Even if the total value of a claim cannot yet be quantified but the claimant is entitled to at least a part of it, this part shall be paid or provided without undue delay. (3) Payment of insurance money, whether under para. 1 or para. 2, shall be made no later than one week after the acceptance and quantification of the claim or part of it, as the case may be.

Article 6:105 Late Performance8 (1) If insurance money is not paid in accordance with Article 6:104, the claimant shall be entitled to interest on that sum from the time when payment was due to the time of payment and at the rate applied by the European Central Bank to its most recent main refinancing operation carried out before the first calendar day of the half-year in question, plus eight percentage points. (2) The claimant shall be entitled to recover damages for any additional loss caused by late payment of the insurance money.

Chapter Seven: Prescription Article 7:101 Action for Payment of Premium Action for payment of premium shall be prescribed after a period of one year from the time when payment is due.

Article 7:102 Action for Payment of Insurance Benefits (1) In general, action for insurance benefits shall be prescribed after a period of three years from the time when the insurer makes or is deemed to have made a final decision on the claim in accordance with Article 6:103. In any event, however, action shall be prescribed at the latest after a period of ten years from the occurrence of the insured event, except in the case of life insurance for which the relevant period shall be 30 years. (2) Action for payment of the surrender value of life insurance shall be prescribed after a period of three years from the time when the policyholder receives the final account from the insurer. In any event, however, action shall be prescribed at the latest after a period of 30 years from the termination of the life insurance contract.

Article 7:103 Other Issues Relating to Prescription Subject to Article 7:101 and Article 7:102 of the PEICL, Articles 14:101-14:503 of the Principles of European Contract Law (PECL)9 shall apply to claims arising out of a contract of insurance. The insurance contract may derogate from these provisions in accordance with Article 1:103 para. 2 of the PEICL.

8 9

This Article is modelled on art. 3 para. 1(d) of the Late Payment Directive (2000/35/EC). Cf. Lando/Beale (eds.), Principles of European Contract Law, Parts I and II (Kluwer Law International, The Hague 2000); Lando/Clive/Prüm/Zimmermann (eds.), Principles of European Contract Law, Part III (Kluwer Law International, The Hague 2003).

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Chapter Eight: Sum Insured and Insured Value

Part Two: Provisions Common to Indemnity Insurance Chapter Eight: Sum Insured and Insured Value Article 8:101 Maximum Sums Payable (1) The insurer shall not be obliged to pay more than the amount necessary to indemnify losses actually suffered by the insured. (2) A clause which provides for the agreed value of the subject-matter insured shall be valid even if the said value exceeds the actual value of the subject-matter, provided that there was no operative fraud or misrepresentation on the part of the policyholder or insured at the time the value was agreed.

Article 8:102 Underinsurance (1) The insurer shall be liable for any insured loss up to the sum insured even if the sum insured is less than the value of the property insured at the time when the insured event occurs. (2) However, when the insurer offers cover in accordance with para. 1, it shall be entitled alternatively to offer insurance on the basis that the indemnity to be paid shall be limited to the proportion that the sum insured bears to the actual value of the property at the time of the loss. In that case, moreover, mitigation costs, as defined in Article 9:102, shall be reimbursed in the same proportion.

Article 8:103 Adjustment of Terms in Case of Overinsurance (1) If the sum insured exceeds the maximum possible loss under the insurance, either party shall be entitled to request a reduction of the sum insured and a corresponding reduction of premium for the remaining contract period. (2) If the parties do not agree on such a reduction within one month of the request, either party shall be entitled to terminate the contract.

Article 8:104 Multiple Insurance (1) If the same interest is separately insured by more than one insurer, the insured shall be entitled to claim against any one or more of those insurers to the extent necessary to indemnify losses actually suffered by the insured. (2) The insurer against which a claim is brought shall pay up to the sum insured under its policy, together with the mitigation costs if any, without prejudice to its rights to contribution from any other insurer. (3) As between insurers, the rights and obligations referred to in para. 2 shall be in proportion to the amounts for which they are separately liable to the insured.

Chapter Nine: Entitlement to Indemnity Article 9:101 Causation of Loss

(1) Neither the policyholder nor the insured, as the case may be, shall be entitled to indemnity to the extent that the loss was caused by an act or omission on his part with intent to cause the loss or recklessly and with knowledge that the loss would probably result. (2) Subject to a clear clause in the policy providing for reduction of the insurance money according to the degree of fault on his part, the policyholder or insured, as the case may be, shall be entitled to indemnity in respect of any loss caused by an act or omission on his part that was negligent.

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Article 11:103 Breach of Duty by One Insured

(3) For the purposes of paras. 1 and 2 causation of loss includes failure to avert or to mitigate loss.

Article 9:102 The Costs of Mitigation (1) The insurer shall reimburse the costs incurred or the amount of damage suffered by the policyholder or the insured in taking measures to mitigate insured loss, to the extent the policyholder or the insured was justified in regarding the measures as reasonable under the circumstances, even if they were unsuccessful in mitigating the loss. (2) The insurer shall indemnify the policyholder or the insured, as the case may be, in respect of any measures taken in accordance with para. 1, even if together with the compensation for the loss insured the amount payable exceeds the sum insured.

Chapter Ten: Rights of Subrogation Article 10:101 Subrogation (1) Subject to para. 3 the insurer shall be entitled to exercise rights of subrogation against a third party liable for the loss to the extent that it has indemnified the insured. (2) To the extent that the insured waives a right against such a third party in a way that prejudices the insurer’s right of subrogation, he shall forfeit his entitlement to indemnity in respect of the loss in question. (3) The insurer shall not be entitled to exercise rights of subrogation against a member of the household of the policyholder or insured, a person in an equivalent social relationship to the policyholder or insured, or an employee of the policyholder or insured, except when it proves that the loss was caused by such a person intentionally or recklessly and with knowledge that the loss would probably result. (4) The insurer shall not exercise its rights of subrogation to the detriment of the insured.

Chapter Eleven: Insured Persons other than the Policyholder Article 11:101 Entitlement of the Insured (1) In the case of an insurance taken out for a person other than the policyholder, if the insured event occurs, that person shall be entitled to the insurance money. (2) The policyholder shall be entitled to revoke such cover, unless (a) the policy provides otherwise; or (b) the insured event has occurred. (3) Revocation shall take effect when written notice of revocation is given to the insurer.

Article 11:102 Knowledge of the Insured Knowledge of a person insured in accordance with Article 11:101 shall not be attributed to the policyholder, unless that person is aware of his status as insured, when the policyholder is obliged to provide relevant information to the insurer.

Article 11:103 Breach of Duty by One Insured Breach of duty by one insured shall not adversely affect the rights of other persons insured under the same insurance contract, unless the risk is jointly insured.

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Chapter Twelve: Insured Risk

Chapter Twelve: Insured Risk Article 12:101 Lack of Insured Risk (1) If the insured risk exists neither at the time of conclusion of the contract nor at any time during the insurance period, no premium shall be due. However, the insurer shall be entitled to a reasonable sum for expenses incurred. (2) If the insured risk ceases to exist during the insurance period, the contract shall be deemed to have been terminated at the time that the insurer is notified thereof.

Article 12:102 Transfer of Property (1) If the title to insured property is transferred, the insurance contract shall be terminated one month after the time of transfer, unless the policyholder and transferee agree on termination at an earlier time. This rule shall not apply if the insurance contract was taken out for the benefit of a future transferee. (2) The transferee of the property shall be deemed to be the insured from the time that the risk in the insured property is transferred. (3) Paras. 1 and 2 shall not apply (a) if insurer, policyholder and transferee agree otherwise; or (b) to a transfer of title by inheritance.

Part Three: Provisions Common to Insurance of Fixed Sums Chapter Thirteen: Admissibility Article 13:101 Insurance of Fixed Sums Only accident, health, life, marriage, birth or other personal insurance may be taken out as insurances of fixed sums.

Part Four: Liability Insurance Chapter Fourteen: General Liability Insurance Article 14:101 Defence Costs The insurer shall reimburse defence costs incurred in accordance with Article 9:102.

Article 14:102 Protection of the Victim Unless the victim gives consent in writing, his position shall not be affected by any settlement of the insurance claim under the policy by the policyholder or the insured and the insurer, whether by agreement, waiver, payment or an equivalent act.

Article 14:103 Causation of Loss (1) Neither the policyholder nor the insured, as the case may be, shall be entitled to indemnity to the extent that the loss was caused by an act or omission on his part with intent to cause the loss; this shall include non-compliance with specific instructions of the insurer after the occurrence of the loss, if done recklessly and with knowledge that otherwise the loss would probably be aggravated.

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Article 14:108 Claims Exceeding the Sum Insured

(2) For the purposes of para. 1 causation of loss includes failure to avert or to mitigate loss. (3) Subject to a clear clause in the policy providing for reduction of the insurance money according to the degree of fault on his part, the policyholder or insured, as the case may be, shall be entitled to indemnity in respect of any loss caused by negligent non-compliance with specific instructions of the insurer after the occur-rence of the loss.

Article 14:104 Acknowledgement of Liability (1) A clause in the insurance contract releasing the insurer from its obligations in case the policyholder or insured, as the case may be, accepts or satisfies the victim’s claim shall be without effect. (2) Unless it consents, the insurer shall not be bound by an agreement between the victim and the policyholder or insured, as the case may be.

Article 14:105 Assignment A clause in an insurance contract depriving the insured of his right to assign his claim under the policy shall be without effect.

Article 14:106 No-Claims-Bonuses / Bonus-Malus-Systems (1) The policyholder shall have the right to request at any time a statement relating to his claims record for the past five years. (2) If an insurer makes the premium or other conditions dependent on the number or the amount of claims paid under the policy, due consideration shall be given to the policyholder’s claims record with other insurers for the past five years.

Article 14:107 Insured Event (1) The insured event shall be the fact giving rise to the insured’s liability that occurred during the liability period of the insurance contract unless the parties to an insurance contract for commercial or professional purposes define the insured event with reference to other criteria such as the claim made by the victim. (2) When the contracting parties define the insured event with reference to the claim made by the victim, cover shall be granted in respect of claims made within the liability period or within a subsequent period of no less than five years and which are based on a fact occurred before the end of the liability period. The insurance contract may exclude cover on the basis that, at the time of conclusion of the contract, the applicant was or ought to have been aware of circumstances which he should have expected to give rise to claims.

Article 14:108 Claims Exceeding the Sum Insured (1) If the total payments due to several victims exceed the sum insured, the payments shall be reduced proportionately. (2) An insurer who, being unaware of the existence of other victims, has in good faith paid out insurance money to the victims known to it, shall be liable to the other victims up to the balance of the sum insured.

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Chapter Fifteen: Direct Claims and Direct Actions

Chapter Fifteen: Direct Claims and Direct Actions Article 15:101 Direct Claims and Defences (1) To the extent that the policyholder or the insured, as the case may be, is liable, the victim shall be entitled to a direct claim for compensation against the insurer under the insurance contract provided that (a) the insurance is compulsory, or (b) the policyholder or insured is insolvent, or (c) the policyholder or insured has been liquidated or wound up, or (d) the victim has suffered personal injury, or (e) the law governing the liability provides for a direct claim. (2) As against the victim, the insurer may raise defences available under the insurance contract unless prohibited by specific provisions making the insurance compulsory. However, the insurer is not entitled to raise any defence based upon the conduct of the policyholder and/or the insured after the loss.

Article 15:102 Information Duties (1) Upon request by the victim, the policyholder and the insured shall provide the information needed for making a direct claim. (2) The insurer shall notify the policyholder in writing of any direct claim made against it without undue delay and, at the latest within two weeks following receipt of the claim. If the insurer breaches this obligation, a payment to or acknowledgement of debt towards the victim shall not affect the rights of the policyholder. (3) If the policyholder fails to provide the insurer with information about the insured event within one month of receiving notice in accordance with para. 2, the policyholder is deemed to agree to a direct settlement of the claim by the insurer. This rule also applies to insureds who have actually received such notice in time.

Article 15:103 Discharge The payment of insurance money to the policyholder or insured, as the case may be, will only discharge the insurer from its obligation towards the victim if the victim (a) has waived his direct claim or (b) has not notified the insurer about his intention to make a direct claim within four weeks of receiving the insurer’s request in writing.

Article 15:104 Prescription (1) Action against the insurer, whether brought by the insured or by the victim, shall be prescribed when the victim’s action against the insured is prescribed. (2) The period of prescription for a claim made by the victim against the insured is suspended from the time, if any, that the insured becomes aware that a direct claim against the insurer has been made until the time that the direct claim is settled or unequivocally rejected by the insurer.

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Article 17:102 Beneficiary of the Insurance Money

Chapter Sixteen: Compulsory Insurance Article 16:101 Scope of Application (1) The PEICL may be chosen by the parties to an insurance contract concluded in performance of an obligation to insure (a) prescribed by Community law, (b) prescribed in a Member State, or (c) prescribed in a Non-Member State to the extent allowed by the law of that State. (2) The insurance contract shall not satisfy the obligation to take out insurance unless it complies with the specific provisions imposing the obligation.

Part Five: Life Insurance Chapter Seventeen: Special Provisions for Life Insurance Section One: Third Parties

Article 17:101 Life Insurance on the Life of a Third Party An insurance contract on the life of a person other than the policyholder shall be invalid, unless the informed consent of the person at risk is obtained in writing and evidenced by signature. Any substantial later change to the contract, including a change of the beneficiary, an increase in the sum insured and a change in the duration of the contract shall be without effect without such consent. The same applies to an assignment of or encumbrance on the insurance contract or the right to the insurance money.

Article 17:102 Beneficiary of the Insurance Money (1) The policyholder may designate one or more beneficiaries of the insurance money and may change or revoke such designation, unless the designation has been declared irrevocable. The designation, change or revocation, unless made in a will, shall be made in writing and be sent to the insurer. (2) The right to designate, change or revoke the designation shall end on the death of the policyholder or the occurrence of the insured event, whichever occurs first. (3) The policyholder or the heirs of the policyholder, as the case may be, shall be regarded as beneficiaries of the insurance money if (a) the policyholder has not designated a beneficiary or (b) the designation of a beneficiary has been revoked and no other beneficiaries have been designated or (c) a beneficiary has died before the insured event occurs and no other beneficiaries have been designated. (4) If two or more beneficiaries have been designated and the designation of any of them is revoked or any of them dies before the insured event occurs, the amount of the insurance money that would have been due to the beneficiary or beneficiaries in question shall be distributed among the remaining beneficiaries proportionately, unless otherwise specified by the policyholder in accordance with para. 1. (5) Subject to any rules on the nullity, voidability or unenforceability of legal acts detrimental to creditors laid down in applicable rules of insolvency law, the insolvent estate of the policyhold-

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Chapter Seventeen: Special Provisions for Life Insurance

er shall have no rights concerning the insurance money, the conversion value or the surrender value as long as the money has not been paid to the policyholder. (6) An insurer paying the insurance money to a person designated in accordance with para. 1 shall be discharged from its obligation to pay, unless it knew that the person in question was not entitled to the insurance money.

Article 17:103 Beneficiary of the Surrender Value (1) Irrespective of a designation under Article 17:102, the policyholder may also designate a beneficiary of the surrender value, if any, and may change or revoke such designation. The designation, change or revocation shall be made in writing and be sent to the insurer. (2) The policyholder shall be regarded as the beneficiary of the surrender value if (a) no beneficiary of the surrender value has been designated or (b) a designation of a beneficiary of the surrender value has been revoked and no other beneficiaries have been designated or (c) a beneficiary of the surrender value has died and no other beneficiaries have been designated. (3) Article 17:102 paras. 2, and 4 to 6 shall apply mutatis mutandis.

Article 17:104 Assignment or Encumbrance (1) Where a beneficiary has been irrevocably designated, an assignment of or encumbrance on the insurance contract or the right to the insurance money by the policyholder shall be without effect unless the beneficiary has consented in writing. (2) An assignment of or encumbrance on the right to the insurance money by a beneficiary shall be without effect unless the policyholder has consented in writing.

Article 17:105 Renunciation of Estate Where a beneficiary is an heir of the deceased person at risk and has renounced the estate, the sole fact of renunciation does not affect his position under the insurance contract.

Section Two: Initial Stage and Duration of the Contract Article 17:201 Applicant’s Pre-contractual Information Duties (1) The information to be provided by the applicant in accordance with Article 2:101 para. 1, shall include those circumstances of which the person at risk was or should have been aware. (2) The sanctions for a breach of pre-contractual information duties under Articles 2:102, 2:103 and 2:105, but not under Article 2:104, shall only be available for five years after the conclusion of the contract.

Article 17:202 Insurer’s Pre-contractual Information Duties (1) The insurer shall inform the applicant about whether he has a right to participate in profits. The receipt of this information must be acknowledged by an explicit statement contained in a document separate from the application form. (2) The document to be provided by the insurer in accordance with Article 2:201 shall include the following information:

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Article 17:205 Insurer’s Right to Terminate the Contract

(a) as regards the insurer: a specific reference to the compulsory publication of the annual report on its solvency and financial condition; (b) as regards the contractual commitments of the insurer: (i) an explanation of each benefit and each option, (ii) information about the proportion of the premium attributable to each benefit, both main benefits and supplementary benefits, where appropriate; (iii) the methods of calculation and distribution of bonuses including a specification of the applicable supervisory law; (iv) an indication of surrender and paid-up values and the extent to which they are guaranteed; (v) for unit-linked policies: an explanation of the units to which the benefits are linked, and an indication of the nature of the underlying assets; (vi) general information on the tax arrangements applicable to the type of policy. (3) In addition, specific information shall be supplied in order to facilitate a proper understanding of risks underlying the contract which are assumed by the policyholder. (4) If the insurer quotes in figures the amount of the possible benefits over and above the contractually guaranteed payments it shall provide the applicant with a model calculation which states the possible maturity benefit based on the actuarial principles for premium calculation with three different rates of interest. This shall not apply to insurance contracts covering risks for which the insurer is uncertain to be liable nor to unit-linked policies. The insurer shall clearly and comprehensibly indicate to the policyholder that the model calculation only represents a model based on fictitious assumptions and that the contract does not guarantee possible payments.

Article 17:203 Cooling-off Period10 (1) For contracts of life insurance, the cooling-off period laid down in Article 2:303 para. 1 shall be one month after receipt of acceptance or delivery of the documents referred to in Article 2:501 and Article 17:202, whichever is the later. (2) The right of the policyholder to avoid the contract in accordance with Article 2:303 para. 1 shall lapse one year after the conclusion of the contract.

Article 17:204 Policyholder’s Right to Terminate the Contract (1) The policyholder shall be entitled to terminate a contract of life insurance which does not attract a conversion value or a surrender value, provided that the termination does not take effect earlier than one year after the conclusion of the contract. The right to terminate before the end of the contract period may be excluded where a single premium has been paid. Termination shall be in writing and become effective two weeks after receipt of notice of termination by the insurer. (2) If the contract of life insurance has attracted a conversion value or surrender value, Articles 17:601 to 17:603 shall apply.

Article 17:205 Insurer’s Right to Terminate the Contract The insurer shall be entitled to terminate a contract of life insurance only to the extent permitted by this Chapter. 10

Article 17:203 para. 1 is modelled on art. 35 of the Life Assurance Consolidation Directive (2002/83/ EC) and art. 6 of the Distance Marketing Directive (2002/65/EC).

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Chapter Seventeen: Special Provisions for Life Insurance

Section Three: Changes during the Contract Period Article 17:301 Insurer’s Post-contractual Information Duties (1) Where applicable, the insurer shall provide the policyholder annually with a written statement of the current value of the bonuses attached to the policy. (2) In addition to the requirements of Article 2:701, the insurer shall inform the policyholder without undue delay about any change concerning: (a) the policy conditions, both general and special; (b) in the event of a change in the policy conditions or an amendment of the PEICL: the information listed in Article 2:201(f) and (g) as well as in Article 17:202 para. 2(b) points i to v. (3) Article 17:202 para. 4 shall also apply where the figures relating to the estimated amount of possible benefits are provided at any time during the contract period. Where the insurer has provided figures, whether before or after the conclusion of the contract, about the potential future development of profit participation, the insurer shall inform the policyholder about any differences between the actual development and the initial data.

Article 17:302 Aggravation of Risk In a life insurance contract, a clause specifying age or deterioration in health as aggravations of risk within the meaning of Article 4:201 shall be regarded as an abusive clause under Article 2:304.

Article 17:303 Adjustment of Premium and Benefits Payable (1) In a life insurance contract covering risks for which the insurer is certain to be liable, the insurer shall only be entitled to an adjustment in accordance with paras. 2 and 3. (2) An increase of premium shall be permissible where there has been an unforeseeable and permanent change in respect of the biometric risks used as the basis for calculating the premium, where an increase is necessary to guarantee the insurer’s continued ability to pay out insurance benefits and where the increase has been agreed by an independent trustee or the supervisory authority. The policyholder shall be entitled to offset the increase in premium with an appropriate reduction of the insurance benefits. (3) In the case of a paid-up policy, the insurer shall be entitled to reduce the insurance benefits under the conditions set out in para. 2. (4) An adjustment in accordance with para. 2 or 3 shall not be permitted (a) in so far as an error has been committed in the calculation of the premium and/or benefits of which a competent and diligent actuary ought to have been aware, or (b) where the underlying calculation is not applied to all contracts including those concluded after the adjustment. (5) An increase of premium or a reduction of benefits shall become effective three months after the insurer has provided the policyholder with written notice about the increase of premium or reduction of benefits, the reasons for this and about the policyholder’s own right to demand a reduction of benefits. (6) In a life insurance contract covering risks for which the insurer is certain to be liable, the policyholder shall be entitled to a decrease of premium where, due to an unforeseeable and permanent change in respect of the biometric risks used as the basis for calculating the premium, the original amount of premium is not appropriate and necessary in order to guarantee the insurer’s continued ability to pay insurance benefit. The decrease has to be agreed by an independent trustee or the supervisory authority.

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Article 17:501 Insurer’s Investigation and Information Duty

(7) The rights set forth in this Article may be exercised not earlier than five years after the conclusion of the contract.

Article 17:304 Alteration of Terms and Conditions (1) A clause which allows the insurer to alter the terms or conditions other than the premium and benefits payable shall be invalid, unless the alteration is required to (a) comply with an amendment of supervisory law including binding measures taken by the supervisory authority, or (b) comply with an amendment of mandatory rules of the applicable national law on employers’ pension plans, or (c) comply with an amendment of national rules imposing specific requirements on a contract of life insurance in order to qualify for special tax treatment or for state subsidies, or (d) substitute a clause of the contract in accordance with the second sentence of Article 2:304 para. 2. (2) The alteration shall become effective at the start of the third month after the policyholder has received written notice informing the policyholder about the alteration and the reasons for it. (3) Para. 1 shall apply without prejudice to other requirements for the validity of alteration clauses.

Section Four: Relation to National Laws Article 17:401 Pension Plans A life insurance contract relating to a pension plan shall be subject to the mandatory rules of the applicable national law on pension plans. The PEICL shall only apply to the extent compatible with these rules.

Article 17:402 Tax Treatment and State Subsidies The PEICL shall not affect national rules imposing specific requirements on a contract of life insurance in order to qualify for special tax treatment or for state subsidies. In the case of a conflict between such requirements of applicable national law and provisions of the PEICL, the latter may be derogated from.

Section Five: Insured Event Article 17:501 Insurer’s Investigation and Information Duty (1) An insurer which has reason to believe that the insured event may have occurred shall take reasonable steps to ascertain this. (2) The insurer, knowing that the insured event has occurred, shall make best efforts in the circumstances to discover the identity and address of the beneficiary and inform that person accordingly. This information shall be provided no later than 30 days after the insurer becomes aware of the identity and address of the beneficiary. (3) If an insurer is in breach of para. 1 or 2, the prescription of the beneficiary’s claim shall be suspended until the beneficiary acquires knowledge of his actual entitlement.

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Chapter Seventeen: Special Provisions for Life Insurance

Article 17:502 Suicide (1) If, within one year after the conclusion of the contract, the person at risk commits suicide, the insurer shall be discharged from its liability to pay the insurance money. If so, the insurer shall pay the surrender value and any profits in accordance with Article 17:602. (2) Para. 1 shall not apply if (a) the person at risk, when committing suicide, acts in a mental state precluding the ability to freely determine his intent, or (b) it is proved beyond any reasonable doubt that, at the time of conclusion of the contract, the person at risk did not intend to commit suicide.

Article 17:503 Intentional Killing of the Person at Risk (1) When a beneficiary kills the person at risk intentionally his designation as a beneficiary shall be deemed to be revoked. (2) An assignment of the claim to the insurance money shall be without effect if the assignee kills the person at risk intentionally. (3) When the policyholder who is also the beneficiary kills the person at risk intentionally, no insurance money shall be payable. (4) When the beneficiary or the policyholder who kills the person at risk does so justifiably, such as in the case of legitimate self-defence, this Article shall not apply.

Section Six: Conversion and Surrender Article 17:601 Conversion of the Contract (1) Article 5:103 shall not apply to contracts of life insurance which have attracted a conversion value or a surrender value. Such contracts shall be converted into paid-up policies unless the policyholder requires payment of the surrender value within four weeks after receiving the information referred to in para. 2. (2) The insurer shall inform the policyholder of the conversion value and the surrender value within four weeks of the expiry of the period referred to in Article 5:101(b) or Article 5:102 para. 1(b) and request the policyholder to choose between conversion and the payment of the surrender value. (3) The request for conversion or payment of the surrender value shall be in writing.

Article 17:602 Surrender of the Contract (1) The policyholder may at any time require the insurer in writing to pay, in part or in full, the surrender value which the policy has attracted, provided that this does not take effect earlier than one year after the conclusion of the contract. The contract shall be adjusted or terminated accordingly. (2) Subject to Article 17:601, if a contract of life insurance which has attracted a surrender value is terminated, rescinded or avoided by the insurer, it is obliged to pay the surrender value, even in the case of Article 2:104. (3) The insurer shall inform the policyholder upon request but in any case every year about the current amount of the surrender value and the extent to which it is guaranteed. (4) The share of any profit to which the policyholder is entitled shall be paid in addition to the surrender value, unless the share has already been taken account of in the calculation of the surrender value.

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Article 18:202 Information Duties

(5) Sums due under this Article shall be paid no later than two months after the receipt of the policyholder’s request by the insurer.

Article 17:603 Conversion Value; Surrender Value (1) The insurance contract shall state the way the conversion value and/or the surrender value is calculated in accordance with the law of the home Member State of the insurer. The stated way of calculating the surrender and/or conversion value shall comply with established actuarial principles and with para. 2. (2) When the insurer deducts the costs of concluding the contract, it shall do so in equal amounts and over a period of no less than five years. (3) The insurer is entitled to deduct an appropriate amount, which is calculated in accordance with established actuarial principles, to cover costs related to the payment of the surrender value, unless the calculation already includes such reduction.

Part Six: Group Insurance Chapter Eighteen: Special Provisions for Group Insurance Section One: Group Insurance in General Article 18:101 Applicability Contracts for group insurance are subject to the PEICL provided that the group organiser and the insurer have made the agreement in accordance with Article 1:102. Group insurance is either accessory and subject to Section 2 of this Chapter or elective and subject to Section 3 of this Chapter.

Article 18:102 General Duty of Care of the Group Organiser (1) In the negotiation and performance of a contract for group insurance, the group organiser shall act dutifully and in good faith taking account of the legitimate interests of the group member. (2) The group organiser shall forward any relevant notices issued by the insurer to the group members and inform them about any amendments to the contract.

Section Two: Accessory Group Insurance Article 18:201 Application of the PEICL Where necessary, the PEICL shall be applied to accessory group insurance mutatis mutandis.

Article 18:202 Information Duties (1) When a group member joins the group, the group organiser shall without undue delay inform the member about (a) the existence of the insurance contract, (b) the extent of cover, (c) any precautionary measures and any other requirements for preserving cover, and (d) the claims procedure. (2) The burden of proving that the group member has received information required by para. 1 shall lie with the group organiser.

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Chapter Eighteen: Special Provisions for Group Insurance

Article 18:203 Termination by the Insurer (1) For the purposes of Article 2:604, the exercise of the right of termination by the insurer shall only be regarded as reasonable if it is limited to the exclusion from cover of the group member to whom the insured event occurred. (2) For the purposes of Article 4:102 and Article 4:203 para. 1, the exercise of the right of termination by the insurer shall only have the effect of excluding those group members from cover who have not taken the required precautionary measures or whose risks were aggravated, as the case may be. (3) For the purpose of Article 12:102 termination of the insurance contract shall only have the effect of excluding group members who have transferred their title to insured property from cover.

Article 18:204 Right to Continue Cover – Group Life Insurance (1) If a contract for accessory group life insurance is terminated or if the member leaves the group, the cover ends after three months or with the expiry of the contract for group life insurance, whichever is earlier. When this occurs, the group member shall have a right to equivalent cover under a new individual contract with the insurer concerned without a new assessment of the risk. (2) The group organiser shall inform the group member in writing without undue delay about (a) the imminent termination of his cover under the contract for group life insurance, (b) his rights under para. 1 and (c) how to exercise those rights. (3) If the group member has indicated his intention to exercise his right under Article 18:204 para. 1, the contract between the insurer and the group member shall continue as an individual insurance contract at a premium calculated on the basis of an individual policy at that time without taking into account the current state of health or age of the group member.

Section Three: Elective Group Insurance Article 18:301 Elective Group Insurance: General (1) Elective group insurance is deemed to be a combination of a framework contract between the insurer and the group organiser and individual insurance contracts concluded within such a framework by the insurer and the group members. (2) The PEICL apply to the individual insurance contracts where the group organiser and the insurer have agreed on their application but, except for Articles 18:101 and 18:102, the PEICL do not apply to the framework contract.

Article 18:302 Alteration of Terms and Conditions Alteration of terms and conditions of the framework contract shall only affect the individual insurance contracts if effected in compliance with the requirements of Articles 2:603, 17:303 and 17:304, as appropriate.

Article 18:303 Continuation of Cover Termination of the framework contract or cessation of membership on the part of an individual group member shall not have any effect on the insurance contract between the insurer and the group member.

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Principles of European Insurance Contract Law (PEICL): Rules, Comments and Notes

Chapter One: Introductory Provisions

Part One: Provisions Common to All Contracts Included in the Principles of European Insurance Contract Law (PEICL) Chapter One: Introductory Provisions Section One: Application of the PEICL

Article 1:101 Substantive Scope of Application (1) The PEICL shall apply to private insurance in general, including mutual insurance. (2) The PEICL shall not apply to reinsurance.

Comments Substantive Scope: Substantive Private Insurance Contract Law C1.  Notwithstanding the focus on mandatory law, the Principles of European Insurance Contract Law are of private law character. The Principles of European Insurance Contract Law contain rules of insurance contract law.

Mutual Insurance C2.  Article 1:101 para. 1 explicitly mentions the applicability of the Principles of European Insurance Contract Law to mutual insurance. This reflects the fact that within mutual insurance the contractual relationship of the insurer and the policyholder can be distinguished from the membership of the policyholder of the mutual insurer. Clearly, the Principles of European Insurance Contract Law only apply to the contractual relationship and leave the membership issues to national corporate law.

Social Insurance Law C3.  The Principles of European Insurance Contract Law do not apply to social insurance. For the delimitation of private and social insurance law, a formal approach is suggested. To avoid rather strenuous endeavours in determining the “social” character of a legal provision, emphasis is put on the decision of legislators as to which branch specific packages of norms are attributed.

Law of Insurance Supervision and Other Public Law on Insurance C4.  Insurance contract law which forms the substance of the Principles of European Insurance Contract Law must be distinguished from the law of insurance supervision. In principle, the two areas of law are to be distinguished by using a formal approach asking whether legislators have created a rule of public rather than of contract law. However, for the purposes of the Principles of European Insurance Contract Law this formal approach is not entirely sufficient. Recourse to national supervisory law is excluded by virtue of Article 1:105 if the relevant rules regulate issues covered by the Principles of European Insurance Contract Law (see Article 1:105 Comment 3).

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International Insurance Contract Law (Conflict of Laws) C5.  This matter is uniformly regulated across Europe by the Rome I Regulation (593/2008) and the Rome II Regulation (864/2007). While the Rome I Regulation (593/2008) entered into force on 17 December 2009, the Rome II Regulation (864/2007) has been in force since 11 January 2009. The Regulations replace the former European regime of international insurance contract law as embodied in the Rome Convention (80/934/EEC), the Life Assurance Consolidation Directive (2002/83/EC), the Second Non-Life Insurance Directive (88/357/EEC) and the Third Non-Life Insurance Directive (92/49/EEC) without essential changes. The Regulations contain conflict rules for insurance contracts but no substantive rule of insurance contract law. The aim of these rules of private international law to create a feasible basis of a European internal insurance market has failed. The Principles of European Insurance Contract Law focus on substantive insurance contract law which will be applicable if the parties opt in their favour. On the relation between private international law and the Principles of European Insurance Contract Law see below Article 1:102 Comments 2 and 3.

Law of Insurance Intermediaries C6.  The law of insurance intermediaries is subject to its own regulation (see in particular Insurance Mediation Directive (2002/92/EC) as amended by MiFID2 (2014/65/EU)) and is not dealt with in the Principles of European Insurance Contract Law. Of course, as far as the professional duties of the intermediaries as against the customer, such as duties to advise, are concerned, one might argue that the close functional connection of these subjects with the insurance contract would justify their regulation within a codification on insurance contract law. The Project Group has indeed considered such an approach but could not follow it for the obvious reason that the Principles of European Insurance Contract Law represent an optional insurance contract law which applies whenever the policyholder and the insurer, being the parties to the insurance contract, agree on their application. Clearly such choice taken by the policyholder and insurer could not affect the personal obligations of the intermediaries as against the policyholder. This is why the Principles of European Insurance Contract Law restrict themselves to regulating the scope of liability of the insurer for acts committed by intermediaries in their Articles 3:101 and 3:102.

Marine Insurance C7.  Marine insurance has, in many countries, been the object of separate codifications and/or has been excluded from codifications of general insurance contract law. The Principles of European Insurance Contract Law do not follow this tradition. In line with more recent tendencies to consider marine insurance law part of general insurance contract law the Principles of European Insurance Contract Law apply, in principle, also to marine insurance. This is particularly because of their optional application: Parties to a marine insurance contract may opt in favour of the Principles of European Insurance Contract Law but are not forced to have them applied to their contract. Moreover, even if the parties to a marine insurance contract opt for the Principles of European Insurance Contract Law they enjoy freedom of contract according to Article 1:103 para. 2(a).

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Reinsurance C8.  The fields of law described above in Comments 3 to 6, although dealing with insurance, a priori do not lie within the scope of the Principles of European Insurance Contract Law because they are not private insurance contract law. Reinsurance is part of insurance contract law. Nevertheless, Article 1:101 para. 2 excludes reinsurance from the Principles of European Insurance Contract Law. In most countries, reinsurance therefore follows its own rules (see the Notes). One might even speak of an internationally broadly established lex mercatoria. There is no need for legislative endeavours in this field.

Notes Application to Private Insurance Contracts N1. In some Member States, the national insurance contract acts explicitly state that they are applicable to private insurance contracts in general or to land insurance as opposed to marine insurance (see art. 54 para. 1(1) Belgian IA 2014, art. 111-1 para. 1 French ICA, art. 1 para. 1 Greek ICA and art. 257 of the Code on Private Maritime Law, arts. 1884 to 1886 Italian CC, art. 4 para. 1 Luxembourg ICA, art. 820 Polish CC, and art. 2 Spanish ICA), thus providing for a very wide scope of application which is narrowed by exceptions and/or supplemented by rules giving priority to special provisions for specific sectors of insurance. The Swedish statute makes a clear difference between individual (Chapters 2 to 16) and collective (Chapters 17 to 20) insurance. Individual insurance is divided into indemnity insurance (Chapters 2 to 9) and personal insurance (Chapters 10 to 16). Indemnity insurance is divided into consumer insurance (Chapters 2 to 7) and business insurance (Chapter 8). For most national legislators, a special rule stating the scope of application appears to be redundant in an insurance contract act or in the pertinent part of the civil code.

Mutual Insurance N2. Insurance provided in the form of mutual insurance is sometimes explicitly mentioned as being subject to the national insurance contract act too (see art. 4 para. 7 Belgian IA 2014, art. 111-1 para. 2 French ICA, and art. 1884 Italian CC according to which the rules of insurance contracts apply to mutual insurance only where compatible); in most countries the rules on insurance contracts will be applied to mutual insurance by analogy.

Marine Insurance N3. Marine insurance is generally considered as a purely commercial business that requires either special rules or full freedom of contract. The exclusion of marine insurance from the scope of the national insurance contract act is therefore a common occurrence. In Belgium and France, it follows from the limitiation of the respective statutes to land insurance (assurance terrestre, see art. 54 Belgian IA 2014 and art. 111-1 para. 1 French ICA). In Austria and Germany, marine inurance is explicity excluded from the application of the insurance contract act (s. 186 Austrian ICA and s. 209 German ICA); the German reform of 2007 has derogated from the special provisions on marine insurance that had previously been part of the Commercial Code,

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without however extending the scope of the insurance contract act to marine insurance. In Italy, art. 1885 CC provides that the rules of general insurance contracts are default rules to be applied for what is not provided by the Code of Navigation. In Poland, marine insurance is governed by the Maritime Code mainly in the sense of marine non-life insurance (also a consequence of art. 820 CC) N4. The approach laid down in Articles 1:101 and 1:103 PEICL is in line with a second group of national laws that provide for a qualified application of the insurance contract act to marine insurance; these statutes either declare that mandatory provisions of the insurance contract act are dispositive only when the insurance is taken out by businesses (s. 3 para. 3 Finnish ICA) or when concerning insurance that is not consumer insurance (s. 7 para. 1 of Ch. 1 Swedish ICA), or they give priority to a specific regulation of marine insurance contained in other laws (art. 1885 Italian CC, art. 2 Portuguese ICA and art. 406 of the Spanish Law of Maritime Navigation), or they are not mandatory in accordance with civil code provisions (art. 807 Polish CC). N5. In the United Kingdom there is no general statute on insurance contract law that would require an exception for marine insurance. Rather marine insurance is the only branch of insurance that is subject to regulation by a general statute, namely the Marine Insurance Act 1906. Its provisions have also inspired many court decisions relating to non-marine insurance contract law over the course of time.

Reinsurance N6. Only very few national regulations of insurance contract law apply to reinsurance. Such application can however be inferred from some special provisions relating to reinsurance in arts. 1928 f. Italian CC, arts. 72 f. Portuguese ICA and arts. 77 f. Spanish ICA. The total exclusion of reinsurance from the application of the insurance contract legislation is the more common rule (s. 186 Austrian ICA, art. 54 Belgian IA 2014, art. 7:927 Dutch CC, s. 1 para. 3 Finnish ICA, art. 111-1 para. 1 French ICA, s. 209 German ICA, art. 4 para. 4 Luxembourg ICA, art. 820 Polish CC, s. 3 para. 2 of Ch. 1 Swedish ICA, and art. 101 para. 1 Swiss ICA.

Other Specific Branches of Insurance N7. Some national insurance contract acts further reduce their own scope of application by excluding other branches of insurance. Such exclusions can be found in the laws of Belgium for the insurance of transport of goods (art. 2 para. 1(2) ICA 2014), of France for the insurance of risks in inland navigation (art. 111-1 para. 1 ICA), of France (art. 111-1 para. 1 ICA) and Luxembourg (art. 4 para. 5 ICA) for credit insurance. A partial exclusion of motor vehicle liability insurance and patient insurance is laid down in s. 3 para. 1 Swedish ICA, and in Finland also including environmental insurance (s. 1 para. 2 ICA). These rules appear, however, to be isolated from a comparative perspective and are not based on a general principle.

Article 1:102 Optional Application The PEICL shall apply when the parties, notwithstanding any limitations of choice of law under private international law, have agreed that their contract shall be governed by them. Subject to Article 1:103, the PEICL shall apply as a whole and no exclusion of particular provisions shall be allowed.

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Comments Basic Principle C1.  In accordance with the recommendations made by the European Economic and Social Council (Opinion on “The European Insurance Contract”, no. 8.6 at p. 26) a European initiative in the field of insurance contracts should aim initially at the possible adoption of an optional model insurance contract. To achieve this aim the parties must be free to agree on the application of the Principles of European Insurance Contract Law irrespective of any existing limitations of their contractual freedom on other grounds.

Legal Nature of Opting-in C2.  The legal nature of the parties’ agreement on the application of the Principles of European Insurance Contract Law is unclear. On the one hand, their choice is meant to replace the relevant provisions of the national law of any Member State that would be applicable under private international law; thus, the choice of the Principles of European Insurance Contract Law would exclude the operation of the choice of law rules relating to risks situated within the Community and contained in art. 7 of the Rome I Regulation (593/2008). These provisions refer only to the law of Member States which might be interpreted as excluding the Principles of European Insurance Contract Law which will be part of Community law. Moreover, they limit the free choice of the applicable law by the parties in various respects. These limitations should not hamper the parties’ agreement on the application of the Principles of European Insurance Contract Law.

On the other hand, it would be unwise to allow parties to choose the Principles of European Insurance Contract Law if the law applicable to the contract under private international law does not permit such a choice. This may be the case if the law applicable to the contract is the law of a non-Member State, for instance if a policyholder habitually resident within the Community takes out insurance with an insurer established outside the Community for a risk located in a third country; see arts. 4 para. 2 and 7 para. 1 of the Rome I Regulation (593/2008). If the foreign law applicable to the contract does not allow a contractual derogation from its own mandatory provisions, Community law should not permit the choice of the Principles of European Insurance Contract Law either, lest that result in divergent solutions in Community courts and in the courts of third countries.

Priority over Conflict Rules C3.  The solution implemented by Article 1:102 is a hybrid one. This provision is a substantive rule, namely it presupposes that the law of the European Union or of one of its Member States is applicable under the conflict of laws; thus, choice of law rules must determine at a first stage whether Community law (or the law of one of its Member States) or the law of a third state applies. In the latter case it would be up to the third state’s law to determine the effect of the parties’ choice of the Principles of European Insurance Contract Law. If Community law or the law of a Member State is applicable, Article 1:102 has an additional significance for private international law. It supersedes art. 7 of the Rome I Regulation (593/2008), and in particular the limitations imposed on the free choice of law laid down therein.

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Article 1:102 Optional Application

Domestic Insurance Contracts C4.  The parties’ right to subject their contract to the Principles of European Insurance Contract Law is not limited to cross-border contracting situations. Thus, parties may want to agree on the application of the Principles of European Insurance Contract Law in view of a future change of residence to another Member State which would turn a domestic contract into an international one. If the Principles of European Insurance Contract Law could be chosen only by parties residing in different Member States it would be out of reach of those citizens of the Community who, at the time of contracting, live in the same country where the insurer is established but who are planning to go abroad. Moreover, Article 1:102, by allowing the choice of the Principles of European Insurance Contract Law also in same country situations, may trigger a competition between different contracting models, namely the Principles of European Insurance Contract Law and the national law. In the long run this may bring about an assimilation of national laws.

No Partial Choice C5.  The Principles of European Insurance Contract Law are conceived as an instrument that provides comprehensive protection to the policyholder and replaces national law that would govern the contract in the absence of a contractual choice of the Principles of European Insurance Contract Law. Thus, the parties are given the choice between national law and the Principles of European Insurance Contract Law as a whole. It would be incompatible with this approach to allow the parties to exclude particular provisions. Selective exclusion of this kind would allow insurers to undermine the basic protection that should be granted to customers in order to make the Principles of European Insurance Contract Law acceptable as an alternative to national law. It is for similar considerations that some international instruments only allow the parties to exclude their rules as a whole; see, for example, the UNIDROIT Convention on International Factoring. C6.  Article 1:102 does not concern the issue whether single provisions of the Principles of European Insurance Contract Law may be derogated from altogether or to the benefit of the policyholder alone. This issue is dealt with in Article 1:103.

Effect on Intermediaries C7.  The parties referred to in Article 1:102 are the parties to the insurance contract, namely the insurer and the applicant or policyholder. An intermediary may be bound by contract to the insurer or the policyholder, as the case may be, but it is a third party to the insurance contract. The parties’ agreement on the Principles of European Insurance Contract Law as the law applicable to the insurance contract therefore has no effect on the rights and obligations of an intermediary.

Note There are no antecedents in national law.

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Chapter One: Introductory Provisions

Article 1:103 Mandatory Character (1) Articles 1:102 second sentence, 2:104, 2:304, 13:101, 17:101 and 17:503 are mandatory. Other Articles are mandatory in so far as sanctions for fraudulent behaviour are concerned. (2) The contract may derogate from all other provisions as long as such derogation is not to the detriment of the policyholder, the insured or beneficiary. (3) Derogation in the sense of para. 2 shall be allowed to the benefit of any party in contracts covering large risks within the meaning of Article 13 para. 27 Directive 2009/138/EC. In group insurance a derogation shall only be held against an individual insured who fulfills the personal characteristics mentioned in Article 13 para. 27(b) or (c) Directive 2009/138/EC, where applicable.

Comments Focus on Mandatory Law C1.  The “living law” of the insurance contract is not statutory in character, but is embodied in general contract terms. It would not be feasible for any European legislator to produce the entirety of norms necessary to facilitate a modern insurance business. The former German ICA for example, attempted this by regulating in detail not only the general aspects but also the main single branches of insurance law. However, the development of insurance practice left these endeavours behind. In addition, modern important fields of business, for example health insurance and legal protection insurance, had not at that time been fully developed. Moreover, wherever freedom of contract prevailed, the insurance industry made use of it by its general contract terms, thus setting aside the statutory regulations. C2.  The essential function for legislation regarding insurance contracts is therefore to take effective measures to limit freedom of contract. This has to be done, on the one hand, for reasons of public policy. For example, taking out insurance without a legitimate interest to be protected must be prevented as well as any inducement to receive insurance benefits by fraudulent means. On the other hand the policyholder needs protection against unfair contract terms. Particular attention has to be paid to clauses which lead to a loss of cover, for example, due to breach of a duty to observe precautionary measures (Article 4:103). In all this, it is not only the policyholder who deserves attention, but also other persons with an interest in the cover: the insured, the beneficiary, the victim and so on. It is a typical feature of modern insurance contract legislation, beginning in the first decade of the 20th century, to impose a large number of mandatory provisions. This contrasts sharply with contract law in general which strongly adhered to freedom of contract. Only later did other fields of contract law begin to follow a similar model. Mention may be made of labour law, the law of landlord and tenant, and the numerous protective devices regarding the consumer which have developed since World War II. C3.  The focus on mandatory rules follows not least from the internal market orientation of the Principles of European Insurance Contract Law. Mandatory rules of national insurance law form a barrier to the functioning of the internal market which can be overcome by replacing them by new uniform provisions. As a result, the Principles of European Insurance

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Article 1:103 Mandatory Character

Contract Law give a comprehensive set of mandatory rules. If chosen by the parties, they replace all national mandatory law.

Technique C4.  Two methods are apparent in pertinent legislative acts. Under the first one, the mandatory provisions are enumerated or designated individually. Under the other, the entirety of the statute is declared mandatory, subject to specific exceptions. The Principles of European Insurance Contract Law follow a double tracked approach in respect of mandatory and semi-mandatory provisions. Some provisions, which are enumerated in the exhaustive list of Article 1:103 para. 1, are absolutely mandatory, which means that no derogation is allowed. The list includes the Articles that deal with fraudulent behaviour on the part of the policyholder, insured or beneficiary. The second sentence of Article 1:103 para. 1 does not specify these Articles because most of them cover fraudulent, intentional and/or negligent behaviour without distinction; see, for example, Articles 4:203, 6:102 para. 3 and 9:101 para. 1. Basic considerations of morality dictate that the parties should not be allowed to agree on insurance cover in the case of fraud. C5.  Article 1:103 para. 2 declares all other provisions of the Principles of European Insurance Contract Law to be mandatory in the sense that they must not be derogated from to the detriment of the policyholder, insured or beneficiary (semi-mandatory rules; there are a few specific exceptions within individual Articles, for example Article 9:101 para. 2). Derogations to the benefit of policyholder, insured or beneficiary are permissible as are derogations which are to the benefit of the insurer but do not disadvantage the policyholder, insured or beneficiary. C6.  The application of semi-mandatory law to all contracts covered by the Principles of European Insurance Contract Law would be inappropriate, especially as far as commercial risks are concerned. A further distinction is needed. There are different approaches by which the scope of the mandatory character of insurance contract law can be defined: frequently, insurance contract acts specify certain branches of insurance in which their rules will be applied but not be mandatory. This concerns mainly branches which are mercantile in character also on the policyholder’s side, for example, transport insurance. Another approach is to restrict the mandatory character of the rules to consumer insurance contracts. Within European law the Distance Marketing Directive (2002/65/EC) as well as the Unfair Contract Terms Directive (93/13/EEC), both applicable to insurance contracts, are restricted to consumer transactions. Yet another approach is taken by the Rome I Regulation (593/2008) concerning the mandatory character of its conflict of law rules in insurance, in particular, the admissibility of agreements on the applicable law. Art. 7 para. 2 of the Rome I Regulation (593/2008) grants free choice of law in cases of large risks as defined under art. 5(d) of the First Non-Life Insurance Directive (73/239/EEC) which is to be replaced by art. 13 point 27 of the Solvency II Directive (2009/138/EC). An almost identical approach is taken by the Brussels Ibis Regulation (1215/2012) concerning jurisdiction clauses (see art. 15 para. 5 together with art. 16 para. 5 of the Regulation). C7.  The exclusive application of mandatory rules to consumer insurance contracts would create unsatisfactory results for professionals and small businesses. While an extension of

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Chapter One: Introductory Provisions

the scope appears desirable, it is very difficult to find a convincing definition. The third approach, namely an exemption of large risks as defined by art. 13 point 27 of the Solvency II Directive (2009/138/EC), provides a solution. Since it is part of the acquis communautaire the Principles of European Insurance Contract Law adopt this approach of European private international law. In addition, the scope of freedom of contract will coincide with the scope of free choice of law as well as free choice of jurisdiction. This is a desirable outcome because mandatory rules of substantive law may be avoided to a certain degree by choosing a foreign legal order according to party autonomy in the choice of law anyhow. The PEICL regulate these related issues in the same way and thereby set up a coherent system of freedom of contract. This solution, as applied to group insurances, explains the second sentence of para. 3. The persons who merit protection in group insurance are the individual insureds, not the policyholder.

Notes N1. The full range of mandatory provisions, minimum protection rules favouring the policyholder, and default or dispositive insurance contract law that is reflected by Article 1:103 PEICL can be found in most national legal systems in Europe. Yet, the mix of the three elements differs from country to country.

Mandatory Acts N2. The smallest latitude for freedom of contract is allowed by Belgian law. According to art. 56 IA 2014, the full statute of 149 articles is mandatory unless a contractual derogation is explicitly permitted in single provisions. In the absence of such exceptions, the provisions of the statute are absolutely binding for the policyholder and the insurer (Fontaine, para. 61; Cousy/Schoorens 65). For a similar approach, see art. 807 para. 1 Polish CC. Given the impact of Belgian law on the Insurance Contract Act of Luxembourg, art. 3 of that country’s Insurance Contract Act will likely be interpreted in the same way. N3. In France, the wording of art. 111-2 points into the same direction. The Cour de cassation has in fact invalidated a contractual prolongation of a prescription period for the benefit of the policyholder as being incompatible with the predecessor provision of art. 111-2 (Cass. civ. 1re, 2.6.1964, RGAT 1965, 46 f.). But there are authors in legal literature who take the view that art. 111-2 only excludes contractual derogations to the detriment of the policyholder (see the discussion by Basedow/Fock-Völker 465). The provision in question also contains a long list of articles exempt from the mandatory character.

Single Mandatory Provisions N4. In other European countries, the bulk of insurance contract law will either be dispositive or guarantee a minimum protection to the policyholder, while single provisions may be designated or considered as absolutely mandatory. Thus, the indemnity principle which excludes an indemnity exceeding the loss suffered by the insured is basically considered as being non-derogable in Austria, until recently in Germany (Prölss/Martin-Kollhosser, § 55 VVG para. 1 (old version); s. 55 German ICA has, however, been abrogated by the 2008 reform. Thus, German law no longer

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Article 1:103 Mandatory Character

prohibits the indemnity from exceeding the loss if the parties so agree (cf. Wandt, para. 727)), and the Netherlands (art. 7:963 para. 1 CC). In the new Dutch Civil Code, the limitation of a liability insurer’s right to offset premium claims against a claim for insurance money (art. 7:935 para. 2 CC) is designated as being mandatory, see art. 7:943 para. 1 CC. In a similar way, art. 97 Swiss ICA and the new Portuguese ICA enumerate the provisions of the act which are absolutely mandatory, see art. 12. The new Dutch Civil Code also enumerates the provisions of the act which are absolutely mandatory (see arts. 7:943 para. 1, 7:963 para. 1 and 7:986 para. 1 CC). N5. In general, provisions that protect the interests of third parties will be immune from contractual derogation agreed between the policyholder and the insurer, see the explicit rule in s. 3 para. 1 Finnish ICA, and in s. 6 para. 2 Swedish ICA. See also arts. 7:963 para. 3 and 7:947 Dutch CC. Another example is given by life assurance which can be taken out on the life of a third party only with that person’s approval (see for example in Italy art. 1919 para. 2 CC; in Germany s. 150 para. 2 ICA); that requirement is characterised as being part of the “ordine pubblico” (Donati/ Volpe Putzolu 187; Wandt, Anwendbares Recht 347) which excludes any possibility of contractual derogation.

Minimum Protection Acts N6. A second group of national insurance statutes that has served as a model for the Principles of European Insurance Contract Law permits contractual alterations of its provisions, but only to the benefit of the policyholder or insured. Since these statutes invalidate agreements that deviate from any provision of the respective act, they may be characterised as minimum protection acts. This is the basic approach taken in Finland (s. 3 ICA), Greece (art. 33 para. 1 ICA; alterations of its provision can, however, be stipulated without restrictions, where it is specifically provided for in the ICA and in case of insurance of carriage of goods, credit and guarantee insurance and marine or aviation insurance), Sweden (s. 6 para. 1 ICA), and Spain (art. 2 ICA). See also arts. 7:943 paras. 2 and 3, 7:963 paras. 2 and 4 to 6 and 7:986 paras. 2 to 4 Dutch CC. In Poland, there is no statutory restriction in place, however it is a common view held in legal commentary.

Single Minimum Protection Provisions N7. A third model of European insurance contract acts departs from the principle of freedom of contract; the single provisions contained in these acts are default rules unless they are specifically designated as establishing a minimum protection for the policyholder. The lists of binding minimum provisions differ in length from country to country. Thus, the list contained in art. 1932 Italian CC is fairly short, while those laid down in art. 13 Portuguese ICA, art. 98 Swiss ICA and in several provisions of the Austrian (ss. 15a, 34a, 68a, 72, 108, 115a, 158p, 178, and 178n) and German ICA (ss. 18, 32, 42, 87, 112, 129, 171, 191, and 208) are much longer. In substance, this technique may amount to the same degree of policyholder protection as the one outlined in Note 6. But all of the statutes mentioned in this Note contain dispositive provisions of law in addition to the binding rules conferring a minimum protection to the policyholder. N8. British insurance contract law is characterised by an almost unrestricted freedom of contract. Except where the EC Directives mentioned in para. 9 apply, the major interference with that principle was to be found in the rules of the Financial Conduct Authority dealing with the conduct of insurance business (ICOBS 8). These restrict the use of legal defences based on

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non-disclosure or misrepresentation of material facts and breach of warranty or condition and, in this respect, follow previously self-regulatory measures agreed by the insurance industry. As far as consumer insurance is concerned, see now the Consumer Insurance (Disclosure and Representations) Act 2012. It should also be noted that decisions made by the Financial Services Ombudsman are made on the basis of what is fair and reasonable and may ignore the express terms of policies. N9. The consumer directives of the European Union should also be mentioned in this context. Of particular relevance to insurance contracts are the Unfair Contract Terms Directive (93/13/ EEC) and the Distance Marketing Directive (2002/65/EC). The consumer directives provide for minimum protection in a double sense: they allow for the consumer’s rights to be extended both by the private transactions with a professional and by appropriate provisions of national law. The latter way is barred by Article 1:105 PEICL which does not permit recourse to national law where the Principles of European Insurance Contract Law apply. But the possibility of private transactions providing for a higher level of consumer protection is in line with Article 1:103 para. 2 PEICL.

Beneficiaries of Mandatory and Minimum Protection Rules N10.  Most national laws define the scope of application of their mandatory or minimum protection rules. For this purpose, they either refer to particular branches of insurance and/or to the personal status of the policyholder. The impact of the acquis communautaire is more and more perceptible. N11.  Certain branches of insurance that are covered by Article 1:103 para. 3 have traditionally been governed by freedom of contract; many Member States have excluded them from the scope of mandatory minimum protection rules. This relates to marine and aircraft insurance which are not assurances terrestres covered by national insurance contract acts (see Article 1:101 PEICL Notes 3 ff.), but it is also true for countries like Greece (art. 33 para. 1 ICA) and Sweden (s. 7 para. 1 of Ch. 1 ICA with a counter-exception for consumer insurance) where the insurance contract act basically applies to marine and aircraft insurance. Further branches left to freedom of contract are transport insurance (see for example s. 187 Austrian ICA and art. 33 para. 1 Greek ICA), credit insurance (art. 33 para. 1 Greek ICA and s. 7 para. 2 of Ch. 1 Swedish ICA), and different types of collective insurance (s. 7 paras. 3 to 5 of Ch. 1 Swedish ICA). N12.  As to the personal criteria used for the demarcation of the mandatory or minimum protection rules, two models can be ascertained. Just like many EU consumer protection directives, the Netherlands restrict the application of some provisions – for example on the breach of the policyholder’s duties of disclosure or on the maximum duration of the insurance contract – to consumers as policyholders (see arts. 7:943 para. 3, 7:963 para. 6 and 7:986 para. 3 CC), namely to individuals acting for non-business purposes. S. 3 para. 2 Finnish ICA takes a similar approach, but extends the application of the minimum protection rules of its insurance contract act to any “natural person or legal person that in terms of the nature and scope of its business or other activities or other circumstances can be compared to a consumer as a party to the contract signed with the insurer.”

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N13  More recent insurance contract regulations draw the borderline between “large risks” and all other risks. The term is defined in art. 13 point 27 of the Solvency II Direcitve (2009/138/ EC). For its subsequent use in EC private law, in particular for choice of court agreements and choice of law agreements, see Comment 5 and Fuchs 49 f. In Poland such a distinction is also being discussed in the preparatory project for the new Civil Code on insurance contract law. N14.  This distinction has been adapted in recent national insurance contract laws to define the scope of mandatory or minimum protection provisions, see in particular s. 210 German ICA, art. 3 para. 3 Luxembourg ICA as well as art. 12 para. 2 and art. 13 para. 2 Portuguese ICA. The enumeration technique employed in these countries pursues the same objective as the formula of the Finnish statute, see Note 12 above, namely to extend the non-derogable protection of the act to small and medium-sized businesses and non-profit organisations taking out insurance, without however subjecting all policyholders to that mandatory protection. Article 1:103 para. 3 follows this model.

Article 1:104 Interpretation The PEICL shall be interpreted in the light of their text, context, purpose and comparative background. In particular, regard should be had to the need to promote good faith and fair dealing in the insurance sector, certainty in contractual relationships, uniformity of application and the adequate protection of policyholders.

Comments The Objective C1.  The objective of the Article is to lay down guidelines for the interpretation of the Principles of European Insurance Contract Law. It sets forth recognised methods of statutory interpretation, in particular the reference to the wording of a provision, its context and its purpose. Since the Principles of European Insurance Contract Law essentially flow from a comparison of various national insurance contract laws regard should be had to the comparative background. The Article draws from interpretation provisions contained in international instruments, in particular art. 31 para. 1 VCLT, art. 7 para. 1 CISG and Article 1:106 PECL.

Interpretation and Development C2.  Interpretation has both a static and a dynamic aspect. The first relates to situations which can occur at present, but have not been envisaged specifically in the Principles of European Insurance Contract Law, while the second concerns situations which could not occur at the time of drafting, but which, when they do occur, have to be dealt with by the existing rules. An example would be the application of the requirement of a written form, established in the 1950s, to the exchange of e-mails in later years.

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Textual Interpretation C3.  The wording of the provisions is of primary importance. While the Principles of European Insurance Contract Law are drafted in English, the concepts used in the Principles of European Insurance Contract Law do not reflect English law but have their own autonomous meaning. As soon as versions of the Principles of European Insurance Contract Law have been adopted in official Community languages other than English they will have the same authority as the English version. In case of divergence between different language versions the meaning has to be clarified in the light of the purpose of a provision, taking account of all official languages; see Case 55/87 Moksel v Bundesanstalt für landwirtschaftliche Marktordnung [1988] ECR 3845 para. 15; Case 26/69 Stauder v Ulm [1969] ECR 419.

Context C4.  In interpreting the provisions of the Principles of European Insurance Contract Law, consideration must be given to their context. In accordance with the long-standing practice of the European Court of Justice this refers to the micro-system of the single Community Act, the Principles of European Insurance Contract Law in this case; see for example Case C-125/79 Denilauler v Couchet Frères [1980] ECR 1553 para. 13. But a contextual interpretation will increasingly often have to look beyond the single Community Act to the place of a given provision in the growing macro-system of Community law as a whole; see, for example, Case 172/91 Sonntag v Waidmann [1993] ECR I-1963 para. 24. Thus, the Principles of European Insurance Contract Law take account of numerous Community acts. Therefore, its rules should be interpreted in the light of the general context of Community law; and in particular regard should be had to the Principles of European Contract Law.

Good Faith and Fair Dealing C5.  The requirement of good faith is a basic principle of European contract law. Under art. 3 of the Unfair Contract Terms Directive (93/13/EEC) a standard term shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer. The good faith principle can also be traced in the case law of the European Court of Justice. Thus, for example, the Court has repeatedly referred to this principle when interpreting jurisdiction clauses under art. 17 of the Brussels Convention11; see Case 25/76 Segura v Bonakdarian [1976] ECR 1851 para. 11; Case 71/83 The Tilly Russ [1984] ECR 2417 para. 18. A duty of good faith is also imposed upon each party by the mandatory provision of Article 1:201 PECL which, moreover, in Article 1:106 list good faith as a guiding principle for interpretation.

Certainty in Contractual Relationships C6.  The principle of legal certainty is one of the basic principles of Community law. The Community courts often have recourse to this principle in various fields. Inter alia, the European Court of Justice has relied on “the principle of legal certainty in contractual matters” 11

The Brussels Convention was initially transformed into the Brussels I Regulation (44/2001), which has now been replaced by Brussels Ibis Regulation (1215/2012).

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as a basis for its views on the provisional validity of anti-competitive agreements; see Case 99/79 Lancôme v Etos & Albert Heyn [1980] ECR 2511 para. 16.

Uniform Application C7.  The need for a uniform application flows from the very existence of uniform law. It has been affirmed by several international conventions, inter alia by art. 7 para. 1 CISG and also by Article 1:106 PECL. It has equally been recognised by the European Court of Justice in many instances, such as Case 55/87 Moksel v Bundesanstalt für landwirtschaftliche Marktordnung [1988] ECR 3845 para. 15; Case C-271/00 Gemeente Steenbergen v Baten [2002] ECR I-10489 para. 28.

Protection of Policyholders C8.  The protection of policyholders in insurance contracts has been a guideline of Community policy for many years. Thus, the choice of law provisions of the Second Generation of Insurance Directives basically referred to the law of the country of the policyholder as the law applicable to an insurance contract; see art. 7 of the Second Non-Life Insurance Directive (88/357/EEC); art. 32 of the Life Assurance Consolidation Directive (2002/83/EC). This model is still followed by the new conflict rules as contained in art. 7 para. 3 of the Rome I Regulation (593/2008). Further evidence is provided by the special rules on jurisdiction contained in arts. 10 ff. of the Brussels Ibis Regulation (1215/2012) which grant the policyholder the privilege of a competent court at his domicile in most cases and which restrict the possibility of clauses choosing any other jurisdiction. The acquis communautaire is thus inspired by the basic objective to ensure adequate protection to policyholders which should also be observed in the interpretation of the Principles of European Insurance Contract Law.

Note While some national laws contain provisions dealing with the interpretation of contracts, few antecedents appear to exist in national laws relating to the interpretation of statutes, but see for example s. 6 Austrian CC laying down similar principles as those set forth in the first sentence of Article 1:104 and additional examples in Polish law: art. 56 and art. 65 paras. 1 and 2 CC.

Article 1:105 National Law and General Principles (1) No recourse to national law, whether to restrict or to supplement the PEICL, shall be permitted. This does not apply to mandatory national laws specifically enacted for branches of insurance which are not covered by special rules contained in the PEICL. (2) Questions arising from the insurance contract, which are not expressly settled in the PEICL, are to be settled in conformity with the Principles of European Contract Law (PECL)12 and, in

12

Cf. Lando/Beale (eds.), Principles of European Contract Law, Parts I and II (Kluwer Law International, The Hague 2000); Lando/Clive/Prüm/Zimmermann (eds.), Principles of European Contract Law, Part III (Kluwer Law International, The Hague 2003).

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the absence of relevant rules in that instrument, in accordance with the general principles common to the laws of the Member States.

Comments Basic Principle C1.  In many countries, insurance contract law is characterised by a great number of very detailed mandatory provisions which differ from country to country. The divergence between them is one of the reasons for the lack of implementation of the European insurance market. In particular that is why insurers are unable to use the same policy for selling insurance cover to consumers resident in different European countries. If the Principles of European Insurance Contract Law are to overcome these difficulties they must of necessity supersede mandatory national provisions.

Mandatory National Provisions C2.  It follows that recourse to national law, for whatever reason, must be prohibited. In the first place the rules of the Principles of European Insurance Contract Law cannot be considered as minimum standards which would nonetheless allow Member States to enforce the stricter provisions of their national law granting greater protection to policyholders. While minimum harmonization has been a standard practice of European legislation in the area of consumer law, a similar approach would undermine the uniform application of the Principles of European Insurance Contract Law from the outset. The consequence would be that insurers would still have to face the present uncertainty about the legal framework of their policies sold in the various Member States.

Supervisory Law C3.  The exclusionary effect of the Principles of European Insurance Contract Law is limited to national provisions of contract law, it does not relate to national supervisory law which remains applicable when the parties have chosen the Principles of European Insurance Contract Law as the applicable contract law. But the borderline between contract law and supervisory law is not the same in all Member States. For example, information duties may be laid down in the law of contract in some Member States and in the supervisory law in others. Such differences must not affect the scope of the exclusionary effect of Article 1:105 para. 1 lest the uniform application of the Principles of European Insurance Contract Law be endangered. The demarcation of contract law and supervisory law must therefore be determined by autonomous interpretation: the subjects treated in the Principles of European Insurance Contract Law are contractual; their regulation by the Principles of European Insurance Contract Law bars the implementation of national provisions dealing with the respective issues regardless of whether the national provisions form part of contract law or supervisory law.

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Internationally Mandatory Provisions C4.  For the same reasons, Member States cannot be permitted to enforce particular provisions of their national law as internationally mandatory provisions. While art. 9 para. 2 of the Rome I Regulation (593/2008) allows Member States to apply those rules of their own law which are mandatory irrespective of the law otherwise applicable to the contract, a similar exemption from the rules of the Principles of European Insurance Contract Law would not be acceptable. The Principles of European Insurance Contract Law ensure comprehensive protection of the policyholder, the insured and the beneficiary; while this protection may fall short of corresponding rules in single Member States this does not entitle the judges of those Member States to disregard the rules of the Principles of European Insurance Contract Law and apply provisions of their national law as internationally mandatory rules instead.

Exceptional Recourse to Mandatory National Provisions C5.  By way of exception, recourse to national law is allowed where a Member State has enacted mandatory provisions for a special branch of insurance such as health care insurance which is not yet covered by specific provisions of the Principles of European Insurance Contract Law. This exception is required since the Principles of European Insurance Contract Law do not deal with all special branches of insurance. The exception does, however, not apply as far as the Principles of European Insurance Contract Law deal with liability insurance, life insurance and group insurance.

Filling Gaps C6.  A further distortion of the Principles of European Insurance Contract Law may result if national provisions are applied in order to fill gaps. Like other instruments of uniform law the Principles of European Insurance Contract Law cannot be comprehensive. In view of their purpose to overcome the divergences between mandatory national provisions, their scope is limited to mandatory law leaving many issues unsettled. It is up to the insurance contract in the first place and to general contract law in the second to fill these gaps. In the absence of general Community contract law the traditional way of filling those gaps would be to apply the provisions of the national law which is applicable under private international law. Under the relevant conflict rules of art. 7 para. 3 of the Rome I Regulation (593/2008), the applicable law will generally be the law of the Member State where the policyholder resides. Consequently, an insurer selling insurance cover under the same policy to applicants from various Member States would have to adjust to as many different national laws. The main obstacle to the cross-border sale of insurance cover would not be removed, but maintained. Therefore, recourse to national law must be prohibited in these situations as well.

General Principles of Contract Law C7.  Gaps in the Principles of European Insurance Contract Law should be filled by principles which are common to the Member States. Having this goal in mind, the Principles of European Insurance Contract Law have been drafted in the light of the Principles of European Contract Law as a core component of the Common Frame of Reference of European Contract Law. In many instances references contained in the Comments on the Rules of the

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Principles of European Insurance Contract Law testify to this close link. Where neither the insurance contract nor the Common Frame of Reference help to fill a gap in the Principles of European Insurance Contract Law, which will not occur very often, it would be up to the national courts and ultimately to the European Court of Justice to identify principles which are common to the laws of the Member States. The case-law of the European Court of Justice on the liability of the Community for damage caused by its institutions or by its servants in the performance of their duties (art. 340 para. 2 TFEU) provides guidance in this respect. It shows in particular that among the various solutions offered by the national laws of the Member States it is the one that best serves the purpose of Community law which should be chosen.

Note There are no antecedents in national law.

Section Two: General Rules Article 1:201 Insurance Contract (1) “Insurance contract” means a contract under which one party, the insurer, promises another party, the policyholder, cover against a specified risk in exchange for a premium; (2) “Insured event” means the materialisation of the risk specified in the insurance contract; (3) “Indemnity insurance” means insurance under which the insurer is obliged to indemnify against loss suffered on the occurrence of an insured event; (4) “Insurance of fixed sums” means insurance under which the insurer is bound to pay a fixed sum of money on the occurrence of an insured event. (5) “Liability insurance” means insurance under which the risk is the exposure of the insured to legal liability towards the victim. (6) “Life insurance” is an insurance in which the obligation of the insurer or the payment of premium depends upon an insured event that is defined exclusively by reference to the death or survival of the person at risk. (7) “Contracts for group insurance” are contracts between an insurer and a group organiser for the benefit of group members with a common link to the group organiser. A contract for group insurance may cover also family of the group members. (8) “Accessory group insurance” means group insurance under which group members are automatically insured by belonging to the group and without being able to refuse the insurance. (9) “Elective group insurance” means group insurance under which group members are insured as a result of personal application or because they have not refused the insurance.

Comments Insurance Contract (para. 1) C1.  The term “insurance contract” is not always defined in insurance contract law because the scope of the concept in national contexts is well-known and sufficiently clear or because

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a definition may be considered as dangerous because of its exclusionary effect. Despite this, para. 1 of the Article includes a general definition of the term as a guide to the reader of the Principles of European Insurance Contract Law rather than a comprehensive definition of an insurance contract. C2.  In accordance with the definition, “insurance contract” means a contract under which one party, the insurer, promises another party, the policyholder, cover against a specified risk in exchange for a premium. The key elements of an insurance contract are thus the transfer (of the economic consequences) of a risk to the insurer and the policyholder’s obligation to pay for this transfer. The risk is often an unwanted incident such as death, accident, fire or burglary, in the non-occurrence of which the person benefiting from the insurance contract has an interest. However, the risk may also be a desired event like being alive at a certain date, getting married or the birth of a child. Such desired events may raise similar economic concerns which the policyholder wants to deal with. C3.  Risk includes the element of uncertainty. It is sufficient for the element of risk that at the time the contract is formed there is no certainty whether, when or up to what amount any payment will have to be made or even how long the agreed payment of premium will last. As uncertainty has to be assessed from the perspective of the parties and at the time the contract is made, even a retroactive insurance – an insurance for a risk which already has materialised – is possible as long as the contracting parties are unaware of the fact that the insured event (see Comment 5 below) has already occurred (see Article 2:401). C4.  The uncertainty relates to an element outside the insurance contract and not to the performance of the contract itself. This latter type of uncertainty exists in many contracts, for example in sales or loan agreements. Parties try to cope with it by different types of securities and guarantees which are however not covered by the definition of insurance in para. 1. Notwithstanding restrictions under supervisory law, para. 1 does not preclude the contract from imposing obligations other than the transfer of risk, it may still be an insurance contract.

Insured Event (para. 2) C5.  In accordance with para. 2, “insured event” does not mean the risk against which the insurance has been taken, but the materialisation of the risk specified in the insurance contract. A risk materialises when the uncertain event defined in the insurance contract occurs. Economic and other consequences of the insured event may occur substantially later. Thus, for example, in an accident insurance, the insured event will usually be defined in the contract as the occurrence of an accident. This is different from the appearance of a physical defect years later, from a necessary operation due to this defect or from the receipt of the invoice concerning the operation.

Indemnity Insurance (para. 3) C6.  In the Principles of European Insurance Contract Law insurance contracts are divided into indemnity insurances (see Part Two) and insurances of fixed sums (see Part Three). The distinction basically depends on the manner in which insurance money is calculated.

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In accordance with para. 3, “indemnity insurance” is an insurance under which the insurer is obliged to indemnify against loss suffered on the occurrence of an insured event. Thus, in indemnity insurance the consequences of the insured event must be measurable in money. C7.  The amount of the insurance money can be based directly on the costs incurred as a result of the insured event, like medical expenses following an illness. Sometimes the indemnity must be calculated according to a rule that may be different from one policy to another and be based, for example, on market value, cost of repair or replacement of the property to be indemnified taking account of the depreciation where appropriate. Parties may also fix the value of the insured property by agreement in the contract. This would not change the character of the contract as an indemnity insurance (see also Article 8:101 and Comments).

Insurance of Fixed Sums (para. 4) C8.  “Insurance of fixed sums” is the opposite of indemnity insurance. It is defined in para. 4 as an insurance under which the insurer is bound to pay a fixed sum of money on the occurrence of an insured event. That is to say that in contrast to indemnity insurance, such insurance is possible even if the risk – someone’s life for example – is not measurable in money. Moreover, as far as insurance of fixed sums is concerned the insurer is obliged to pay the stipulated sum or annuity regardless of any financial loss. C9.  The main idea and purpose of insurance is to cover losses. If the loss and the insurance money were not linked together, insurance would come close to gambling. Therefore, insurances of fixed sums cannot be allowed for all types of insurance. In Article 13:101 this possibility is limited to only accident, health, life, marriage, birth or other personal insurance. However, an indemnity insurance may provide for the payment of a flat sum (which for practical purposes comes close to an insurance of fixed sums) provided that the limits drawn by Article 8:101 are respected.

Liability Insurance (para. 5) C10.  “Liability insurance” is defined in para. 5 very broadly (‘exposure of the insured to legal liability’) in order to cover various types of liability policies which are found in the European Single Market. Thus, the definition applies to policies under which the insurer’s liability is triggered by commission of the wrongful act, the occurrence of loss, or claims made. For the various types of liability insurance covered by the PEICL, see Annex I classes 10-13 of the Solvency II Directive (2009/138/EC).

Life Insurance (para. 6) C11.  “Life insurance” is defined in para. 6 essentially by the element of a biometric risk to be covered by the insurer. This is made clear by referring to the “death or survival” of the person at risk. Apart from that, the definition is very broad in order to cover all types of life insurance which are found in the European Single Market. This includes insurances where the payment of the insured sum by the insurer is guaranteed for a certain point in the future but the period during which the premium is paid by the policyholder depends on the survival or death of the person at risk (frequently called “term-fix Versicherung” in

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Germany). In such case, the biometric risk which the insurer bears relates to the amount of premium it will get for providing cover. If, for instance, the person at risk dies two years after the conclusion of the contract, the policyholder will only have to pay premium for the two-year period. Afterwards, the insurer has to take over. C12.  For the various types of life insurance, see Annex II of the Solvency II Directive (2009/138/EC). The PEICL are primarily intended to serve for the life insurance mentioned in art. 2 para. 3(i) and (ii) of Solvency II, although it is possible for the parties to agree on the application of the PEICL also outside these life insurances. Art. 2 para. 3(i) and (ii) mentions: “(i) life insurance which comprises assurance on survival to a stipulated age only, assurance on death only, assurance on survival to a stipulated age or on earlier death, life assurance with return of premiums, marriage assurance, birth assurance; (ii) annuities”.

Group Insurances: Accessory Group Insurance, Elective Group Insurance (­paras. 7-9) C13.  For Comments on the definition of group insurances, and in particular of accessory and elective group insurance, see Article 18:101 Comments 2 to 4. C14.  Paras. 8 and 9 provide that the group members are “insured” or “automatically insured”. This wording does not restrict the application of the definition to indemnity insurances. For instance, a person at risk under a life insurance contract would also be “insured” within the meaning of the definitions under paras. 8 and 9.

Notes The Pros and Cons of Defining the Insurance Contract N1. The term insurance contract is usually employed for the description of the scope of application of an insurance contract act, see the notes on Article 1:101. Given the numerous mandatory or minimum protection rules contained in such acts, a precise definition is even more significant since it determines the implications for freedom of contract. On the other hand, commercial practice has brought about a large number of new contractual arrangements which are sometimes difficult to reconcile with a clear definition of an insurance contract. Therefore, the countries which have actually endeavoured to define the insurance contract are not very numerous. In particular, the more recent laws of Finland, Germany, Sweden and Portugal lack such definition. In the legal literature of Poland, the definition of insurance contract is interpreted in differing ways (art. 805 para. 1 CC); Fuchs, Rozprawy 915 f.; Fuchs/Nowak/Nowak-Kowalewski and Fuchs 27 ff. N2. An alternative to a single definition for all kinds of insurance contracts may consist in the drafting of separate definitions for indemnity or non-life insurance on the one hand and life insurance or personal insurance on the other. A similar approach is taken by the laws of Finland (s. 2 ICA) and Italy (art. 1882 CC; additional definitions are contained in the Code of Private Insurance with reference to legal expenses insurance, see Cerini 107). See the new Dutch Civil Code for a system of a general definition combined with sub-definitions for indemnity, life and

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personal insurance. In the Swedish Act (s. 4 of Ch. 1 ICA) separate definitions are provided for consumer insurance, enterprise insurance and collective insurance. Like the former Belgian ICA, the IA 2014 combines a general definition (art. 5 para. 14 IA) with subdefinitions of indemnity insurance (art. 55, 3° IA), insurance of fixed sums (art. 55, 4° IA), property insurance (art. 5, 15° IA) and personal insurance (art. 5, 16° IA).

Standard Elements of Definitions of the Insurance Contract N3. There are three elements which can be found in different forms in all statutes that do provide for a definition of the insurance contract in general: the policyholder’s duty to pay a premium; the uncertainty about the insured event; and the insurer’s duty to pay insurance money if the insured event occurs. The second and third of these elements are, however, far from clear and need additional explanations to avoid an excessively narrow wording.

The Insurer’s Obligation N4. Art. 7:925 of the Dutch Civil Code defines the insurance contract inter alia by the insurer’s obligation to make one or more payments (uitkeringen) to the other party. It thereby follows the model of the UK Marine Insurance Act 1906 which also refers to the insurer’s obligation to indemnify the assured, see s. 1. What is appropriate for marine insurance may lead to difficulties for other branches of insurance. Thus, a liability insurance policy stating the insurer’s obligation to defend the policyholder’s interest by granting legal advice might not be covered by the Dutch definition if taken literally. Similar problems may arise if a health insurer promises to provide, not a reimbursement of health care costs incurred by the policyholder, but medical services by doctors or hospitals operating under a franchising arrangement with the insurer. Art. 7:926 para. 1 CC therefore brings about a helpful clarification stating that a performance other than in money shall be deemed to be “payment” for the purpose of the application of the Dutch insurance contract law. N5. The formula used by Article 1:201 para. 1 PEICL according to which the insurer promises “cover” appears to avoid such difficulties. It is inspired by the Belgian and Luxembourg statutes which identify the insurer’s duty as performing an obligation laid down in the contract (à fournir une prestation stipulée dans le contrat, art. 5(14) Belgian IA 2014 and art. 1(A) Luxembourg ICA). This leaves it to the parties to agree whether that obligation sounds in money or in kind, which is made explicit in Greek law (art. 1 para. 1 ICA). In Poland, the above approach is consequence of art. 3 para. 1 of the Act on Insurance Activity (see Fuchs, Ochrona 40 ff.)

Uncertain Event N6. Similar problems may arise from the requirement of uncertainty relating to the insured event. It is especially in some insurance contracts with a marked investment element that it may be questioned whether the occurrence of the insured event is uncertain, as required by the statutes of Belgium (art. 5(14) IA 2014) or Luxembourg (art. 1(A) ICA). These problems may be avoided by an explicit reference to such investment contracts which are considered as insurance contracts (art. 1(A) Luxembourg ICA). A more general approach is taken by the Dutch Civil Code which specifically points out that the uncertainty of the event may be the occurence itself, the time of the occurrence or the duration of the payment of premium (art. 7:925 CC). “Insured

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event” has its own definition in art. 2 para. 18 of the Polish Act on Insurance Activity (see Fuchs, Rozprawy 915 ff.)

Definitions of Other Terms N7. Definitions are a matter of convention. They become significant for the application of the rules that make use of the terms defined. Apart from the term insurance contract itself (see Note 1), comparing definitions of the Principles of European Insurance Contract Law with those of national insurance contract laws therefore does not appear to provide relevant insights. This applies to the other definitions in Article 1:201 and to those in Article 1:202.

Article 1:202 Further Definitions (1) “Insured” means the person whose interest is protected against loss under indemnity insurance; (2) “Beneficiary” means the person in whose favour the insurance money is payable under insurance of fixed sums; (3) “Person at risk” means the person on whose life, health, integrity or status insurance is taken; (4) “Victim”, in liability insurance, means the person for whose death, injury or loss the insured is liable; (5) “Insurance agent” means an insurance intermediary employed by an insurer for marketing, selling or managing insurance contracts; (6) “Premium” means the payment due to the insurer on the part of the policyholder in return for cover; (7) “Contract period” means the period of contractual commitment starting at the conclusion of the contract and ending when the agreed term of duration elapses; (8) “Insurance period” means the period for which the premium is due in accordance with the parties’ agreement; (9) “Liability period” means the period of cover; (10) “Compulsory insurance” means an insurance which is taken out in pursuance of an obligation to insure imposed by laws or regulations.

Comments Introduction C1.  An insurance contract is concluded between the insurer and the policyholder as the parties to the contract. In addition, the insurance contract may affect a number of other persons with rights and obligations based on the Principles of European Insurance Contract Law and/or the insurance contract. Although it is possible and often even common for one person to have several of these roles at the same time, it must be kept in mind that every right and duty is connected to a role, not to the person behind the role. Therefore, it would be incorrect to state, for example, that the insured is responsible for the insurance premium even if the insured in a certain case happens also to be the policyholder.

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C2.  In Article 1:202 certain roles related to the insurance contract are defined for the purposes of the Principles of European Insurance Contract Law. It should be noted that these definitions do not necessarily correspond to the ones used in insurance contract law in different countries.

Insured (para. 1) C3.  As far as the Principles of European Insurance Contract Law are concerned, “insured” means the person whose interest is protected against loss under indemnity insurance (Article 1:202 para. 1). Unlike in some national insurance contract laws, the definition does not include the person on whose life, health, integrity or status the insurance is taken (the “person at risk”, see Article 1:202 para. 3). The policyholder is not necessarily identical to the insured (see in particular Articles 11:101 to 11:103). The insured could be, for example, an owner of a property where the policy is taken out by the tenant; a holder of a right of lien where goods are insured by their owner; or a potential tortfeasor where a liability insurance is taken out by a parent as a family insurance. The insured is the one entitled to the insurance money.

Beneficiary (para. 2) C4.  In Article 1:202 para. 2 “beneficiary” is defined as the person in whose favour the insurance money is payable under insurance of fixed sums. Thus, it is not a general term for the person receiving the insurance money. The beneficiary may be compared to the insured, but his entitlement to the insurance money is not dependent on suffering loss. A policyholder is not necessarily a beneficiary. Neither is the “person at risk” (see Article 1:202 para. 3) necessarily the beneficiary.

Person at Risk (para. 3) C5.  It is important for the purposes of the Principles of European Insurance Contract Law to distinguish “person at risk” from “insured” (see Article 1:202 para. 1). Person at risk is the person on whose life, health, integrity or status the insurance is taken (Article 1:202 para. 3). Status in this context means such a change in a person’s life as, for example, marriage, adoption of a child, or starting an education. The policyholder is not necessarily the person at risk. Neither is the person at risk necessarily the beneficiary (insurance of fixed sums) or the insured (indemnity insurance).

Victim (para. 4) C6.  Although liability insurance is also in the interest of the person suffering loss or damage, the insured in such insurance is the tortfeasor. It is his or her interest in not having to bear the economic consequences of the liability which forms the object of the insurance contract. The person suffering loss or damage benefits from the insurance and may in some cases even be entitled to a direct right of action against the insurer. This person has been defined in the PEICL as “victim”, the person for whose death, injury or loss the insured is liable (Article 1:202 para. 4). While the word “victim” is used in everyday language also in

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other context, in particular in accident insurance, the Principles of European Insurance Contract Law limit its use to liability insurance.

Insurance Agent (para. 5) C7.  The Insurance Mediation Directive (2002/92/EC), as amended by art. 91 of MiFID2 (2014/65/EU), does not speak of the “insurance agent” but the term “intermediary” is used for both agents and brokers. “Tied insurance intermediary” is defined in art. 2 para. 7 of the Directive to be “any person who carries on the activity of insurance mediation for and on behalf of one or more insurance undertakings in the case of insurance products which are not in competition but does not collect premiums or amounts intended for the customer and who acts under the full responsibility of those insurance undertakings for the products which concern them respectively”. This definition is unfit for the purposes of the Principles of European Insurance Contract Law because the Directive deals mainly with professional responsibilities of the intermediary rather than with the issue of agent’s authority (Article 3:101). Therefore, in the Principles of European Insurance Contract Law the term “insurance agent” is used. It means an insurance intermediary employed by an insurer for marketing, selling or managing insurance contracts (Article 1:202 para. 5; “marketing, selling or managing insurance contracts” describes the activities mentioned in art. 2 para. 3 of the Insurance Mediation Directive (2002/92/EC), as amended, in a more concise manner). “Employed” in the context of Article 1:202 para. 5 means that a person is entrusted with the responsibilities of marketing, selling or managing insurance contracts by the insurer. The agent does not have to be an employee but may as well be engaged on a self-employed basis.

Premium (para. 6) C8.  The primary obligation of a policyholder is to pay the insurance premium. In accordance with Article 1:202 para. 6, “premium” means the payment due to the insurer on the part of the policyholder in return for cover. In addition to the actual premium, the policyholder may, for example, in unit-linked insurances be obliged to pay also certain handling fees in addition to the premium. When applying the articles concerning premium (Articles 5:101 to 5:105) these kinds of fees are not considered as premium.

Contract Period (para. 7) C9.  In an insurance contract there are several periods of time which must be distinguished: One of them, “contract period”, is defined in Article 1:202 para. 7 as the period of contractual commitment starting at the conclusion of the contract and ending when the agreed term of duration elapses. As an insurance contract can be prolonged after the contract period has expired, a single insurance contract may consist of several contract periods. As a general rule, the contract cannot be altered during a contract period but only from the beginning of a new contract period (see Article 2:603).

Insurance Period (para. 8) C10.  “Insurance period” means the period for which the premium is due in accordance with the parties’ agreement (Article 1:202 para. 8). Thus, a contract period may consist of

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one or more insurance periods. Also, the insurance period does not necessarily fall within the contract period. For example, in retroactive insurance, the policyholder has to pay premium for an insurance period preceding the contract period. Moreover, the insurance period is not identical to the liability period. For example, the policyholder is under an obligation to pay a premium for the period of time in which the insurer is relieved of its obligation to cover the risk in accordance with Article 5:102 para. 2 (non-payment of a subsequent premium).

Liability Period (para. 9) C11.  The third period of time defined is the “liability period”. In accordance with Article 1:202 para. 9 it means the period of cover. This period may begin at the same time as the contract period or later. In case of retroactive cover, the liability period may even start before the contract period. As far as liability insurance is concerned, the liability period may differ substantially from the contract period depending on the fact that triggers the insurance cover (manifestation, occurrence, claims made).

Compulsory Insurance (para. 10) C12.  “Compulsory insurance” as opposed to voluntary insurance is defined by reference to an obligation to take out such insurance which is imposed on the policyholder. Such obligation to insure may arise from the law of the European Union, the law of Member States, or the law of third States. At a lower level, it may arise also from instruments adopted by official entities invested with regulatory powers such as autonomous regions in federal Member States, municipalities or professional bodies. In contrast, the definition does not cover insurance obligations which arise from private instruments such as a contract or the articles of an association because these are of private origin and are therefore classified as voluntary. Nevertheless, the PEICL may be chosen for such insurance contracts.

Note See Article 1:201 Note 7.

Article 1:203 Language and Interpretation of Documents13 (1) All documents provided by the insurer shall be plain and intelligible and in the language in which the contract is negotiated. (2) When there is doubt about the meaning of the wording of any document or information provided by the insurer, the interpretation most favourable to the policyholder, insured or beneficiary, as appropriate, shall prevail.

13

Article 1:203 para. 2 is modelled on art. 5 of the Unfair Contract Terms Directive (93/13/EEC).

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Comments Relationship to the Principles of European Contract Law C1.  As compared with Article 1:104 dealing with the interpretation of the Principles of European Insurance Contract Law, Article 1:203 lays down requirements relating to the drafting and interpretation of insurance contracts. Generally, insurance contracts are interpreted like other contracts in particular in accordance with text, context and purpose. Therefore, in principle, the rules contained in Chapter Five of the Principles of European Contract Law apply to insurance contracts. Article 1:203 contains some special rules for written documents provided by the insurer, including notices and other communications from the insurer, as well as policies even if they have been individually negotiated.

Transparency C2.  Article 1:203 is intended to promote the transparency of documents. The words of the Article are based on the first and second sentences of art. 5 of the Unfair Contract Terms Directive (93/13/EEC). That the contents should be expressed fully and clearly is an aspect of the requirement of good faith to enable policyholders to assess their rights and obligations. C3.  Plain and intelligible means plain and intelligible to the reasonable policyholder. All documents provided by the insurer must put the policyholder in a position to assess, by applying general rules of interpretation (see Comment 1), all the legal consequences of the policy, in particular his rights and obligations. If not, the contra proferentem rule of construction (see Article 5:103 PECL) applies, and the interpretation most favourable to the policyholder will prevail. If, however, a term is meaningless to a reasonable policyholder, the contra proferentem rule cannot be applied. In such case, the court may disregard the term and enforce the remainder of the document.

Language of Documents C4.  Documents will only be transparent if they are issued in a language the policyholder understands. Therefore, Article 1:203 para. 1 provides a language rule which gives the policyholder a right to receive all documents provided by the insurer in the language in which the contract is negotiated. In many cases this will be the mother tongue of the policyholder because insurers will market products and communicate with customers in their native language. However, if the policyholder approaches a foreign insurer, for example through an insurance broker, and uses a different language it can be inferred that the policyholder submits to communication with the insurer in that language. Therefore, it is sufficient that documents are drafted in the language in which the contract was negotiated. C5.  Article 1:203 para. 1 departs from language rules in existing European contract law. According to art. 185 para. 6 of the Solvency II Directive (2009/138/EC), information concerning life insurances must be provided by the insurer in an official language of the Member State of the place of commitment which is, in most cases, the Member State in which the policyholder has his habitual residence. The policyholder may, however, choose an official language of another Member State. Similarly a timeshare provider must issue all documents

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in an official language of the Member State in which the purchaser is resident or – upon the request of the purchaser – of which he is a national according to art. 4 para. 3 and art. 5 para. 1 of the Timeshare Directive (2008/122/EC). However, some Member States specified in that Directive may require a certified translation of the contract in other languages; cf. art. 5 para. 1(2) and (3). C6.  Such rules are not sufficient to achieve the purpose of the Principles of European Insurance Contract Law particularly because they would tend to inhibit certain insurance transactions. An insurer, who does not do business in the country in which the policyholder has his habitual residence but is approached by a prospective customer in the language in which the insurer is doing business, may decide to refuse cover because all relevant documents would have to be translated. In such cases an excessively strict language rule may have the effect of denying the policyholder access to foreign insurance markets.

Sanctions C7.  Article 1:203 does not provide for specific sanctions for violations of the language requirements. A judge, therefore, will have to apply appropriate sanctions which are available under general contract law. For that purpose the judge may refer to the Principles of European Contract Law in accordance with Article 1:105 para. 2 but not to any sources of national contract law (see Article 1:105 para. 1). In general, a judge may hold that a document edited in a language other than the one required by Article 1:203 para. 1 has not reached the policyholder. Similarly the judge may decide that an information provided in another language than required has not been given at all. On the other hand the policyholder will be estopped from invoking a breach of Article 1:203 in particular situations. This will be the case for example when the documents have been provided in the mother language of the policyholder which was not the language of negotiations. C8.  In addition, the policyholder may claim damages for losses that may occur if information to be provided in a particular language remains unknown to him because it was given in a language he does not understand. Moreover, measures of collective enforcement of the language requirement may be taken. A non complying insurer may face a class action for injunctions as referred to in Article 1:301 or sanctions imposed by the competent supervisory authority in accordance with national supervisory law.

Notes Transparency N1. Several EC directives give evidence of a general quest for more transparency in consumer transactions. A possible way to achieve this goal is by making his commitment more intelligible for the policyholder. Therefore, special provisions have been established requiring insurance documents to be drafted in a clear and comprehensible manner, see in particular art. 185 para. 6 of the Solvency II Directive (2009/138/EC) and art. 3 para. 3 of the Distance Marketing Directive (2002/65/EC).

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N2. Various antecedents can be found in the national legal systems of the Member States: some of them are directly focused on insurance contracts, see for example art. 14 and art. 15 para. 3 of the Belgian Royal Decree of 22 February 1991 on Insurance Supervision; art. L. 112-3 French ICA (furthermore: stipulations regarding nullity, forfeiture or exclusions are valid only if they are drafted in an easily perceptible manner; see also arts. L. 113-12 and L. 113-15 French ICA); s. 7 German ICA and s. 2 para. 1 of Ch. 2 Swedish ICA (concerning pre-contractual consumer information); art. 2 para. 8 Greek ICA; art. 166 and arts. 182 to185 of the Italian Code of Private Insurance (referring to pre-contractual information documents); art. 16 para. 2 Luxembourg ICA (any limitations and exclusions regarding cover must be highlighted); art. 12 paras. 3 and 4 of the Polish Act on Insurance Activity); art. 21 Portuguese ICA; and art. 3 Spanish ICA (concerning general and special contract terms).

Language N3. In the Single European Market with its many languages, the understanding of insurance documents depends on the use of language that is comprehensible for the policyholder. Language regulations therefore are not uncommon in Community instruments. In art. 185 para. 6 of the Solvency II Directive (2009/138/EC), it is laid down that the written information concerning life insurances provided for in this regulation shall be drafted in one of the official languages of the Member State of the commitment, which is the Member State where the policyholder has his habitual residence. However, subpara. 2 stipulates that the said documents may be drafted in a different language if the policyholder so requests and if permitted by the law of the Member State or if the policyholder is free to choose the applicable law. N4. Accordingly, the regulations of most European insurance laws are aligned with this rule, see for example s. 9a para. 6 Austrian ISA (the pre-contractual information must be in German, unless the policyholder expressly accepts another language or has chosen a different law); art. 112-3 French ICA (insisting on French wording); Italy (pre-contractual information must be in Italian when the policyholder does not opt for another language); art. 16 para. 2 Luxembourg ICA (the contract has to be drafted in one of the official languages of Luxembourg or in a language understood by the policyholder); art. 8 para. 1 Spanish ICA (the policyholder can choose one of the official languages of the place where the contract is made. In addition, the policyholder can request a different language according to art. 185 para. 6 of the Solvency II Directive (2009/138/ EC)); United Kingdom (the information must be in an official language of the State of the commitment or in another language agreed by the parties – ICOBS 6.3.1).

In dubio contra stipulatorem N5. Article 1:203 para. 2 draws on a provision of the Unfair Contract Terms Directive (93/13/ EC). According to the second sentence of art. 5 of that Directive, the interpretation of a standard term that is most favourable to the consumer will prevail where doubts remain because of an unclear drafting of a contract term. This provision has been implemented in the laws of all Member States.

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Article 1:204 Receipt of Documents: Proof The burden of proving that the policyholder has received documents to be provided by the insurer shall lie with the insurer.

Comments C1.  Article 1:204 places the burden of proof of the receipt of the documents required by Article 2:201 (Provision of Pre-contractual Documents) and Article 2:501 (Contents) by the policyholder on the insurer because it is its duty to provide the policyholder with these documents. This is in line with general rules on the burden of proof but repeated in Article 1:204 in order to avoid doubt and make the rule mandatory. C2.  In contrast, Article 1:204 does not interfere with general rules on the standard of proof. In particular means of easing proof such as “res ipsa loquitur”, “prima facie evidence” and so on may be applied in favour of the insurer.

Notes General Law of Evidence N1. As part of the general provisions, Article 1:204 articulates a rule which in most countries is left to the general law of evidence. When the insurer is under an obligation to convey certain information or documents to the policyholder, it would generally be incumbent upon the insurer to prove that it has performed that duty. However, rules on the burden of proof may be susceptible of being derogated from by agreement under national law. A binding rule, see Article 1:103 para. 2, avoids such derogations and ensures a uniform application of the Principles of European Insurance Contract Law in this respect throughout the European Union.

Specific Rules of Insurance Law N2. Several countries have explicitly put the burden of proof for the issue of certain documents and information upon the insurer, see Austria: s. 5b para. 3 ICA; and Germany: s. 8 para. 2 ICA; see also art. 2 para. 6 Greek ICA. As far as applicable to the conclusion of the specific insurance contract, the Member States’ rules may follow art. 15 of the Distance Marketing Directive (2002/65/EC), according to which the Member States “may stipulate that the burden of proof in respect of the supplier’s obligation to inform” can be placed upon the supplier. The Member States have apparently made little use of this option (for an implementing provision, see art. VI, 62 of the Belgian Code of Economic Law; see also the Spanish Royal Decree on Insurance Supervision: under art. 107 the insurer has to make sure that the policyholder receives all necessary information and acknowledges its receipt by means of a note at the end of the policy or in an additional document). See also the notes on Articles 2:201 to 2:203 and Articles 2:501 to 2:502.

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Article 1:205 Form of Notice

Article 1:205 Form of Notice Subject to specific rules contained in the PEICL, notice by the applicant, policyholder, insured or beneficiary in relation to the insurance contract shall not be required to take any particular form.

Comments Consensual and Formal Contracts C1.  The validity of an insurance contract subject to the Principles of European Insurance Contract Law does not depend on any particular form; see Article 2:301. In particular the issue of an insurance policy is not a condition precedent to its conclusion; rather, the obligation to issue such a policy follows from the conclusion of the contract. This basic rule is in line with the general development of contract law. While the observation of particular forms has been a general feature of ancient contract law, modern law has enlarged the significance of consent as the sole source of contractual obligations. C2.  The trend towards consensual contracts, also reflected by Article 2:101 para. 2 PECL, is supplemented by provisions that point out the validity of notices irrespective of a particular form such as Article 1:205. This provision is in line with Article 1:303 para. 1 PECL; while that article deals with notices given by any party to a contract, Article 1:205 only applies to notices given by the applicant, policyholder, insured or beneficiary, but not by the insurer. C3.  Under Article 1:103 para. 2 PEICL, the principle laid down in Article 1:303 para. 1 PECL and reaffirmed, with slight amendments, in Article 1:205 PEICL cannot be derogated from as far as notices given by the persons listed in the latter provision are concerned. With regard to notices of the insurer, no general principle is established in the Principles of European Insurance Contract Law, although various provisions provide for the written form in specific situations (see below in Comment 11). Where those provisions do not apply, the matter is left to the dispositive principle of Article 1:303 para. 1 PECL which may serve to fill the gap under Article 1:105 para. 2 PEICL.

Proof C4.  While a notice covered by Article 1:205 may be valid irrespective of any particular form, it has to be proven if contested by the insurer. The means of proof and the degree of probability required are left to the national law of the court seized. Article 1:205 interferes with that national law only to the extent that national provisions require the written or any other specific form as a mandatory precondition of proof.

Notice C5.  In accordance with Article 1:303 para. 6 PECL, the term “notice” is understood in a broad way and comprises not only the conveyance of information, but also announcements containing an element of intention: promises, statements, offers, an acceptance, demand, request or other declaration. Thus, the applicant may comply with his duty of disclosure under Article 2:101 by oral answers to the questions put to him by the insurer. Similarly,

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the revocation of an application under Article 2:302, the cancellation of preliminary cover under the second sentence of Article 2:403 para. 2, or the request for a reduction of premium in the case of a reduction of risk, Article 4:301, may be communicated by any means, notwithstanding any contract clauses that may require a notice in writing. C6.  Article 1:205 applies not only to notices specifically mentioned in other provisions of the Principles of European Insurance Contract Law, but to all “notices […] in relation to the insurance contract”. It follows that notices which are prescribed, not in the Principles of European Insurance Contract Law, but in the insurance contract, are equally subject to Article 1: 205 provided that they are given by the applicant, policyholder, insured or beneficiary. Therefore, such notices may be given by any means irrespective of any writing requirement laid down in the same insurance contract.

Persons Favoured C7.  Article 1:205 concerns only notices by the applicant, policyholder, insured or beneficiary. The policyholder is defined in Article 1:201 as the person to whom the contractual promise of the insurer is addressed; before he receives that promise, his status is that of an applicant. For the definition of the insured and beneficiary, see Article 1:202 paras. 1 and 2. For notices by the insurer or other persons, see above in Comments 2 and 3.

No Particular Form Being Required C8.  Under a widespread practice of insurance companies, contract terms require policyholders and other persons who want to derive benefits from an insurance contract to make certain declarations in writing, perhaps even supplemented by further formal requirements such as the registration of a letter. It follows from Article 1:205, which may not be derogated from under Article 1:103 para. 2, that such clauses are invalid and shall be disregarded. C9.  Some provisions of the Principles of European Insurance Contract Law seem to suggest by the use of other terms that a written notice is required. Thus, Article 6:101 para. 2 declares the notice of the insured event to be effective “on dispatch”. It would be erroneous, however, to infer that such notice must be in writing. That provision is rather meant to make clear that, in the case of a written notice, dispatch and not receipt by the addressee is the relevant point in time for assessing whether the notice has been given without undue delay. While a certain period of time may elapse between dispatch and receipt in the case of a written notice, this is not the case if the notice is given orally or by telephone. In those cases, the second sentence of Article 6:101 para. 2 is irrelevant. C10.  The freedom of form is subject to “specific rules contained in the PEICL”. Such formal requirements are laid down in various provisions, for example for declarations of termination or avoidance in Article 2:202 para. 2(b), Article 2:303 para. 1, Article 2:602 para. 1(b), Article 2:604 para. 3, or Article 4:301 para. 2. A written declaration is also required for the revocation of the designation of an insured by the policyholder under Article 11:101 para. 3.

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Notices by the Insurer C11.  While the Principles of European Insurance Contract Law do not establish a general principle for the form of notices by the insurer, see above in Comments 2 and 3, a large number of specific provisions require the insurer to give written notice in order to make the policyholder aware of a serious situation; see, for example, notices of avoidance and termination under Article 2:104, Article 2:602 para. 1(a), Article 4:203 para. 1, or Article 5:103 para. 1. Serious consequences for the policyholder may also result from the effects of Article 5:101(a) (non-payment of the first or single premium) and Article 6:103 para. 2 (rejection of a claim by the insurer); in both cases the insurer’s notices have to be in writing.

Notes Community Law N1. The European directives do not specifically address the formal requirements for notice by the applicant, policyholder, insured or beneficiary. The obligation in art. 185 para. 6 of the Solvency II Directive (2009/138/EC) to communicate certain information to the policyholder in writing in a clear and accurate manner before the contract is concluded only relates to information to be provided by a life insurer, not by the applicant, insured, policyholder or beneficiary. Art. 8 para. 1 of the Amended Proposal for a Council Directive on Insurance Contract Law refers to the provisions in the insurance policy for the form of notice of an insured event.

The Kind and Context of the Notice N2. At national level, the picture seems to be slightly more complex. Again, it appears to be necessary to distinguish in general between formal requirements affecting the insurer and formal requirements affecting the applicant, insured, policyholder or beneficiary. Article 1:205 only deals with formal requirements affecting the applicant, policyholder, insured or beneficiary. For formal requirements affecting the insurer, see, for example, Articles 2:102, 2:104, 2:201, 2:402, 2:502, 2:602, 2:603, 2:604, 2:701, 5:101, 5:102, 5:103, and 6:103 para. 2 PEICL and the corresponding notes. In addition, Article 1:205 is subject to the specific rules in the Principles of European Insurance Contract Law establishing particular requirements as to form. This relates in particular to the formal requirements for the conclusion of an insurance contract, the proof of its existence (Article 2:301) and its revocation during a cooling-off period (Article 2:303 para. 1). The formal requirements at the stage of concluding the contract are addressed in Articles 2:301 and 2:303 para. 1 PEICL and the corresponding notes. Other specific formal requirements affecting the applicant, policyholder, insured or beneficiary are addressed in Articles 2:602 para. 1(b), 2:604 para. 3 and 2:702 para. 2 PEICL and the corresponding notes. N3. The relevance of Article 1:205 is therefore limited to all other notices made by the applicant, policyholder, insured or beneficiary. These notices can be of a different nature, they may relate to an aggravation of risk during the contract (Article 4:202), the occurrence of an insured event (Article 6:101) or any other situation where a duty to give notice is established by law (for example in the case of double insurance) or such notice is made voluntarily. It is thus difficult to give a general and all-embracing comparative law answer to the question of whether all notices of

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the applicant, policyholder, insured or beneficiary which fall under Article 1:205 are subject to formal requirements in national insurance laws. A precise answer would rather depend on the relevant kind of notice and a comparison of the provisions which govern in national law (namely the provisions on aggravation of risk, occurrence of an insured event, and so on; for a detailed analysis of the form of notice in specific situations in German and English law, see Rühl 51, 71, 96, 152, 157, 162, 166, 221, 288, 297, 306, 311s and 346).

General Principle: No Formal Requirements N4. If an attempt at providing a general answer is nevertheless made, it would probably be that European insurance laws are in general supportive of giving notice in an informal manner (for England, see Clarke 23-3B, for Germany, see Hofmann 118, Schimikowski, para. 193; Bruck/ Möller-Rolfs, § 19 VVG para. 80; for both see Rühl above). However, at the same time many European insurance laws seem to allow the parties to stipulate in the insurance contract that notice made in relation to the insurance contract after conclusion of the contract must be in writing or by eletronic communication (for Austria, see the second sentence of s. 34a ICA; for the United Kingdom, see Clarke 26-2B, MacGillivray 19-041; for Germany, see s. 32 ICA regarding notice given to the insurer (not to his agent), BGH 10.2.1999, Neue Juristische Wochenschrift 1999, 1633, 1634-1636, Bruck/Möller-Brömmelmeyer, § 32 VVG paras 23 ff., Schwintowski/Brömmelmeyer-Schwintowski, § 32 VVG para. 4 ff., Wandt, paras. 398 und 398a; for England and Germany, see Rühl above).

An Example: Notice of an Insured Event N5. This can be illustrated by the example of the form of notice in case of occurrence of an insured event. All European laws start from the basis of a liberal approach, requiring no specific form for such notice (for Austria, see Basedow/Fock-Lemmel 1077; for Belgium, see Fontaine, para. 318; for Denmark, see Basedow/Fock-Scherpe 974; for the United Kingdom, see Clarke 262B; for France, see Cass. civ. 20.10.1992, RGAT 1993, 99, Bonnard, Droit et pratique, para. 543; for Germany, see Prölss/Martin-Armbrüster, § 30 VVG para. 9; for Greece, see Chatzinikolaou-Aggelidou 182, Kiantos 129, Rokas, para. 429 ff. and Skouloudis 267; for Italy, see Cendon-Franzoni, art. 1913, 1681, Rescigno-Gallone, Codice Civile, art. 1913, 2131; for Luxembourg, see Basedow/ Fock-Völker 798; for the Netherlands Asser/Clausing/Wansink 230 ff.; for Poland, see art. 818 para. 1 CC; for Portugal, see Vasques 300; for Spain, see Bataller/Latorre/Olavarria (art. 16) 201, Sánchez Calero, (art. 16) 264: a requirement of written form is stipulated for a notice according to art. 38 ICA; and for Switzerland, see the second sentence of art. 38 para. 1 ICA). N6. However, while most jurisdictions permit the insurer to require written notice or the use of specific forms by including a corresponding clause in the insurance contract (for example Belgium: Fontaine, para. 318; the United Kingdom: Clarke 26-2B; Germany: Prölss/Martin-Armbrüster, § 30 VVG para. 9, Schimikowski, para. 220, Wandt, para. 939; Greece: Basedow/Fock-Papathoma-Baetge 624; Italy: Basedow/Fock-Brunetta d’Usseaux 714; Luxembourg: Basedow/ Fock-Völker 798; Denmark: Basedow/Fock-Scherpe 974; Switzerland: the second sentence of art. 38 para. 1 ICA, Maurer 340), others object to such contractual stipulations (France: Lamy Assurances, para. 613).

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Article 1:206 Imputed Knowledge

Article 1:206 Imputed Knowledge If any person is entrusted by the policyholder, the insured or the beneficiary with responsibilities essential to the conclusion or performance of the contract, relevant knowledge which that person has or ought to have in the course of fulfilling his responsibilities shall be deemed to be the knowledge of the policyholder, the insured or the beneficiary, as the case may be.

Comments The Issues C1.  The Principles of European Insurance Contract Law contain a number of information duties, in particular Article 2:101 requiring an applicant for insurance to inform the insurer of material circumstances of which the applicant “is or ought to be aware”. The circumstances that are material are those identified, in the case of Article 2:101, by the requirement that they be “the subject of clear and precise questions put to him by the insurer”. However, there remain issues about what exactly an applicant “is or ought to be aware” of within the range of material circumstances, in other words, about what kinds of knowledge might be imputed to applicants whether they actually have that knowledge or not. These issues are discussed in the Comments on Articles 2:101 ff. Such issues also arise when persons other than the policyholder are involved in the formation and/or performance of the contract. These are the concern of Article 1:206.

Imputation and Agency C2.  The very notion of imputing knowledge presumes that applicants in good faith may be treated in law as being in breach of an information duty, with significantly adverse consequences in some cases, when they do not actually possess that knowledge but their agents do. Such issues might be resolved by reference to the general law of agency. However, people with knowledge to be imputed may not be agents within the general law of agency. In view of the particularity and importance of insurance information duties, it is therefore commonplace to regulate the issue of imputation in the context of insurance contracts. This is the function of Article 1:206, which does not deal with the imputation of acts committed by such persons to the policyholder or to the insurer, as the case may be. The extent to which such acts can be imputed is a matter of general law of agency.

Persons Whose Knowledge May Be Imputed C3.  Persons whose knowledge may be imputed to the policyholder or the insured, as the case may be, are characterised by two elements: as indicated by the word “entrusted” in Article 1:206 there must be a special relationship between these persons and the policyholder which has come into existence for other reasons. The object of their being “entrusted” must be to confer responsibility essential to the conclusion or performance of the insurance contract. C4.  Such relationships may result from employment, marriage or other domestic relations, business organisations and so on. In all of these contexts it is very difficult to draw the line

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between persons whose knowledge can be imputed to the policyholder and other persons who may have actual knowledge but cannot be expected to communicate that information to the policyholder. The concept of “entrustment” with responsibilities is sufficiently flexible to allow for the identification of the relevant persons. C5.  A simple example is that of two or more individuals who seek joint insurance cover on the house that they share. Under Article 1:206 non-disclosure of material facts known only to one of the joint policyholders affects the other. Thus, one who actually arranges the insurance is deemed to know material facts known only to the other and vice versa. In the event of non-disclosure the insurer is usually entitled to avoid the contract of insurance as regards both of them. Another example is that of the professional caretaker entrusted with the care of the property in the absence of the owner and policyholder. The latter are deemed to know what is known to the caretaker. A person employed to clean the property would not be such an example.

Notes General Law of Agency N1. The rule on the imputation of knowledge, set forth in the introductory part of the Principles of European Insurance Contract Law, addresses an issue that remains in the domain of the general law (of agency) in most countries. Accordingly, it was also taken up by the drafters of the Principles of European Contract Law, see their Article 1:305 which however contains a dispositive rule as opposed to the mandatory character of Article 1:206 PEICL. It follows that the fair and full understanding and analysis of Article 1:206 implies the reference to the accompanying comments and notes of Article 1:305(a) PECL. Very similar to the provision in the Principles of European Contract Law is the draft Art. II–1:105 of the Draft Common Frame of Reference. While both general provisions cited above do not only deal with the imputation of knowledge, but also that of intention, gross negligence and other states of the mind, the wording of Article 1:206 is limited to the imputation of knowledge. This imputation enables the judge, however, to draw consequences as to the negligence of the policyholder, insured or beneficiary.

Specific Provisions for Insurance Contracts N2. Article 1:206 PEICL addresses situations where the policyholder, the insured or the beneficiary entrusts a person with certain responsibilities regarding the conclusion or performance of the contract. This person may be referred to as an agent, although he may not be an agent in a technical sense. Just like Article 1:206, some national insurance laws point out that the knowledge of both the policyholder and his agent is relevant, see Note 3 below. Article 1:206 further extends to cases where the insured also acts as an agent of the policyholder. Take the example of a liability insurance taken out by the policyholder in favour of his family; while family members are co-insured, their knowledge about an insured event will be imputed to the policyholder under Article 1:206. Some national laws specifically deal with similar situations, see Note 4 below.

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Knowledge of the Policyholder’s Agent N3. National provisions specifically drafted for insurance contracts mainly relate to the pre-contractual duty of disclosure of the party which takes out insurance. The purpose of Article 1:206 to hold the policyholder responsible for his agent’s knowledge can be achieved in two ways: the law may either impose upon the agent a duty to disclose his knowledge and hold the principal responsible for any breach of that duty, or the agent’s knowledge may be treated as the knowledge of the policyholder. A detailed rule of the first type can be found in ss. 18 and 19 of the UK Marine Insurance Act 1906. S. 19 extends the assured’s duty of disclosure to all agents effecting insurance. Rules of the latter type are contained in the insurance contract acts of German influence. Under s. 19 Austrian ICA, s. 20 German ICA, and art. 5 Swiss ICA, the knowledge of the agent and the knowledge of the policyholder are treated alike. For a similar approach, see also the second sentence of art. 815 para. 1 Polish CC. As a consequence, the knowledge of both the policyholder and his agent has to be taken into account under s. 20 German ICA when compliance with the duty of disclosure has to be assessed.

When Policyholder and Insured are Not Identical N4. Rather than addressing the knowledge of agent and principal, several jurisdictions have particular rules for those contracts where the policyholder and the insured are not identical. Under Finnish law (s. 22 ICA) and under Swedish law (s. 1 of Ch. 12 ICA in cases of “individual personal insurance”), the policyholder as well as the insured is required to give “true and complete answers” to the insurer’s questions. Similarly, the law of Luxembourg “en cas d’assurance de personnes” requires the insured, in addition to the policyholder, to disclose all the information which he should reasonably expect to be important to the insurer (art. 11 para. 1(2) ICA). Cf. for the similar solution under Greek law: Rokas, para. 422a ff., Basedow/Fock-Papathoma-Baetge 616, for Italy art. 1894 CC provides that, only if the insured has knowledge of the lack of disclosure or wrong declaration made by the contracting party, this knowledge can be raised by the insurer as a defence (see Cerini 95) and for Spain, see art. 11 ICA. Similarly and following the concept of a contract for the account of a third-party (“für fremde Rechnung”), the knowledge of the policyholder and the knowledge of the insured are both declared relevant under German law (s. 47 ICA), Austrian law (s. 78 ICA) and Polish law (art. 815 para. 2(1) CC). If made known to the insurer, however, the insured’s knowledge remains irrelevant when the insured is not aware of the conclusion of the contract (s. 47 para. 2 German, s. 79 para. 2 Austrian ICA and art. 815 para. 2(1) Polish CC). N5. This solution appears to differ from the French rule in art. L. 113-2 ICA, which the courts – following older legislation – construe in such a way that the relevant knowledge is the knowledge of the policyholder only (“connues de lui”), see Cass. civ. 1er, 1.2.2000, no. 97-11, 539; Lamy Assurances, para. 266). The former and traditional rule was also observed in the Netherlands, where it was generally accepted under the former law that only the applicant’s knowledge was relevant (Wansink/Kamphuisen/Kalkman-Kamphuisen 28). Under the new law, however, all information must be disclosed by the applicant including the information of all third parties having an interest in the insurance. Consequently, knowledge of any such third-party will be imputed to the policyholder (art. 7:928 para. 2 CC). This development demonstrates the evolution of the law, which is also contained in the imputation rule of Article 1:206 PEICL and allows the insured to be considered as a person entrusted with certain aspects of the performance of the contract.

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Article 1:207 Non-Discrimination14 (1) Gender, pregnancy, maternity, nationality and racial or ethnic origin shall not be factors resulting in differences in individuals’ premiums and benefits. (2) Terms in breach of para. 1, including terms as to premium, shall not be binding on the policyholder or the insured. Subject to para. 3, the contract shall continue to bind the parties on the basis of non-discriminatory terms. (3) In the case of breach of para. 1, the policyholder shall be entitled to terminate the contract. Notice of termination shall be given to the insurer in writing within two months after the breach becomes known to the policyholder.

Comments Insurance and Differentiation C1.  The activities of insurance companies by necessity include differentiation between classes of risk. Insurers try to assess the risk they accept by relying on statistical or other experience which is structured according to certain characteristics of the risk insured. Thus, brick houses are less susceptible of burning down than wooden houses, property located close to a river is more exposed to flooding than property situated on a distant hill and so on. The same considerations apply to human risk factors: Young owners and drivers of cars will more often be involved in accidents than older persons, they are therefore considered as a higher risk whose cover requires higher premiums. Women live longer than men; financing a pension scheme by means of life assurance for women therefore requires higher premiums. On the other hand women drivers cause accidents less often than men which factor permits a lower premium, all other things being equal. It follows from these examples that the actuarial approach to insurance traditionally has involved differentiation on the basis of gender, age, or other personal characteristics. C2.  However, the basic orientation of the European Union under art. 19 TFEU is to “take appropriate action to combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation”. While art. 19 does not state a legal rule which would be directly applicable as between private parties, it confers upon the Union the power to adopt legislation in pursuance of the goal of non-discrimination. But the impact of art. 21 of the Charter of Fundamental Rights of the European Union which was transformed into binding primary law by the Treaty of Lisbon, may reach even further. According to para. 1 of that provision “any discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation shall be prohibited.” Art. 23 stresses that “equality between women and men must be ensured in all areas, including employment, work and pay.” Art. 21 para. 2 repeats the prohibition of any discrimination on grounds of nationality that had already formed part of the Treaty of Rome and its successors. The enumeration of the prohibitions is not exhaustive as can be inferred from art. 21 para. 1 (“any discrimination based on any ground such as …”). Where 14

This Article is modelled on the Gender Directive (2004/113/EC) and on Case C-236/09 Association Belge des Consommateurs Test-Achats ASBL and Others v Conseil des ministres [2011] ECR I-773.

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art. 21 of the Charter is applied to insurance it may therefore be potentially incompatible with any differentiation of premium on the basis of personal characteristics of the policyholder or person at risk. C3.  The prohibitions established protection against the discriminatory exercise of power by the European Union and by the Member States when they are implementing the law of the Union, see art. 51 of the Charter. For the time being it is still unclear whether and to what extent they are directly applicable in relations between private parties, in particular between insurers and policyholders. With regard to labour relations the Court of Justice has pointed out that “the principle of non-discrimination on grounds of age must […] be regarded as a general principle of Community law” which supersedes both national and secondary Community legislation; see the judgment of 22 November 2005, Case C-144/04 Mangold v Helm [2005] ECR I-9981 para. 75. Given the particular circumstances of that decision it is unlikely that the very broad statement by the European Court of Justice applies equally to other areas of law such as insurance. First, non-discrimination has always been an objective of particular significance in labour law; see art. 141 EC. Secondly, the Court had to deal with a situation where a directive implementing the general principle had already been adopted, but not yet transformed into national law. Thirdly, and unlike insurance, labour relations are not by necessity dependant upon a selection of personal criteria used to differentiate between people. C4.  In respect of insurance the Court of Justice has more recently pointed out that because of “the principle of equal treatment for men and women, enshrined in arts. 21 and 23 of the Charter, the respective situations of men and women with regard to insurance premiums and benefits contracted by them are comparable” and that a derogation from the principle of equal treatment between men and women cannot be permitted to persist indefinitely, see 1 March 2011, Case C-236/09 Association belge des Consommateurs Test-Achats v Conseil des ministres [2011] ECR I-773, paras. 30 and 31-32. However, the procedural setting of this case was not a dispute between private parties, but the challenge to the validity of an EU directive. The Court quashed a decision of the Council, not that of an insurer. The judgment therefore still leaves some doubt as to the impact of art. 21 of the Charter on private relations. Moreover, the Court’s repeated invocation of art. 23 (which only deals with the equality of men and women, not with other differentiations) in combination with art. 21 suggests that the discrimination on other grounds such as age which is only mentioned in art. 21 may be treated with more tolerance than the discrimination on grounds of sex. The European Commission Guidelines ([2012] OJ C11/1) published after Test-Achats explicitly point out that the judgment “does not affect the use of other risk-rating factors, such as age or disability, which is currently not regulated at EU level” (para. 18). C5.  Because of these remaining uncertainties Article 1:207 does not establish a broad principle of non-discrimination banning the differentiation on the basis of any of the factors listed in art. 21 of the Charter; such a broad principle might be the end of risk-based premium calculation which has been the traditional basis of private insurance. The more risk factors are prohibited, the more insurance will become a social compensation scheme. For the time being, the PEICL preserve the traditional model of private insurance as far as possible. Thus, Article 1:207 is limited to the implementation of what at present can be said to be the law of the Union. At present, the acquis communautaire contains essentially

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three relevant hardcore prohibitions of discrimination: The prohibition of any discrimination on grounds of nationality laid down in art. 18 TFEU, the principle of equal treatment irrespective of racial or ethnic origin established by the Race Equality Directive (2000/43/ EC), and the principle of equal treatment between men and women in the access to and the supply of goods and services as stated in the Gender Directive (2004/113/EC). Some of these provisions address all forms of discrimination; see art. 18 TFEU and art. 2 para. 1 of the Race Equality Directive (2000/43/EC). They would exclude not only discriminatory premiums and insurance benefits, but also discriminatory refusal to offer cover at all. Article 1:207 does not cover such refusal because all the Principles of European Insurance Contract Law, including that in Article 1:207, presuppose agreement of the parties on an insurance contract subject to the PEICL; refusal to offer cover is therefore outside its ambit.

Equal Treatment of Men and Women C6.  Para. 1 adapts the provision contained in art. 5 of the Gender Directive (2004/113/EC) to the particular circumstances of an optional instrument on European insurance contract law. Art. 5 takes account of the need for a specification of the principle of equal treatment laid down in art. 4 of that Directive for insurance contracts. Art. 5 reads:

1. Member States shall ensure that in all new contracts concluded after 21 December 2007 at the latest, the use of sex as a factor in the calculation of premiums and benefits for the purposes of insurance and related financial services shall not result in differences in individuals’ premiums and benefits. Initially, para. 2 of art. 5 permitted Member States to allow proportionate differences in individuals’ premiums and benefits under certain conditions and for a limited period of time. However, art. 5 para. 2 was declared invalid by the European Court of Justice on 1 March 2011, Case C-236/09 Association belge des Consommateurs Test-Achats v Conseil des ministres [2011] ECR I-773. As a consequence of this decision, para. 1 is the only remaining provision of art. 5 of the Directive. Article 1:207 para. 1 is modelled on this provision and explicitly adds differentiations relating to pregnancy and motherhood. While they could be considered as indirect discriminations on grounds of gender, the explicit prohibition excludes any doubt.

Non-Discrimination on Grounds of Nationality, Racial or Ethnic Origin C7.  According to art. 12 EC any discrimination on grounds of nationality is prohibited. This prohibition is directly applicable, and citizens of the European Union can rely on art. 12 EC; see Case C-85/96 Martínez Zala v Bayern [1998] ECR I-2691 para. 63. While the prohibition is aimed in the first place at discriminatory treatment by Member States, it has also been applied to certain private law relations between individuals; see for example Case C-281/98 Angonese v Cassa di Risparmio di Bolzano [2000] ECR I-4139 paras. 33 ff. It is, however, uncertain to what extent private contracting parties are actually bound by art. 12 EC. With regard to insurance contracts the prohibition of discrimination on grounds of nationality is appropriate however, as evidenced by the national law of several Member States. In addition, art. 2 of the Race Equality Directive (2000/43/EC) prohibits any direct

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Article 1:208 Genetic Tests

or indirect discrimination based on racial or ethnic origin. As laid down in art. 3 para. 1 this prohibition applies to the private sector and in particular to the supply of services which are available to the public. Thus, insurance is most likely included in the prohibition. It relates to the discrimination against all individuals involved whether they are policyholders, insured persons, persons at risk or beneficiaries.

Sanctions C8.  Violation of the principle of non-discrimination should not lead by itself to the avoidance of the whole contract which would deprive the policyholder or insured of the cover needed. The insurance contract should remain binding on both parties, but the discriminatory terms and premium obligations should not be binding on the policyholder or insured, as the case may be. This solution is in line with art. 6 of the Unfair Contract Terms Directive (93/13/EEC). Thus, while the insurer will remain fully bound by the contract the policyholder and insured may invoke the prohibition of discrimination that has been violated, and claim the substitution of the premiums or terms concerned by premiums or terms which would have been agreed upon had the prohibition of discrimination been complied with. In addition, the policyholder is entitled to terminate the contract for the future.

Burden of Proof C9.  In accordance with general principles it is up to the policyholder or insured to show that certain premiums and benefits violate the prohibitions of discrimination laid down in the second sentence of para. 1 and in para. 2. But it would be sufficient that a prima facie case is made in this respect, for example that certain differences in premiums and benefits are shown which support the suspicion that discriminatory practices are applied by the insurer. It would then be up to the insurer to demonstrate that these differences are justified by distinctive features of the particular risk other than pregnancy, maternity, nationality, racial or ethnic origin. As to the use of gender as a relevant factor, the first sentence of Article 1:207 para. 1 shifts the burden of proof to the insurer from the very beginning.

Note Article 1:207 implements non-discrimination directives of the European Union, see the Comments. There do not appear to be any antecedents relating to the field of insurance in national law.

Article 1:208 Genetic Tests (1) The insurer shall not ask the applicant, the policyholder or the person at risk to undergo a genetic test or to disclose the results of such a test, nor shall such information be used by the insurer for the purpose of rating risks. (2) Para. 1 does not apply to personal insurance where the person at risk is 18 years of age or more and the sum insured for this person exceeds EUR 300,000 or the money payable under the policy exceeds EUR 30,000 per year.

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Comments Background C1.  Article 2:101 obliges the applicant to “inform the insurer of circumstances of which he is or ought to be aware, and which are subject of clear and precise questions put to him by the insurer”. This may comprehend questions about results of a genetic test or even a request by the insurer to undergo such test. While an insurer may well have an interest in obtaining genetic information as regards personal insurances, this obviously conflicts with the applicant’s right to privacy as genetic information is one of the most personal items of data. Disclosure duties in this area may be incompatible with the right to data protection provided by Union Law15 and by the laws of Member States. C2.  The conflict of interest is reflected in a strong political sentiment against the use of genetic tests as a means of risk assessment in the field of insurance. This has led to restrictions or prohibitions on the use of genetic data in several Member States.16 The PEICL take up these concerns and try to balance the interests involved.

Scope of Application C3.  Even though it may be of particular practical importance only in the field of life and health insurances, Article 1:208 applies to all types of insurance contracts. This is because there may be other insurances such as accident insurance or insurance covering the risk of inability to work where it may be of relevance.

Subject of Prohibition (para. 1) C4.  According to Article 1:208, the insurer is barred from any use of individual genetic data. Thus, it is not allowed to accept an application on condition that the applicant, the policyholder or the person at risk, as the case may be, undergoes a genetic test; nor can the latter be obliged to disclose the results of an earlier genetic test. In this way, pressure to undergo a genetic test and to disclose the results in order to improve the chance of being accepted or to benefit from lower premiums is excluded. The insurer is not even allowed to use data which is voluntarily disclosed.

Exceptions (para. 2) C5.  Para. 2 provides an exception to the strict rule of para 1. It is applicable to all types of personal insurance (for the meaning of “personal insurance”, see Article 2:601 Comment 7). 15

See, for example, art. 8 of the Charter of Fundamental Rights of the European Union and the Data Protection Directive (95/46/EC). 16 See, for example, art. 58 para. 1 Belgian IA 2014; s. 18 of the German Genetic Diagnostics Act; s. 67 of the Austrian Law on Genetic Engineering; arts. 26 ff. of the Swiss Law on Genetic Screening of Humans); s. 2 of Ch. 2 of the Swedish Law on Genetic Integrity; the Concordat and Moratorium on Genetics and Insurance (agreement between the UK government and the Association of British Insurers).

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This exception presumes that the insurer’s demand for information including genetic data is more justified, if the sum insured or the money payable under the policy reaches a certain level. Similar ideas can be found in several national laws.17 As a consequence of the exception under para. 2, the insurer may ask the applicant, policyholder or the person at risk, as the case may be, to undergo a genetic test and the latter will have to disclose the results of an earlier test, in accordance with Article 2:101 ff. C6.  However, in accordance with Swedish law,18 the exception under para. 2 only applies if the person at risk is 18 years of age or more. Minors merit more protection. Thus, an insurer must not request a parent or guardian to consent to a genetic test of a minor, or to disclose the results of an earlier test. In these cases all the restrictions under para. 1 will apply.

Section Three: Enforcement Article 1:301 Injunctions19 (1) A qualified entity, as defined in para. 2, is entitled to seize a competent national court or authority and seek an order prohibiting or requiring the cessation of infringements of the PEICL, if applicable in accordance with Article 1:102. (2) A qualified entity means any body or organisation on the list drawn up by the European Commission in pursuance of Article 4 of the Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers’ interests.

Comments Enforcement of Mandatory Rules by Injunction C1.  Article 1:301 restates the rules contained in arts. 4 and 7 of the Injunctions Directive (2009/22/EC).

These provisions read as follows: Article 4 – Intra-Community infringements 1. Each Member State shall take the measures necessary to ensure that, in the event of an infringement originating in that Member State, any qualified entity from another Member State where the interests protected by that qualified entity are affected by the infringement, may apply to the court or administrative authority referred to in Article 2, on presentation of the list provided for in paragraph 3 of this Article. The courts or administrative authorities shall accept this list as proof of the legal capacity of the qualified entity without prejudice to their right to examine whether the purpose of the qualified entity justifies its taking action in a specific case.

17

See s. 18 para. 1 of the German Genetic Diagnostics Act; art. 27 para. 1(d) and (e) of the Swiss Law on Genetic Screening of Humans). 18 See s. 2 of Ch. 2 of the Swedish Law on Genetic Integrity. 19 This Article is modelled on the Injunctions Directive (2009/22/EC).

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2. For the purposes of intra-Community infringements, and without prejudice to the rights granted to other entities under national legislation, the Member States shall, at the request of their qualified entities, communicate to the Commission that these entities are qualified to bring an action under Article 2. The Member States shall inform the Commission of the name and purpose of these qualified entities. 3. The Commission shall draw up a list of the qualified entities referred to in paragraph 2, with the specification of their purpose. This list shall be published in the Official Journal of the European Union; changes to this list shall be published without delay and the updated list shall be published every six months. Article 7 – Provisions for wider action This Directive shall not prevent Member States from adopting or maintaining in force provisions designed to grant qualified entities and any other person concerned more extensive rights to bring action at national level. Article 1:301 adapts these provisions to the insurance context. It is intended to ensure that adequate and effective means exist to prevent the continued use of unfair terms in insurance contracts.

Measures by Qualified Entities C2.  Standing is granted to entities qualified according to art. 4 para. 3 of the Injunctions Directive (2009/22/EC) to take measures to stop or prohibit the actual or imminent violation of any mandatory rules in the Principles of European Insurance Contract Law. However, the regulations contained in the Principles of European Insurance Contract Law are to protect consumer and non-consumer policyholders, while the list in art. 4 para. 3 of the Injunctions Directive (2009/22/EC) refers to organisations which essentially protect consumers’ interests. In practice the application of Article 1:301 will be restricted to consumer cases. This is not an optimal situation; however, standing under art. 4 of the Injunctions Directive (2009/22/EC) is the only route currently available to organisations for bringing collective actions of this kind.

Note Background in Community Law N1. As laid out in the comments, Article 1:301 is to be construed against the background of the Injunctions Directive (2009/22/EC) and art. 7 of the Unfair Contract Terms Directive (93/13/ EEC). Included in the former is an annex listing all the other directives whose infringements shall give rise to the special remedy provided by the Directive.

Article 1:302 Out-of-court Complaint and Redress Mechanisms Application of the PEICL does not preclude access to out-of-court complaint and redress mechanisms otherwise available to the policyholder, insured or beneficiary.

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Article 1:302 Out-of-court Complaint and Redress Mechanisms

Comments Out-of-court Complaint and Redress Mechanisms under National Law C1.  Much national legislation or self-regulation by the insurance industry has introduced mechanisms of alternative dispute resolution for the settlement of insurance disputes. The most prominent example is the Insurance Ombudsman, an institution which exists in Member States such as Belgium (Ombudsman van de Verzekeringen / Belgian Insurance Ombudsman), Finland (Vakuutus- ja rahoitusneuvonta, Vakuutuslautakunta / Finnish Financial Ombudsman Service, Finnish Insurance Complaints Board), Germany (Ombudsmann für Versicherungen / German Insurance Ombudsman), the Netherlands (Ombudsman Verzekeringen / Dutch Insurance Ombudsman), Poland (Rzecznik Ubezpieczonych / Insurance Ombudsman), Switzerland (Ombudsman der Privatversicherung und der Suva / Ombudsman for Private Insurance and SUVA) and the United Kingdom (Financial Ombudsman Service, which includes an insurance section). Some other Member States have introduced similar out-of-court complaint and redress mechanisms. Mention may be made for example of Greece (Synigoros tou Katanaloti / Hellenic Consumers’ Ombudsman) and Sweden (Allmänna reklamationsnämnden, Ansvarsförsäkringens Personskadenämnd, Trafiksadenämnden / National Board for Consumer Complaints, Board on liability insurance covering personal injuries, Traffic Accident Board). C2.  The main characteristics of such mechanisms are informal access to justice, a free or low cost service and wide discretion to find a fair and just solution which is binding on the insurer but does not preclude access to the courts for the complainant. Clearly such institutions are of great support to the policyholder, insured or beneficiary when enforcing their claims under an insurance policy.

Relationship to the Principles of European Insurance Contract Law C3.  The Principles of European Insurance Contract Law do not deal with out-of-court complaint and redress. However, it is not intended that they should interfere with the various mechanisms established in the Member States. This is why Article 1:302 makes clear explicitly that opting for the Principles of European Insurance Contract Law as the law governing the insurance contract will not rule out in any way the access of the policyholder, insured or beneficiary to the appropriate national mechanism. C4.  Some rules of procedure provide that the national ombudsman services do not decide cases governed by foreign law (see for example in Germany art. 8 para. 3 of the Code of Procedure for the Insurance Ombudsman allowing the Insurance Ombudsman to refuse taking a case which has to be decided on foreign law; or art. 4(a) of the Financial Services Ombudsman Regulations in the Netherlands limiting the authority of the ombudsman to cases which are submitted to Dutch law). Article 1:302 is intended to make it clear that a case governed by the Principles of European Insurance Contract Law is not meant to be regarded as being governed by foreign law for the purpose of such provisions. National ombudsman services should not refuse to accept such cases; since the Principles of European Insurance Contract Law are drafted as a European optional instrument which is to be put in force in

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the whole Community, namely every Member State, their application cannot be considered a case of application of foreign law.

Note The national mechanisms display a wide variety of forms even within a single Member State. Some of these mechnanisms have already been mentioned in the comments.

Chapter Two: Initial Stage and Duration of the Insurance Contract Section One: Applicant’s Pre-contractual Information Duty Article 2:101 Duty of Disclosure (1) When concluding the contract, the applicant shall inform the insurer of circumstances of which he is or ought to be aware, and which are the subject of clear and precise questions put to him by the insurer. (2) The circumstances referred to in para. 1 include those of which the person to be insured was or should have been aware.

Comments Information Imbalance C1.  Insurers require information about the circumstances surrounding the risk in order to decide whether or not to accept an application for insurance. Since these circumstances lie mostly in the knowledge of the applicant rather than the insurer, full and honest disclosure of these facts is of fundamental importance to the insurer’s decision. A distinction between incomplete (undisclosed) information and inaccurate (misrepresented) information may be difficult to draw. For example, when an applicant for motor insurance with five convictions for motoring offences in the last five years states that he has had four, is that a misrepresentation of the number of offences or non-disclosure of the fifth? Hence there is a tendency in current law to deal with misrepresentation and non-disclosure in the same way, and this approach has been adopted in the Principles of European Insurance Contract Law.

The Timing of the Duty C2.  Since insurers require information about the circumstances surrounding the risk in order to decide whether or not to accept an application for insurance, the relevant circumstances are those prevailing at the time that the insurer reaches the decision which, if favourable to the application, is taken to be the time that the contract of insurance is concluded. When the circumstances change in a material way between the time the application is submitted and the time when the contract is concluded, the applicant is obliged to give the insurer notice of any such change, of which the applicant is or should be aware.

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Article 2:101 Duty of Disclosure

Questionnaires C3.  An applicant may be obliged either to disclose the information on his or her own initiative or to disclose it in response to questions put by the insurer, thus leaving the initiative with the insurer. The question method is the one required by Article 2:101 para. 1, mainly for the reason that it is usually more difficult for applicants than for insurers to appreciate what information is material to the risk. Such a rule is more likely to cut unnecessary transaction costs and eliminate subsequent disputes. That is why, although the “own initiative” rule is that found as the basic rule of law in most European countries, insurance practice today has mostly adopted the question method. This is true in particular of contracts on “mass risks”.

Relative Knowledge C4.  Article 2:101 requires applicants to inform the insurer of circumstances of which they were or should have been aware. In one country the corresponding rule applies only to persons seeking insurance in the course of business. In most countries in Europe, however, the law makes no such distinction, although, as regards the consequences of breach of duty, in practice some account is taken of the knowledge and experience that can be expected of an applicant of the kind in question. Today the distinction between applicants in business and applicants that are not is difficult to draw and, in the opinion of some commentators, outdated. There is a marginal area of business activity that affects business people in their private life too; an example is the insurance of computers and cell phones, which may be used both at home and at work. Hence Article 2:101 makes no such distinction. Nonetheless, courts or tribunals applying Article 2:101 should recognise the reality that some kinds of applicant can be expected to know more than others. More knowledge might be expected, for example, of a physician applying for health insurance and of a fireman applying for house insurance than would be expected of other kinds of applicant in such cases.

Inside Knowledge: the Alter Ego C5.  Firms that are incorporated usually have one or more individuals, for example a CEO or a managing director, who are regarded by the law of the country of incorporation as the “alter ego” of the company and whose knowledge is regarded as that of the company. Frequently, however, certain functions are delegated to individuals lower in the corporate hierarchy. When that function can be exercised without further reference back to persons higher in the hierarchy or chain of command, that person’s knowledge may be regarded as that of the company. These are the persons whose knowledge counts for the purpose of Article 2:101. For example, in the case of a medium-sized property company, the relevant person might be the managing agent of the particular block of shops or offices to be insured. In a large company of any kind that person is usually the company’s risk manager, if any. Mutatis mutandis the same is true of unincorporated associations.

Outside Knowledge: The Knowledge of Agents C6.  Whether or not applicants for insurance have actual knowledge of material facts, in many countries they are deemed to know what is known or should be known to certain of their agents – in the case of companies or associations agents outside the organisation.

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Among such agents distinguish those with a mandate limited to contract specified insurance cover from those wider functions. These are persons whose role or mandate goes beyond contracting insurance but is such that they are likely to receive information relevant to insurance cover that might be sought by their principal. In appropriate circumstances they are expected to communicate that information to their principal; this too is information, in the language of Article 2:101 para. l, of circumstances which an applicant ought to know. Most applicants with whom the Principles of European Insurance Contract Law are concerned are consumers and small businesses, and it is the first category of agent that will be important. They include the agents sometimes referred to as “insurance brokers” and “insurance intermediaries”. In this connection see also Article 1:206.

Enquiry or Investigation C7.  Article 2:101 is an objective rule in the sense that it presumes that applicants for insurance have certain kinds of knowledge. Underlying this is an expectation that statements made to insurers be made honestly. Applicants should not be allowed to “turn a blind eye” to the possibility of information which is adverse to their application but which can be readily unearthed. Thus, applicants are expected to check statements they make in applications against any relevant records, including computer records, in their possession, whether at home or in the office. Applicants are expected to make reasonable enquiries. To expect a professional opinion, however, goes too far. When an insurer wants a professional assessment of a risk, such as a valuation of property to be insured, usually the insurer must ask its applicants expressly to get a valuation, or arrange for one to be made itself. C8.  When applicants seek cover for one or more other persons, the circumstances which applicants know or ought to know, include those which were or should have been known to the other persons concerned. Here too therefore applicants have a duty to check relevant matters not within their own actual knowledge or of which they are uncertain but which may be within the actual or deemed knowledge of the other persons. For example, in the case of motor cover, applicants must disclose not only their own convictions for motoring offence, if any, but also those of other persons to be insured. This is the effect of Article 2:101 para. 2.

Notes Survey N1. All European insurance laws recognise a duty of the insured to disclose information before the insurance contract is concluded (see also art. 3 of the Amended Proposal for a Council Directive on Insurance Contract Law). However, at first sight they seem to be fundamentally divided on the question whether the insured is obliged to disclose any material information for the insurance contract without a specific request by the insurer or whether the scope of the duty to disclose depends on the questions of the insurer.

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Duty of Spontaneous Disclosure N2. The duty to disclose any material information on the insured’s own initiative is the position in the insurance laws of Austria, Belgium, Italy, Luxembourg, Portugal and, in part, the United Kingdom (for Austria, see Schauer 108; for Belgium, see Cousy/Schoorens 76; for Italy, see arts. 1892 to 1894 CC and Cerini 77; for Luxembourg, see art. 11 ICA and Commentaire des Articles, in Chambre des deputes, session ordinaire 1996-1997, no. 4252, note on art. 11, 34; for Portugal art. 24 ICA, Vasques 220; for the United Kingdom, see s. 18 of the Marine Insurance Act 1906, Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501 and MacDonald Eggers 41-029, Rühl 47, for qualification, see Clarke 23-12A, but note that the Consumer Insurance (Disclosure and Representations) Act 2012 abolished a pure duty of disclosure on consumers and that the Insurance Act 2015 proposes to rewrite the duty in commercial insurances and replace s. 18 of the Marine Insurance Act 1906). The Dutch CC makes an exception on the duty of spontaneous disclosure where the insurance was concluded on the basis of a questionnaire drafted by the insurer (art. 7:928 para. 6), and in respect of facts concerning an person’s criminal past (art. 7:928 para. 5), in both cases apart from the intent of misleading the insurer (see Wansink/Kamphuisen/Kalkman-Wansink 9). German law also provides a restricted duty of spontaneous disclosure – developed from the principle of utmost good faith – in cases of obviously extraordinary and material information which particularly affect the insurer’s interests (see BGH 19.5.2011, Versicherungsrecht 2011, 1549). N3. The scope of the duty to disclose is however limited: the insured need not disclose facts which are either known to the insurer or presumed to be known to him as matters of common knowledge or facts which an insurer should know in the ordinary course of business (for Belgium, see the second sentence of art. 58 IA 2014; for England and Wales, Marine Insurance Act 1906, s. 18(3)(b), MacDonald Eggers 41-030; for Luxembourg, see the second sentence of art. 11 para. 1 ICA) or facts which diminish the risk of the insurer (for England and Wales, Marine Insurance Act 1906, s. 18(3)(a), see Clarke 23-10C; for the Netherlands, art. 7:928 para. 5 CC). In the Swedish Act (s. 8 para. 1 of Ch. 8) the duty of spontaneous disclosure, existing only in business insurance, is limited to information of evident importance for assessment of the risk. N4. A further important limitation on the duty to disclose comes into play if an insurer does not enquire into a particular matter which most insurers (and thus the prudent insurer) would regard as material and therefore ask about. Such behaviour may be regarded exceptionally by English law as a waiver of the applicant’s duty of disclosure in particular if it forms part of the market policy of the insurer or if the insurer has conducted his own investigations (for example Clarke 23-12A). A similar position is found in Dutch law (Wansink/Kamphuisen/Kalkman-Wansink 9-10).

Duty to Answer the Insurer’s Questions N5. On the other hand, in the insurance laws of Finland, France, Germany, Greece, Poland, Spain, Switzerland and the United Kingdom as regards consumer insurance, the scope of the duty of disclosure depends on the range of the insurer’s questionnaire. In France, the insured is not obliged to any disclosure beyond his answers to the questions of the insurer, the rule of art. L. 113-2 para. 2 ICA is regarded as conclusive (Lamy Assurances, para. 278). A similar conclusive rule is found in s. 22 Finnish ICA, s. 19 para. 1 German ICA (see Wandt, paras. 789 ff.), art. 3 para.

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1(b) Greek ICA, art. 815 para. 1 Polish CC, art. 10 Spanish ICA (Bataller/Latorre/Olavarria 194, for further references, see Basedow/Fock-Schlenker 1315), art. 4 para. 1 Swiss ICA (see OG des Kantons Zürich, 11.4.1969, SVA XIII No. 16 and Maurer 251) and the UK Consumer Insurance (Disclosure and Representations) Act 2012, ss. 2 and 3.

Approximation N6. Whereas the starting points of both positions at first sight seem to be quite distinct, a certain approximation is brought about by the doctrine of waiver of disclosure in those cases where the insurer does not ask questions on points which a prudent insurer would regard as material. Therefore, the rule of Article 2:101 favours the second approach, also taking into consideration that the broad concept of spontaneous disclosure has been subject to considerable criticism in recent years (for the United Kingdom, see Clarke 23-12A and the reflection of this approach in the recasting of the duty of disclosure in commercial insurances in the Insurance Act 2015; for Germany, see Basedow/Fock-Basedow/Fock 71). In fact, the new German ICA obliges the applicant only to answer questions put to him by the insurer (cf. s. 19; Wandt, para. 785).

Article 2:102 Breach (1) When the policyholder is in breach of Article 2:101, subject to paras. 2 to 5, the insurer shall be entitled to propose a reasonable variation of the contract or to terminate the contract. To this end the insurer shall give written notice of its intention, accompanied by information on the legal consequences of its decision, within one month after the breach of Article 2:101 becomes known or apparent to it. (2) If the insurer proposes a reasonable variation, the contract shall continue on the basis of the variation proposed, unless the policyholder rejects the proposal within one month of receipt of the notice referred to in para. 1. In that case, the insurer shall be entitled to terminate the contract within one month of receipt of written notice of the policyholder’s rejection. (3) The insurer shall not be entitled to terminate the contract if the policyholder is in innocent breach of Article 2:101, unless the insurer proves that it would not have concluded the contract, had it known the information concerned. (4) Termination of the contract shall take effect one month after the written notice referred to in para. 1 has been received by the policyholder. Variation shall take effect in accordance with the agreement of the parties. (5) If an insured event is caused by an element of the risk, which is the subject of negligent non-disclosure or misrepresentation by the policyholder, and occurs before termination or variation takes effect, no insurance money shall be payable if the insurer would not have concluded the contract had it known the information concerned. If, however, the insurer would have concluded the contract at a higher premium or on different terms, the insurance money shall be payable proportionately or in accordance with such terms.

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Comments Remedies Available to Insurers C1.  The information about the circumstances surrounding the risk to be insured forms the basis of the insurers’ judgement and calculations when concluding the contract of insurance. If insurers discover later that that information was inaccurate or incomplete, they should be entitled to reconsider whether or on what terms they wish to continue to cover the risk. Accordingly, Article 2:102 para. 1 entitles insurers to terminate the contract or to propose a reasonable variation of the contract of insurance in question.

Termination (Article 2:102 paras. 2 (second sentence), 3 and 4) C2.  Insurers are entitled to terminate the contract and the cover altogether in two cases. The first is when the inaccurate or undisclosed information was so significant, namely so material to the risk that, if they had been fully and accurately informed, they would not have concluded the contract of insurance at all. In other cases, in particular when the information is less significant, insurers should not be in a position to threaten termination just in order to get a better bargain. The second case for termination is when, after the prescribed period of time, the parties to the insurance contract have been unable to agree a reasonable variation. In each case termination of the contract takes effect one month after notification. Moreover, like the corresponding provision of the Principles of European Contract Law, Article 9:305, termination under the Principles of European Insurance Contract Law, Article 2:102, takes effect not retroactively but for the future.

Variation (Article 2:102 para. 2) C3.  When insurers elect to propose a variation of the insurance contract, that variation must be reasonable and, in any event, the variation proposed is without effect unless it has been accepted by the policyholder concerned. Policyholders should be in a position to seek better terms elsewhere, when possible. Variation of the contract, when accepted by a policyholder, takes effect on acceptance or, when the proposed variation is neither accepted nor rejected by the policyholder, one month after receipt of the variation proposal. When policyholders fail to respond, it is better that there should be cover along the lines of the variation proposed than no cover at all. Variations, like termination (see Comment 2), do not have retroactive effect.

Notice (Article 2:102 para. 2) C4.  Article 2:102 para. 2 requires the insurers to elect between the remedies available within a reasonable time, which is one month, once they are aware of the breach. On the one hand, policyholders must not be kept in a position of undue doubt and uncertainty. On the other hand, insurers cannot be expected to make an instant election even with knowledge of the breach. In that regard insurers should not be obliged to check in detail the accuracy or completeness of every application. However, they should not be able to turn a blind eye to errors or omissions which are obvious from the application form itself, from what they know

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about the particular risk or in the light of information about risks of the kind in question which they know or should know. C5.  Once aware of an error or non-disclosure, insurers are not obliged to immediately notify the policyholder concerned, and that the question of sanction is under review. Usually the fact will indeed have come to the attention of the policyholder. However, when the insurer’s decision is to terminate the contract, the policyholder must be given clear notice of the decision and enough time to obtain alternative insurance cover, when available.

Discharge (Article 2:102 para. 5) C6.  The procedures provided for by Article 2:102 take time and, moreover, an error of non-disclosure may be discovered only after an insured event has occurred. Be that as it may, when the error or non-disclosure is innocent, policyholders should not be unduly prejudiced. Thus, Article 2:102 para. 5 provides that in such an eventuality the insurance money shall remain payable to a policyholder in full. The same is true when the error or non-disclosure is the product of negligence by the policyholder, as long as there is no causal connection with the loss. However, when there is negligence and a causal connection, the insurance money payable is qualified in the way set out in Article 2:102 para. 5. In case of intentional breach, Article 2:104 applies which gives the insurer the choice between the sanctions provided in Article 2:102 and avoidance of the contract under Article 2:104.

Notes The All-or-Nothing Principle N1. The consequences of a breach of the applicant’s pre-contractual duty of disclosure differ in European insurance contract laws. The most severe sanction is foreseen in the insurance laws of England and Wales, Ireland and Scotland. In the laws of these countries, the insured loses all insurance cover for the insured event even if the non-disclosure was innocent or the non-disclosure had no relation to the insured event (all-or-nothing approach; s. 18(1) of the UK Marine Insurance Act 1906 for England and Wales, see Carter v Boehm (1766) 3 Burr 1905 and Park 78; for Scotland, see Wilson/Forte-Forte, para. 858; for Ireland, see Schütte 34-35. In England, however, the severity has been tempered by clauses referred to as “non-avoidance clauses”: see Toomey v Eagle Star Ins Co Ltd (No 2) [1995] 2 Lloyd’s Rep 88; or “non-validation clauses”: Seashell of Lisson Grove v Aviva [2011] EWHC 1761 (Comm) [2012] Lloyd’s Rep IR 356: See further Clarke 23-18G. Further the all-or-nothing principle has been modified for consumer insurances by the Consumer Insurance (Disclosure and Representations) Act 2012 and should be modified for commercial insurances when the Insurance Act 2015 comes into force in 2016. N2. The insurance laws in Austria and Germany also follow the all-or-nothing approach, but limit its scope by requiring negligence or even gross negligence (Germany) of the breach and a causal link between the non-disclosure and the insured event (ss. 16 para. 3 and 21 Austrian ICA and s. 19 paras. 2 and 3 German ICA). For a similar approach, see art. 815 para. 3 Polish CC. The all-or-nothing principle is furthermore precluded if the insurer would, nevertheless, have concluded the contract, albeit under different conditions, even if it had known the non-disclosed

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circumstances, s. 19 para. 4 German ICA (see Wandt, paras. 801 ff.). Except in the case of fraud, the Dutch Civil Code applies the all-or-nothing approach only if the insurer, had it been aware of the true state of affairs, would not have concluded the insurance contract at all (art. 7:30 para. 4). In Sweden, concerning business insurance, the all-or-nothing approach is applied not only in cases of fraud and acts in contravention of good faith (as with consumer insurance), but also where the policyholder has intentionally or negligently disregarded the information duty and the insurer can prove that it would not have concluded the contract at all if the disclosure duty had been performed, s. 9 paras. 1 and 2 of Ch. 8 ICA. N3. For the legal systems which adhere to the all-or-nothing approach, it is not necessary to distinguish between the effect of non-disclosure on the insurance contract before an insured event occurred and the effect of non-disclosure after an insured event occurred as it is done in Article 2:102 para. 5: In both situations, the insurer is entitled to rescission of the contract.

The Proportional Reduction of the Insurance Money N4. Other European countries and in particular the more recent insurance laws have taken a different approach. Depending on the nature of the breach, they have opted for a proportional reduction of insurance money. These systems need to distinguish between the situations before and after the insured event occurred in order to make it possible for the insurer to terminate or adjust the contract based on wrong disclosure to the correct assessment of the risk. N5. They also differentiate between the innocent, negligent and fraudulent applicant, denying the protection of the reduction model in particular to the fraudulent applicant who does not deserve any form of protection (see Article 2:104 and corresponding notes) but granting its benefits to the negligent applicant who retains at least a proportionally reduced insurance cover. This reduction model can be found in art. 3 para. 3(c) of the Amended Proposal for a Council Directive on Insurance Contract Law and in the laws of Belgium (art. 60 IA 2014), Denmark (s. 6 ICA), France (art. L. 113-9 ICA), Finland (s. 24 para. 2 ICA), Greece (art. 3 para. 5 ICA), Italy (art. 1893 CC), Luxembourg (art. 13 ICA), the Netherlands (art. 7:930 paras. 2 and 3 CC), Portugal (art. 26 para. 4 ICA), Spain (art. 10 para. 3 ICA) and the United Kingdom (Consumer Insurance (Disclosure and Representations) Act 2012 as regards consumer insurance; a similar regime for commercial insurance is contained in the Insurance Act 2015). The Dutch Civil Code limits the scope of the reduction model in so far as the insurer has to pay in full if the facts, not or not correctly disclosed, are not material to the assessment of the risk as it has materialised (Wansink/Kamphuisen/Kalkman-Kamphuisen 31). N6. A more flexible form of the reduction model exists in the new insurance law of Sweden where the consumer insurance cover is not reduced on a strictly proportional basis but in accordance with what is reasonable in the light of the significance which the fact would have had for the insurer’s risk assessment, whether such disregard was intentional or negligent, and other circumstances (s. 2 para. 2 of Ch. 4 ICA). A somewhat similar model also applies to non-life insurance in Finland (s. 23 para. 2 ICA, according to which if the policyholder or the insured has, either wilfully or through negligence which cannot be considered slight, failed to fulfil his duty of disclosure, compensation may be reduced or refused).

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N7. Many of the aforementioned statutes also contain provisions for contract variation and/or termination which are similar to Article 2:102 paras. 1 and 2, see for example art. 60 Belgian IA 2014, art. L. 113-9 French ICA, s. 20 para. 1 Finnish ICA, s. 19 para. 4 German ICA, art. 3 paras. 3 and 4 Greek ICA and art. 13 para. 1 Luxembourg ICA. In the Dutch CC, the contract as such remains in force in the event of non-disclosure, albeit with “gaps” in the cover and it is up to the policyholder to decide to terminate it or not. The insurer may terminate the contract only in case of fraud or if it would not have concluded the contract at all, being aware of the true state of affairs (art. 7:929 CC, Wansink/Kamphuisen/Kalkman-Kamphuisen 29-30.).

Approximation N8. It should be added that the sharp differences between the positions of the insurance laws as described above do not result in equally far-reaching differences in insurance practice. This is particularly true for the United Kingdom and Ireland where the harsh position of the common law (Redgrave v Hurd (1881) 20 Ch D 1 (CA); Graham v Western Australian Ins Co Ltd (1931) 40 Ll. L. R. 64, 66, per Roche J) was, at least with regard to consumer contracts, considerably softened by the Statements of Insurance Practice issued by the Association of British Insurers and the Codes of Practice of the Irish Insurance Federation (Rühl 98-99, Basedow/Fock-Rühl 1459). In the United Kingdom it is now the focus of the Financial Conduct Authority (FCA), see ICOBS 8. The Financial Services Act 2012 abolished the previous Financial Services Authority with effect from 1 April 2013. Its responsibilities were split between two new agencies (the Prudential Regulation Authority, a division of the Bank of England, and the Financial Conduct Authority). Insurance issues as regards the conduct of business as opposed to financial regulation are now handled by the Financial Conduct Authority. Moreover, as far as doctrinal law is concerned, the position of insurance consumers was softened by the Consumer Insurance (Disclosure and Representations) Act 2012 and will be softened for business insureds under the provisions of the Insurance Act 2015 when it comes into force in 2016.

Innocent Breach N9. Finally, Article 2:102 para. 5 provides for an exception from the proportionality model in favour of an innocent applicant. The rules on contract variation and termination apply both to innocent and negligent misrepresentations – both negligent and innocent misrepresentations lead to a miscalculation of the insured risk and therefore require adjustment of the insurance contract for the future. But the rule of Article 2:102 para. 5 applies only to negligent misrepresentations and thus abandons the proportional reduction of insurance cover in favour of the innocent insured. A similar privilege for the innocent insured can be found in the insurance laws of Belgium (art. 60 para. 2 IA 2014), Finland (ss. 23 para. 2 and 24 para. 2 ICA), Luxembourg (art. 13 para. 2 ICA) and, so far as consumers are concerned, the United Kingdom (Consumer Insurance (Disclosure and Representations) Act 2012, ss. 4 and 5).

Article 2:103 Exceptions The sanctions provided for in Article 2:102 shall not apply in respect of (a) a question which was unanswered, or information supplied which was obviously incomplete or incorrect;

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(b) information which should have been disclosed or information inaccurately supplied, which was not material to a reasonable insurer’s decision to enter into the contract at all, or to do so on the agreed terms; (c) information which the insurer led the policyholder to believe did not have to be disclosed; or (d) information of which the insurer was or should have been aware.

Comments Unanswered Questions C1.  To reduce transaction costs insurers commonly require applicants to complete standard forms containing questions drafted with no particular applicant in mind. Such forms exhibit a tendency to contain more questions than are strictly necessary for insurers to reach a decision on a particular application. Thus it is not uncommon that an application is submitted with an incomplete or blank answer because, for example, the applicant is unable or unwilling to supply the information required, but that the insurer concludes the contract nonetheless. In such a case, the inference is that the answer was not material to the decision or that it was so marginal to the decision that the insurer was willing to assume that, if supplied, the information would not have been material. This is the kind of scenario envisaged by Article 2:103(a).

Immaterial Information C2.  Article 2:103(b) makes an exception for information that is not material to a reasonable insurer’s decision to enter the contract at all, or to do so on the terms agreed. Insurers are not entitled to the remedies provided for in Article 2:102 by reference to information which, they maintain, is material to them, even though it is not material to most other insurers of that kind of risk. The exception is the corollary of the rule, that is found in the law of many countries, that applicants are obliged to disclose (only) information that is (objectively) material to the risk in question. Moreover, in most countries, to be material the information in question must be sufficiently significant to be causative – in the sense that, if it had been disclosed, it would have had a certain effect on the conduct of the insurer: that the insurer would have refused to conclude the contract at all or would have done so only on different terms. The relevant effect is confirmed by Article 2:103(b). However, there is a reputable presumption underlying Article 2:101 that the information requested by the insurer’s question form is material in this sense. Note also Article 4:201, concerning aggravation of risk, in which the insurer’s rights are triggered by changes in the risk insured that are material in this same sense.

The Reasonable Insurer C3.  The “reasonable insurer”, like the “reasonable man”, is a mythical figure popular with legislators. However, whereas most people claim to have a notion of the “reasonable man”, there is less confidence about what is meant by a “reasonable insurer” and about what such an insurer is likely to regard as material. In some cases it will be obvious nonetheless. Elements of “moral hazard”, such as past convictions for criminal offences, are a clear ex-

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ample. In other less obvious cases, the expectation is that information will be sought about the practice of the insurance market in question and thus about the notion of “reasonable insurer” there. In any event, the applicant’s duty is limited by Article 2:101 to answering the insurer’s questions, with the corollary that these are matters that the particular insurer regards as material and with the presumption that the relevant insurance market would agree.

Waiver C4.  Article 2:103(c) envisages an applicant who answers an insurer’s questions with the assistance of an employee or representative of the insurer. Not uncommonly such persons’ representative advise applicants about the kind of information to be supplied in response to one or more of the questions. When applicants are advised erroneously that a certain fact does not have to be mentioned, and it is nonetheless reasonable for them to rely on that advice, the particular insurer is estopped from pleading non-disclosure on the part of the applicant. In other words, through their designated employees or representatives, insurers may be deemed to have waived the disclosure of the information in question and are not entitled to the remedies provided for in Article 2:102.

Information Known to Insurers C5.  When material information is already known to insurers, there is a rebuttable presumption that they conclude a related contract of insurance in reliance on their own knowledge rather than on what is said or not said about the matter by applicants. Good faith, mutuality and fair dealing require that such a rule apply not only to what insurers actually know but also to information that they ought to know. Moreover, such considerations also dictate that in principle the knowledge thus imputed to insurers be no less extensive than that imputed to applicants: see Article 2:101 Comments 4 to 7. For insurers, the imputation should not extend to purely paper based records, which are likely to be extensive and too costly to search. However, subject to the operation of data protection legislation, the imputation extends to information which is readily accessible and thus to in house computer data, notably records, and also to collective data compiled in cooperation with other insurers.

Effects of the Exceptions C6.  If one of the exceptions in Article 2:103 applies, an insurance contract which has been properly concluded and is not invalid on other grounds will remain in force as agreed.

Notes Obvious Defects of the Policyholder’s Answer, Article 2:103(a) N1. The rule of Article 2:103(a) reflects a kind of waiver of disclosure different from the one discussed in the notes on Article 2:101. Article 2:103(a) does not concern a waiver of disclosure in relation to facts which the insurer did not ask for (although a prudent insurer would have asked for). It rather concerns a waiver of disclosure of information the insurer asked for but did not receive or which it received with obvious gaps or errors.

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N2. This situation is dealt with both in national laws which require spontaneous disclosure and in laws which do not. Both systems seem to arrive at the same result: if the insurer concludes a contract of insurance although it is aware of incomplete or incorrect disclosure by the insured, it is deemed to have waived its right of information and consequently loses the remedies for the breach of the duty to inform (which are spelt out in Articles 2:102 and 2:104). This is true for the laws of Belgium (art. 58 para. 2 IA 2014), Finland (s. 35 para. 1 ICA), Germany (BGH 11.5.2011, Versicherungsrecht 2011, 909; BGH 25.3.1992, BGHZ 117, 385 and s. 19 para. 5(2) ICA), Greece (the third sentence of art. 3 para. 1 ICA), Luxembourg (art. 11 para. 2 ICA), the Netherlands (art. 7:928 para. 4 CC and Wansink/Kamphuisen/Kalkman-Kamphuisen 28-29), Poland (the third sentence of art. 815 para. 1 CC), Spain (Bataller/Latorre/Olavarria 195, Sánchez Calero, (art. 10) 203, for further references, see Basedow/Fock-Schlenker 1319), Sweden (s. 4 of Ch. 4 ICA), Switzerland (art. 8 no. 6 ICA) and England and Wales (Clarke 23-12B1 and 23-13). An exceptio doli is made in the case of a fraudulent applicant: he shall not benefit from the possible negligence of the insurer who does not conduct further inquiries (art. 58 para. 2 Belgian IA 2014; s. 35 para. 1 Finnish ICA; art. 3 para. 1(c) Greek ICA; art. 11 para. 2 Luxembourg ICA).

Immaterial Information, Article 2:103(b) N3. As the purpose of the duty of disclosure is to enable the insurer to assess and calculate the risk insured, circumstances which are not material to the risk (namely which would not influence a reasonable insurer’s decision to conclude the contract or to calculate the premium) are, in all legal systems, outside the duty of disclosure. This rule can be found in art. 3 para. 1 of the Amended Proposal for a Council Directive on Insurance Contract Law, s. 16 para. 1 Austrian ICA, art. 7:928 para. 4 Dutch CC, s. 35 para. 2 Finnish ICA, art. 113-2 para. 2 French ICA, s. 19 para. 1 German ICA, the first sentence of art. 3 para. 1 Greek ICA, art. 1892 para. 1 Italian CC, art. 11 para. 1 Luxembourg ICA, art. 24 para. 1 Portuguese ICA, art. 10 para. 1 Spanish ICA and art. 4 para. 2 Swiss ICA.

The Insurer’s Knowledge and Behaviour, Article 2:103(c) and (d) N4. The exceptions of Article 2:103(c) and (d) are discussed by implication in the notes on Article 2:101. A provision similar to Article 2:103(c) can be found in art. 8 no. 2 Swiss ICA, a rule similar to Article 2:103(d) in art. 3 para. 1 of the Amended Proposal for a Council Directive on Insurance Contract Law, s. 16 para. 3 Austrian ICA, art. 58 para. 1 Belgian IA 2014, s. 19 para. 4 German ICA, s. 35 para. 1 Finnish ICA, art. 11 para. 1 Luxembourg ICA and art. 8 nos. 3 and 4 Swiss ICA.

Article 2:104 Fraudulent Breach Without prejudice to the sanctions provided for in Article 2:102, the insurer shall be entitled to avoid the contract and retain the right to any premium due, if it has been led to conclude the contract by the policyholder’s fraudulent breach of Article 2:101. Notice of avoidance shall be given to the policyholder in writing within two months after the fraud becomes known to the insurer.

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Comments The Range of Remedies C1.  According to Article 2:102 para. 1 and Article 2:102 para. 3, in cases of innocent non-disclosure or inaccuracy, insurers are entitled to terminate the contract in two cases. One is when the parties have been unable to reach timely agreement on a reasonable variation. The other is when a fully and accurately informed insurer would not have concluded the contract of insurance at all. In the case of fraudulent non-disclosure or inaccuracy, as in the case of negligence, such conditions do not apply so that termination is entirely at the discretion of the insurer. The very fact that a policyholder was fraudulent in the presentation of the risk raises adverse implications about the moral hazard involved, and insurers are entitled to avoid the contract at their will.

The Impact of Fraud C2.  Fraud is not defined in the Principles of European Insurance Contract Law, however, under Article 4:107 para. 2 PECL a party’s “representation or non-disclosure is fraudulent if it was intended to deceive”. While in most countries fraud is not only a breach of morality but also a breach of the criminal law the Principles of European Insurance Contract Law consider any deliberate deception as being fraudulent. The consequences in law for contracts induced by fraud are often severe: fraus omnia corrumpit. However, the impact of fraud on the decision of insurers to contract varies widely in insurance cases, and severe consequences may not be appropriate. The applicant who states his age to be 49 rather than 50, in an application for fire insurance, may well be more foolish than fraudulent.

Avoidance C3.  In the circumstances described the effect of fraud under Article 2:104 is that the contract is not void but may be avoided at the discretion of the insurer concerned. This too is the rule for contracts in general in Article 4:107 para. 1 PECL, under which the remedy for fraud is also avoidance. Article 2:104 does not oblige insurers to avoid the contract. Insurers have the alternative remedy provided by Article 2:102 either to terminate the contract for the future or to propose a variation of the existing contract. This follows from the fact that intentional breach is more serious than innocent or negligent breach (a maiore ad minus). This is why the first sentence of Article 2:104 refers to Article 2:102.

The Position of Policyholders C4.  Article 2:104 allows insurers to avoid the contract only when they have been led to conclude the contract by the fraud of the policyholder. A similar rule is found in Article 4:107 para. 1 PECL. Fraud which has no effect on an insurer’s decision to conclude the contract, whether because the false information was inherently immaterial or because the insurer was aware that the information was false, does not carry consequences adverse to the policyholder. The requirement of causation reflects the widespread view that it is not the primary role of insurance contract law to uphold social morality with rules that are punitive.

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C5.  In the case of innocent breach of Article 2:101 when insurers exercise the right to terminate the contract, the effect is not retroactive but prospective. The policyholder in question is not required to repay the amount of honest claims previously paid under the policy. When breach is negligent insurers may demand repayment subject to the proportionality rule: Article 2:102 para. 5. In cases of fraud, however, insurers are entitled to avoid the contract of insurance with unqualified retroactive effect. In this respect Article 2:104 is once again in line with the Principles of European Contract Law, in which Article 4:107 para. 1 provides that a “party may avoid a contract when it has been led to conclude it” by the other party’s fraudulent non-disclosure; and in which Article 4:115 provides that on avoidance “either party may claim restitution of whatever it has supplied under the contract”, except that under Article 2:104 PEICL insurers are entitled to retain premium paid. Retention of premium in cases of fraud may be authorised by a term of insurance policies, a common term that has been upheld and enforced by the courts. Although in this and other respects the Principles of European Insurance Contract Law contain elements of retribution, it is mainly inspired by the goal of deterrence. A fraudulent applicant must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, unless there has been an intervening loss, I will not lose. C6.  As in the case of innocent or negligent non-disclosure, in the interests of certainty for all concerned insurers are required to reach a decision within a certain time. However, whereas in the other cases insurer must decide within one month, in case of fraud policyholders are treated less sympathetically and the insurer is given more leeway: the corresponding period is two months.

Notes N1. The countries which follow the model of proportionate reduction of insurance cover in case of non-disclosure make an exception in the case of a fraudulent applicant. In such cases no need for protection is felt. Similar exceptions can be found in art. 3 para. 4 of the Amended Proposal for a Council Directive on Insurance Contract Law and in the laws of Belgium (art. 59 IA 2014), Denmark (s. 4 ICA), Finland (ss. 23 para. 1 and 24 para. 1 ICA), France (art. L 113-8 ICA), Greece (art. 3 para. 6 ICA), Italy (art. 1892 CC), Luxembourg (art. 12 ICA), the Netherlands (art. 7:930 para. 5 CC), Spain (art. 10 para. 3 ICA) and Sweden (s. 4 of Ch. 4 ICA). N2. For those countries which adhere to the all-or-nothing model and deny cover to a negligent or innocent applicant who breaches the duty of pre-contractual disclosure, it goes without saying that a fraudulent applicant will not be entitled to claim insurance cover.

Article 2:105 Additional Information Articles 2:102-2:104 shall also apply to any information supplied by a policyholder at the time of concluding the contract in addition to that required by Article 2:101.

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Comment Article 2:105 is aimed at occasions in which an applicant supplies material information even though it has not, in accordance with Article 2:101 para. 1, been the subject of clear and precise question put to him by the insurer. Policyholders are not obliged to supply additional information but, when they do so and it is material to an insurer’s decision, it must be as accurate and complete as that which is the subject of such questions.

Note The application of Articles 2:102 to 2:104 to voluntarily supplied information is a necessary implication for those insurance laws which start from the premise of a duty to disclose any material information spontaneously (Austria, Belgium, Italy, Luxembourg, Portugal and the United Kingdom; for references see the notes on Article 2:101). But also those jurisdictions which limit the scope of the duty of disclosure to the questions asked by the insurer seem to apply the sanctions if information was voluntarily supplied, as the questions only limit the duty of disclosure, but do not discharge the applicant from the duty to give true information, for example art. 5 Belgian IA 2014.

Article 2:106 Genetic Information This Section shall not apply to the results of genetic tests which are subject to Article 1:208 para. 1.

Comments C1.  Article 2:106 makes it clear that the provision in Article 1:208 para. 1 is lex specialis as regards the applicant’s pre-contractual information duties provided for by this section; see also the comments to Article 1:208.

Section Two: Insurer’s Pre-contractual Duties Article 2:201 Provision of Pre-contractual Documents20 (1) The insurer shall provide the applicant with a copy of the proposed contract terms as well as a document which includes the following information if relevant: (a) the name and address of the contracting parties, in particular of the head office and the legal form of the insurer and, where appropriate, of the branch concluding the contract or granting the cover; (b) the name and address of the insured and, in the case of life insurance, the beneficiary and the person at risk; (c) the name and address of the insurance agent; (d) the subject matter of the insurance and the risks covered; (e) the sum insured and any deductibles; 20

This provision is modelled on arts. 183 to 189 of the Solvency II Directive (2009/138/EC).

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(f) the amount of the premium and the method of calculating it; (g) when the premium falls due as well as the place and mode of payment; (h) the contract period, including the method of terminating the contract, and the liability period; (i) the right to revoke the application or avoid the contract in accordance with Article 2:303 in the case of non-life insurance and with Article 17:203 in the case of life insurance; (j) that the contract is subject to the PEICL; (k) the existence of an out-of-court complaint and redress mechanism for the applicant and the methods of having access to it; (l) the existence of guarantee funds or other compensation arrangements. (2) If possible, this information shall be provided in sufficient time to enable the applicant to consider whether or not to conclude the contract. (3) When the applicant applies for insurance cover on the basis of an application form and/or a questionnaire provided by the insurer, the insurer shall supply the applicant with a copy of the completed documents.

Comments Pre-contractual Documents in General C1.  Pre-contractual documents have become an ever more frequent means of conferring protection on consumers in general (see for example arts. 3 and 4 of the Package Travel Directive (90/314/EEC); arts. 5 and 6 of the Consumer Rights Directive (2011/83/EU); art. 3 of the Distance Marketing Directive (2002/65/EC); arts. 3 para. 1, 4 para. 1 and 5 para. 2 of the Timeshare Directive (2008/122/EC) as well as arts. 5 ff. of the Consumer Credit Directive (2008/48/EC) and applicants for insurance cover in particular (arts. 183-185 of the Solvency II Directive (2009/138/EC)); as to national legislation, see the Notes below). Pre-contractual documents help to ensure transparency for the prospective policyholder. They put such persons in a position to check the prospective contract and reach an informed decision. Above all, the scope of insurers’ information duties is further extended by current EU legislation, such as the PRIIP Regulation (1286/2014) and the proposed IDD (Insurance Distribution Directive21).

Duty to Provide an Applicant with a Pre-contractual Document C2.  In view of the policy considerations referred to in Comment 1, Article 2:201 para. 1 requires the insurer to provide the applicant with a pre-contractual document containing relevant information concerning the insurance contract under negotiation, as well as the proposed contract terms. This duty is independent of the obligation of the insurer to issue an insurance policy after conclusion of the contract (Article 2:501).

21

See the Proposal for a Directive of the European Parliament and of the Council on insurance mediation (recast) – Confirmation of the final compromise text with a view to agreement, Doc. No. 10747 / 15 of 16 July 2015, Interinstitutional File: 2012 / 0175 (COD); the Directive has, however, not yet been adopted.

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Pre-contractual Documents in Special Branches of Insurance C3.  The contents of the pre-contractual document are described by Article 2:201 para. 1 in a way that is referable to all branches of insurance. In some branches additional information is required (see for example the list of information to be given by a life insurer under art. 185 of the Solvency II Directive (2009/138/EC)). Such requirements are dealt with at a later stage within the rules specific to single branches of insurance.

Right to a Copy of the Completed Documents C4.  Applicants often complete forms provided by the insurer. Examples are the application form and the questionnaire (see Article 2:101 para. 1). Both documents are of decisive evidential value for ex-post determination of the contents of the concluded insurance contract or a possible breach of the applicant’s pre-contractual information duty (Articles 2:101 to 2:105). Therefore, the insurer is obliged to hand out copies of such completed forms to the applicant (Article 2:201 para. 3).

Form of Documents C5.  The document must be in writing. This includes means of communication that provide a record readable by both sides, as defined by Article 1:301 para. 6 PECL. In particular, messages sent by telegram, telex, telefax and e-mail are equivalent to written statements under that rule.

Notes European Directives and their Implementation N1. The Solvency II Directive (2009/138/EC), which recasts the so-called Third Generation Insurance Directives, explicitly requires that the insurer provides the prospective policyholder with certain information before entering into the contractual relationship. Similar information duties have been laid down in further EC directives that may also become relevant for insurance. This relates, in particular, to art. 5 of the Electronic Commerce Directive (2000/31/EC) and to art. 3 of the Distance Marketing Directive (2002/65/EC). The information requirements under the latter directives are not always in line with those of the insurance directives. N2. For the implementation of the information requirements of the Third Generation Insurance Directives, see for instance s. 9a paras. 1 and 3 and s. 18b para. 1 Austrian ISA; art. 30 Belgian IA 2014 in conjunction with art. 15 para. 1 of the Belgian Royal Decree of 22 February 1991 on Insurance Supervision; art. 20 para. 1-2 Dutch ISA in conjunction with the Dutch Decree on the Supervision of the Conduct of Financial Enterprises (which enables the insurer to furnish the required information later after the conclusion of the contract together with the delivery of the policy on the condition that the policyholder is granted a cooling-off period of 30 days); s. 5 para. 1 Finnish ICA (according to s. 5 para. 2, this information does not need to be provided if the policyholder does not want it or if giving the information “would pose excessive inconvenience”)

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and the Ministry of Justice Decree on Information to be provided on Life Insurance (177/2011); art. L. 112-2 French ICA; s. 7 German ICA together with the Regulation on Duties of Information Relating to Insurance Contracts of 18 December 2007; arts. 166 and 182 to 187 of the Italian Code of Private Insurance plus the rules provided in the ISVAP Regulation No. 5/2006; art. 13a of the Polish Act on Insurance Activity; art. 18 Portuguese ICA; art. 60 Spanish ISA in conjunction with arts. 104 to 107 of the Spanish Royal Decree on Insurance Supervision; and in the United Kingdom ICOBS 6. N3. Art. 3 para. 1 Swiss ICA also states that the insurer has to give the applicant specific information either by including them in the proposal form or by giving a separate document before the prospective policyholder submits his proposal. The Swedish ICA (see ss. 2 and 3 of Ch. 2 for indemnity insurance and ss. 2 and 3 of Ch. 10 for personal insurance) is similar, but it restricts this duty of information to cases where the applicant has not renounced his right to information and where the information is not impracticable to be given. Cf. also the Finnish ICA under Note 2 above.

The Kind of Information to Be Given N4. Article 2:201 para. 1 closely adheres to the policyholder information requirements of the Solvency II Directive (2009/138/EC). According to art. 183 para. 2 of the Solvency II Directive (2009/138/EC), the information duties in non-life insurance only apply if the applicant is a natural person.

Stricter Requirements under National Laws N5. Some Member States set even more demanding standards than the directives. This relates for example to Austria: s. 18b para. 1 ISA requires additional information about the insurer’s performance and the choice of the policyholder in this matter; under s. 5b para. 2(2) ICA the general insurance conditions must be provided to the policyholder. In France, the insurer must hand out either a copy of a draft contract with all its annexes or a note containing detailed information on the insurance cover, including exclusions and the duties of the policyholder, see art. 112-2 ICA. In Germany (the information must include among other items the general policy conditions, the name and address of the contracting parties, the total costs to be borne by the policyholder, including the premium and any taxes and additional fees, s. 7 ICA and the Regulation on Duties of Information Relating to Insurance Contracts of 18 December 2007). For Italy, see art. 185 of the Code of Private Insurance. In Spain, the insurer shall include the text of the general contract terms in the proposal if such a proposal exists (art. 3 para. 1 ICA); see also arts. 53, 60 and 81 ISA. In the United Kingdom, the Financial Services (Distance Marketing) Regulations 2004 implement the Distance Marketing Directive (2002/65/EC). The Regulations set minimum standards for the information that must be provided to consumers before they enter certain financial services contracts, among them contracts of insurance. Distance marketing is when there is no personal contact with the consumer, but the transaction is conducted through the Internet or by post or by telephone. See, for example, http://fshandbook.info/FS/html/FCA/ ICOBS/3/Annex2. Switzerland puts the insurer under an obligation to state the general policy conditions (the second sentence of art. 3 para. 2 ICA).

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Information Duty Drafted in General Terms N6. Contrary to the enumeration technique chosen by the respective directives and several national legislators, some legal systems merely stipulate a duty of pre-contractual information in general terms, sometimes accompanied by one or more examples, see s. 5 para. 1 Finnish ICA and s. 2 para. 1 of Ch. 2 Swedish ICA: any information needed by the applicant to assess his insurance requirements and to select the insurance shall be provided; details specifically mentioned concern the premium, insurance terms and conditions and all major exclusions from cover.

Application Form Provided by the Insurer, Article 2:201 para. 3 N7. Article 2:201 para. 3 is drafted on the model of s. 5b para. 1 Austrian ICA which requires the insurer to immediately issue a copy of the policyholder’s written application. The same rule has been adopted in Belgium (art. 64 para. 3 IA 2014), Luxembourg (art. 16 para. 3 ICA) and Greece (art. 2 paras. 2 and 4): no later than at the time of conclusion of the contract shall the insurer furnish, to the policyholder, a copy of the information previously given to the insurer by the policyholder concerning the risk to be covered. In Switzerland, too, the policyholder can demand that the insurer has to deliver a copy of the policyholder’s declarations – included in the proposal of insurance or otherwise made – on the basis of which the contract was finally concluded (art. 11 para. 2 ICA).

Article 2:202 Duty to Warn about Inconsistencies in the Cover (1) When concluding the contract, the insurer shall warn the applicant of any inconsistencies between the cover offered and the applicant’s requirements of which the insurer is or ought to be aware, taking into consideration the circumstances and mode of contracting and, in particular, whether the applicant was assisted by an independent intermediary. (2) In the event of a breach of para. 1 (a) the insurer shall indemnify the policyholder against all losses resulting from the breach of this duty to warn unless the insurer acted without fault, and (b) the policyholder shall be entitled to terminate the contract by written notice given within two months after the breach becomes known to the policyholder.

Comments General Remarks C1.  Insurance contracting is typically characterised by inequality of knowledge and experience as between the insurer and the policyholder. Such inequality may give rise to duties to inform the other party under general European contract law (see Article 4:107 PECL). Article 2:202 aims at establishing a general pre-contractual duty on the part of the insurer to assist the applicant by providing information relevant to the applicant’s choice of cover.

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Duty to Assist the Applicant C2.  The duty of assistance concerns areas where the insurer can usually be considered an expert. In general, insurers are experts as to the evaluation of risks as well as to the contents of their insurance policy. This is why Article 2:202 para. 1 obliges the insurer to warn the applicant about aspects of the proposed risk not covered by the policy. C3.  The duty of assistance is limited to situations where the insurer had reason to know about gaps in cover referred to in Comment 2, because the actual risk situation of the applicant was apparent to the insurer or where such a gap should reasonably have been anticipated by the insurer. C4.  The scope of the duty of assistance is to be determined in the light of all circumstances of the particular case. This is why Article 2:202 para. 1 refers to the circumstances and mode of contracting. Several aspects may be relevant:

a. The information duties of the insurer will be more extensive if there are face to face negotiations between an applicant and an agent representing the insurer. In this context reference should be made to art. 12 para. 3 of the Insurance Mediation Directive (2002/92/EC) as amended by art. 91 of MiFID2 (2014/65/EU), according to which insurance intermediaries (including agents) “shall at least specify, in particular on the basis of information provided by the customer, the demands and needs of that customer as well as the underlying reasons for any advice given to the customer on a given insurance product. These details shall be modulated according to the complexity of the insurance contract being proposed”. b. Consideration should be given to whether or not the applicant is professionally advised by an insurance broker. If so, the insurer may assume that the applicant is well advised by the broker and duties of assistance will arise only in exceptional circumstances. This is why the example of negotiating through an insurance broker is specifically mentioned in Article 2:202 para. 1. c. The duties to warn will be less extensive if there are no face to face negotiations between the applicant and the insurer or an agent representing the insurer. Under such circumstances the insurer will only be able to give fairly routine assistance. A similar position is taken in the Distance Marketing Directive (2002/65/EC). In particular, according to art. 3 para. 1(2) (a), the insurer has to provide the consumer with “a description of the main characteristics of the financial services”. d. Furthermore, the pre-contractual duties of the insurer may be limited if the mode of contracting does not entitle the applicant to expect assistance. This may be the case when insurance products are sold in a supermarket and it is clear that the retailer of such products is not primarily involved in the marketing of insurance. However, consideration should also be given to whether such a way of marketing insurance policies is appropriate in the light of the complexity of the insurance product at stake. In particular, if fund linked life assurance policies (with the possibility of losing the investment) are sold, a warning about the nature of such insurance and the extent of the risks involved needs to be provided, irrespective of

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the way of such policies are marketed. Reference should be made, however, to art. 1 para. 2 of the Insurance Mediation Directive (2002/92/EC) as amended by art. 91 of MiFID2 (2014/65/ EU). According to that provision professional standards should not be applied to persons whose principal professional activity is other than advising on and selling insurance, if the insurance policies sold are not complex and marketing them does not require any general or specific knowledge.

Consequences of Failure to Assist C5.  Lack of the requisite information may ultimately lead to insufficient insurance cover for the policyholder (in some cases it may also lead to over-insurance or undesired coverage). In such cases, under general contract law the party that has a right to be informed appropriately may rescind the contract (see, for example, Article 4:107 PECL: “avoidance”) or sue for damages. In some countries insurance laws provide for modification of the insurance contract in accordance with the reasonable expectations of the policyholder.

Damages C6.  Article 2:202 para. 2(a) establishes a right of the policyholder to damages. The insurer will have to pay the policyholder the amount of money that will put him in the position he would have been in, had he been duly warned by the insurer. The insurer will be relieved of the obligation to pay damages only if it proves that there was no fault on its part. C7.  Damages might become payable in various circumstances. In some cases the policyholder would have bought alternative insurance cover had he known that a particular risk was not covered under the policy in question. In other cases, for example if a risk is not insurable in the market, the policyholder might have refrained from engaging in activities involving the risk; of course this would have to be proved. Article 2:202 para. 2(a) does not specifically deal with the burden and standard of proof. However, it is an established practice of the courts throughout the Member States of Europe to ease the burden of proof on the policyholder by presuming or at least accepting a prima facie case that the policyholder would have reacted in a reasonable manner had he been warned by the insurer. Therefore, it may be assumed that the policyholder would have been ready to buy additional cover if it was available at a reasonable price in the market. C8.  If an insurer finds out about a breach of its duty to warn after the making of the contract, it may perform its duty at that time. If then the policyholder does not respond (for example by buying additional cover), there will be no further liability for damages on the part of the insurer.

Termination C9.  Article 2:202 para. 2(b) gives the policyholder a right to terminate the contract. Termination will have no retroactive effects.

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Notes Community Law N1. The pre-contractual information duties of the insurer can basically be divided into two subcategories: the duty to inform about the insurance policy in general and the duty to advise the insured in respect of his individual requirements of insurance in particular. Whereas the former is dealt with in the section on the insurance policy (Articles 2:501 and 2:502), the latter is subject to Articles 2:201 to 2:203. The insurance directives of the European Community so far only deal with the information duty concerning the insurance policy in general and do not regulate the duty to advise the insured about his particular needs. An exception can be seen in the Insurance Mediation Directive (2002/92/EC) (as amended), but this Directive only applies to the duties of insurance intermediaries and does not stipulate a duty to advise for the insurer (see art. 12 of the Directive). In the neighbouring field of investment services, art. 25 para. 2 of MiFID2 (2014/65/ EU) requires investment firms providing advise to the investor on investment services and financial instruments to test any investment recommended for its suitability to the investor. While MiFID2 (2014/65/EU) has amended the Insurance Mediation Directive (2002/92/EC), it does not apply to insurance undertakings (art. 2 para. 1(a) of that Directive). However, the situation may change with an enactment of the proposed Insurance Distribution Directive. This Directive is proposed to apply to insurers in cases of direct marketing and provides for duties of advice in particular for so called insurance based investment products (see art. 25 IDD as proposed by the Presidency / ​General Secretariat of the Council on 16 July 2015).

National Law N2. The laws of the Member States differ as to the duty of the insurer – as opposed to the insurance intermediary – to provide advice on the suitability of the insurance for the needs of the insured. Three legislative model solutions can be discerned. The laws of Germany (s. 6 para. 1 ICA), Sweden (s. 2 of Ch. 2 and s. 2 of Ch. 10 ICA, Basedow/Fock-Scherpe 926 and Bengtsson 206-208) and the rules in the FCA Handbook in the United Kingdom. Detailed guidance on the question of suitability is set out, for example, in ICOBS, which imposed more general duties to provide “product information”. See ICOBS 6.1. ff. N3. In other countries the courts require the presence of particular circumstances. This is the case in Austria (OGH 28.3.2012, 7 Ob 100/11y; OGH 30.11.1989, Versicherungsrecht 1991, 87, OGH 10.5.1984, Versicherungsrecht 1985, 1099 (1100)) and France (Cass. civ. 2.10.1984, Bull. Civ. I n° 241; Cass. civ. 1.12.1989, RGDA 1999, 335 (336); for further references, see Basedow/ Fock-Völker 476 ff.) where such a duty is imposed if the insured had expressly stated a special need for insurance or if it is apparent that his perception of the insurance cover is misconceived. In Italy, a similar duty is imposed on both intermediaries and insurers (art. 183 of the Code of Private Insurance). N4. In a third group of legal systems no such duty seems to exist at all, at least not in a binding form. This relates to Greece, but only as regards the specific provisions of the Insurance Contract Law, (see Basedow/Fock-Papathoma-Baetge 583 ff.), to Spain (see Basedow/Fock-Schlenker 1291) and to Switzerland (see Honsell/Vogt/Schnyder-Fuhrer art. 34 VVG paras. 46, 137). See also the interesting approach in art. 811 para. 1 Polish CC. In other jurisdictions, it has at least not been

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considered at large in legal debate (for example in Belgium, see Basedow/Fock-Fock 241 and in the Netherlands, see Wansink, Het Verzekeringsarchief 2009 3-28). N5. The solution which is proposed in Article 2:202 reflects a compromise solution between the extremes. The duty to give advice is limited to circumstances in which the insurer can foresee or reasonably could have foreseen that the cover provided will not be adequate for the needs of the insured. In this appreciation of all relevant circumstances, the mode of contracting and in particular the involvement of an independent intermediary who is obliged to advise the insured under art. 12 of the Insurance Mediation Directive (2002/92/EC), as amended, are taken into account.

Sanctions N6. Those statutes which impose a duty to advise the insured about inconsistencies between the cover offered and his individual requirements of insurance generally provide for some form of sanction in case of breach of that duty. Under the new German law, an insurer who breaches its obligation to give advice has to compensate the policyholder for any loss resulting from that breach, unless the insurer acted without fault (s. 6 para. 5 ICA). Under the Swedish Act, the insurer cannot rely on particularly important information that should have been but has not been provided to the consumer according to s. 4 of Ch. 2 ICA (s. 8 of Ch. 2 ICA). N7. Austrian law sanctions a breach of the duty to inform on the basis of its general civil law concept of culpa in contrahendo. As a consequence, the insured can claim compensation for the lack of insurance cover resulting from the breach of the duty to inform. The liability arising from culpa in contrahendo requires fault on the side of the insurer who is responsible for any auxiliary personnel (s. 1313a CC). French law, on the other hand, invokes tort law in order to sanction a breach of a duty to inform or to warn the insured (art. 1382 CC, Fil 109-117). The liability under art. 1382 CC requires fault, but the insurer is held responsible for his intermediaries and agents as préposés (art. 1384 para. 5 CC, art. 511-1 ICA). N8. In Austrian, German and French law the indemnification for lack of insurance cover is regarded as (either quasi-contractual or delictual) compensation. N9. The law of the United Kingdom enforces the duty to inform and consult with the instruments of public law (for example financial penalties or limitation/withdrawal of the permission to carry on regulated activities, see the enforcement section of the FCA Handbook) and the procedures of the Financial Ombudsman Bureau which may lead to the Ombudsman ordering fair compensation for the insured (Basedow/Fock-Rühl 1406, 1408, 1412 f., s. 229 of the UK Financial Services and Markets Act 2000).

Article 2:203 Duty to Warn about Commencement of Cover If the applicant reasonably but mistakenly believes that the cover commences at the time the application is submitted, and the insurer is or ought to be aware of this belief, the insurer shall warn the applicant immediately that cover will not begin until the contract is concluded and, if

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applicable, the first premium is paid, unless preliminary cover is granted. If the insurer is in breach of the duty to warn it shall be liable in accordance with Article 2:202 para. 2(a).

Comments Problems of Commencement of Cover in Practice C1.  Application forms contain questions as to when the cover sought is to begin. The applicant commonly enters the day of making the application as the desired commencement date, because the risk usually exists at the time when the application is made. Applicants often believe themselves to be automatically insured once they have signed the application form. Such belief is supported by the fact that insurers often grant preliminary cover but it may turn out to be a seriously mistaken belief if the insurer does not grant preliminary cover in the specific case. Moreover, agents often assist applicants in filling out the application form. As long as the agent does not respond negatively to an applicant’s request for immediate cover, the applicant will consider the silence of the agent as confirmation of his belief that he enjoys cover as of the time of signing the application.

Duty to Warn C2.  A request for immediate cover implies a tacit request for preliminary cover and requires immediate response by the insurer. This is why the first sentence of Article 2:203 obliges the insurer either to grant such cover or to warn the applicant about the lack of cover as long as the insurance contract is not concluded and, if applicable, the first premium is not paid (see Article 5:101). Article 2:203 is a special case of the general duty of the insurer to warn the applicant about gaps in the insurance cover and, therefore, leads to the same sanctions (see Article 2:203 referring to Article 2:202 para. 2).

Notes Community Law N1. Under European law, the most detailed list of information duties so far is in art. 185 of the Solvency II Directive (2009/138/EC) concerning life insurance. In its para. 3 b), the information on the commencement of cover is only referred to indirectly by the obligation incumbent upon the insurer to inform about the “term of the contract” (see also Article 2:201 and the notes).

The Sanction of Immediate Cover N2. The duty established by Article 2:203 resembles s. 1a para. 2 Austrian ICA. This requires that the applicant who, in order to apply for insurance cover, uses a standard form issued by the insurer, shall be indemnified by the insurer for losses occurring before the contract is concluded if the insurer cannot prove that it had warned about the (later) commencement of cover.

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N3. Under Swedish law, the situation for the applicant differs insofar as the law, if not agreed upon otherwise by the parties, prescribes the commencement of the insurer’s obligation to indemnify the applicant to start the day after the applicant has either sent off the application or has received an offer by the insurer (s. 2 para. 2 of Ch. 3 ICA). As a consequence, a gap in cover is unlikely. However, the rule is modified when the commencement of the cover is made contingent upon the policyholder’s payment of the premium. Then, the cover only commences the day after the premium has been paid.

Incomplete and Unclear Sanctions N4. Under the new German law, the insurer is required to inform the applicant about the commencement of cover (s. 7 ICA and s. 1 para. 1(12) of the Regulation on Duties of Information Relating to Insurance Contracts of 18 December 2007). In case of breach of the duties listed in that regulation, the period allowed for avoidance in s. 8 does not commence. While no indemnification of the applicant is prescribed by the ICA, a right to damages may follow from general principles of contract law (Wandt, para. 287). N5. In other countries, the provisions requiring the insurer to provide information on the terms of the contract do not explicitly refer to the situation underlying Article 2:203; see for example for Finland, s. 5 ICA; for France, art. 112-2 ICA; for Greece, art. 2 para. 6 ICA and art. 4 para. 2(h) and para. 3(d) of the Legislative Decree on Insurance Undertakings; for Belgium, art. 15 of the Royal Decree of 22 February 1991 on Insurance Supervision; and for Luxembourg, art. 10 para. 1 ICA. The sanctions for breach of those duties are not explicitly set forth in the respective laws but would result from principles of general contract law.

Section Three: Conclusion of the Contract Article 2:301 Manner of Conclusion An insurance contract shall not be required to be concluded or evidenced in writing nor subject to any other requirement as to form. The contract may be proved by any means, including oral testimony.

Comments The Principles of European Contract Law C1.  The rules of insurance contract law are not the same as those of general contract law, although in most countries the latter to a certain extent are used and applied in insurance contract law. This is particularly the case regarding the formation of contract. Many of the provisions of the Principles of European Contract Law concerning this part of European contract law (Articles 2:101 to 2:302) can be applied to insurance contract law. In this way a desirable simplification is attained. C2.  Attention has to be paid, however, to the possibility that there are provisions of the Principles of European Contract Law on the formation of contract that are not always ap-

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propriate for insurance contracts. After all, the Principles of European Insurance Contract Law do not generally have the same goals or constituency as the Principles of European Contract Law. C3.  Articles 2:301 and 2:302 illustrate the point. Article 2:301 adopts Article 2:201 para. 2 PECL because a mandatory provision is needed in insurance contract law. Article 2:302, however, deviates from the Principles of European Contract Law, aiming to increase the protection of the applicant in a way that would not have been the case if the corresponding rule of the Principles of European Contract Law were applied.

Agreement C4.  The main rule of general contract law in Europe is that it is enough for contract formation that the parties reach agreement. With the exception of some specific types of contract, there are no rules requiring a contract to be concluded in or evidenced by writing or in any other way. To write a contract might be quite natural, but the conclusion of the contract normally takes place before the parties record it in writing. C5.  The same ought to apply to insurance contracts. In a few European countries some kind of form is required for the insurance contract to be valid, but there is no reason to implement a rule of this kind at the European level. Moreover, it is important and socially desirable that insurance cover can be put in place as quickly as possible after the decision of the applicant to apply for insurance and the agreement of the parties. Observance of formalities will cause delay.

Ways of Concluding an Insurance Contract C6.  Since there is no requirement of form for an insurance contract, agreement can be oral or in writing. The latter can be effected by post, fax or electronically. Nothing prevents the insurer and the applicant choosing different ways. So, for instance, the applicant might propose insurance by telephone, while the acceptance by the insurer might be given in a letter sent by post. C7.  Normally the conclusion of an insurance contract presupposes activity by both parties. But there are also situations where the inactivity of one of them could lead to such conclusion. A situation of this kind could arise where, although no insurance contract is in fact concluded, the applicant believes the opposite and the insurer has reason to suspect this mistake without doing anything to correct it. Such an infringement of good faith towards a negotiating party, who, because of his mistake never considers taking alternative insurance, might result in the conclusion of an insurance contract.

Insurance Contract C8.  An insurance contract is concluded if the parties intend to be legally bound, and they reach a sufficient agreement: this is the rule in Article 2:101 PECL, which applies equally to insurance contracts. The decision whether there has been an intention to be legally bound must be taken from an objective point of view. If the insurer or the applicant afterwards

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asserts that they never had that intention, the starting point lies with the other party’s expectations. What could reasonably had been understood by the statements and conduct of the party denying intention will, together with the demand for a sufficient agreement, determine whether a contract has been concluded or not: see Article 2:102 PECL. C9.  It is not possible to give a satisfactory formulation covering all the cases where sufficient agreement has been reached by the parties. The existence of such agreement has to be sought from case to case. For the conclusion of a contract according to Article 2:301, however, the parties cannot be expected to know all the details of the cover and its price. In principle it is enough that the parties know what kind of insurance is intended. The social importance of insurance implies that the degree of agreement required cannot be as high as in general contract law.

Mandatory Character C10.  Article 2:301 closely follows Article 2:101 para. 2 PECL. However, contrary to the Principles of European Contract Law, the Principles of European Insurance Contract Law do not leave the parties free to agree the form in which the contract is to be concluded. An agreement between the insurer and the applicant that a special form has to be observed by them for an insurance contract to be concluded is meaningless from the point of view of the conclusion of the contract. The very agreement on form proves that the parties intended to be legally bound. C11.  For example, an applicant, who wants to take fire insurance, agrees on 1 September with the insurer that a certain form of agreement has to be observed before there is an insurance contract. This is to be recorded on a form agreed on 10 September. The applicant’s house is burnt down on 9 September. The conclusion of the contract, however, took place on 1 September, and the applicant is probably (see Comment 7 above) protected by the fire insurance, although the particular form agreed to was not completed in time.

Proof C12.  In the Principles of European Contract Law the main rule is immediately followed by the rule that the contract may be proved by any means, including witnesses: the second sentence of Article 2:101 para. 2. There is a need to repeat this rule in the Principles of European Insurance Contract Law, since one cannot rule out the possibility of agreement between the insurer and the applicant that proof of the contract by some means should not be valid unless witnessed. Such an agreement is not valid.

Notes A Matter of General Contract Law N1. References to general contract law are common in national laws with regard to the formation of the insurance contract. This is true for Austria (Basedow/Fock-Lemmel 1014), for Belgium (Basedow/Fock-Fock 233), for Denmark (Basedow/Fock-Scherpe 290), for France (Basedow/Fo-

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ck-Völker 465-466), for Germany (Basedow/Fock-Lemmel 321: the reference to the Civil Code and Commercial Code for issues not regulated in the ICA is also valid for the new ICA), for Greece (Basedow/Fock-Papathoma-Baetge 577, Chatzinikolaou-Aggelidou, Simvasi 195 ff., Rokas, paras. 238 ff. and Rokas, Eisigiseis paras. 62 ff.), for Ireland (Basedow/Fock-Rühl 1393), for Italy (Basedow/Fock-Brunetta d’Usseaux 666), for the Netherlands (Basedow/Fock-Fock 828), for Poland (Kowalewski 239), for Portugal (see art. 4 ICA referring to the subsidiary application of the general rules of civil and commercial law), for Sweden (Basedow/Fock-Scherpe 920, also valid for the new ICA) and for the United Kingdom (Birds 5.1 ff., Clarke 11-1).

Consensual Contract N2. The insurance contract is generally considered as a consensual contract which is formed by the consent of the parties, no special form being required (see for Austria, Basedow/Fock-Lemmel 1018; for Denmark, Basedow/Fock-Scherpe 923-924; for Finland, Basedow/Fock-Scherpe 923924 and Hoppu/Hemmo 90-96; for France, Lamy Assurances, para. 443 and Basedow/Fock-Völker 469; for Germany, Basedow/Fock-Lemmel 326; for Greece, Basedow/Fock-Papathoma-Baetge 580, Chatzinikolaou-Aggelidou, Simvasi 196 ff. and Rokas, paras. 237 ff.; for Ireland, Basedow/ Fock-Rühl 1399; for Italy, Cerini 65; for the Netherlands, Basedow/Fock-Fock 830; for Poland, Kowalewski 242; for Spain, Bataller/Latorre/Olavarria 179, Bataller/Veiga 523 and Basedow/Fock-Schlenker 1288; for Switzerland, Basedow/Fock-Bälz 1212; for Sweden, Basedow/Fock-Scherpe 923-924; for the United Kingdom, Birds 5.1 ff. and Basedow/Fock-Rühl 1399; see however for Scotland, Article 2:501 Note 9. Moreover for marine insurance a policy is required: s. 22 of the UK Marine Insurance Act 1906; and when insurance is contracted electronically an accessible form is required: regulation 6 of the UK Electronic Commerce (EC Directive) Regulations 2002. N3. Even where special rules require written form or consider the policy as an equivalent to the insurance contract, these rules are not meant to establish written form as a condition for a valid insurance contract (see for Austria, Basedow/Fock-Lemmel 1018; for Belgium, Basedow/ Fock-Fock 238 and Cousy/Schoorens 95; for Italy, Basedow/Fock-Brunetta d’Usseaux 671). Such provisions would in general rather be part of the law of evidence. N4. The consensual character of the insurance contract does not withstand the imposition of the duty on the insurer to provide certain pre-contractual information to the policyholder/applicant nor is the consensual nature of the contract impaired by the insurer’s obligation to issue a policy. The breach of those obligations does not invalidate the contract, but is rather considered as a breach of contractual or pre-contractual obligations arising in view of the conclusion of, or from, the insurance contract. For such obligations flowing from national law, see the notes on Articles 2:201 and 2:501. It is however true that the imposition of pre-contractual information duties makes the conclusion of the insurance contract without the observation of any form whatsoever de facto difficult (see Basedow/Fock-Lenzing 156 with regard to the EC directives).

Article 2:302 Revocation of an Application for Insurance An application for insurance may be revoked by the applicant if his revocation reaches the insurer before the applicant receives an acceptance from the insurer.

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Comments An Application for Insurance C1.  An application for insurance is usually a proposal to conclude an insurance contract. To be effective the proposal must show an intention to be legally bound and contain proposed terms which are sufficiently definite. If the proposal is accepted by the insurer there is a contract. As the conclusion of the contract needs no particular form, acceptance can be given orally, by post, electronically or in any other way; see Article 2:301.

Revocation by the Applicant C2.  Before the application for insurance reaches the insurer it may be withdrawn by the applicant. However, even after it has reached the insurer the applicant may be able to revoke his application. Article 2:302 prescribes that this must be done at the latest before he receives the acceptance of the insurer. C3.  Article 2:202 para. 1 PECL is not as generous to the applicant as is Article 2:302. According to the former the crucial moment before which a revocation must be effected is dispatch of the acceptance. Applied to insurance law this rule would imply that the applicant would be unable to revoke his application after that. This would normally not be a problem if acceptance was given orally or sent by e-mail, since the arrival of the acceptance here comes close to the moment of dispatch. But the situation is different when the insurer’s acceptance is sent by post and the rule in Article 2:302 is different too.

Time for the Arrivals of Revocations and Acceptances Sent Electronically C4.  A revocation sent electronically arrives when it reaches the insurer’s server. Correspondingly, an acceptance arrives when it reaches the applicant’s server. This rule is justified; because of the previous application both parties can be expected to check their e-mails. The same rule may not be appropriate for all other kinds of notices.

Art. 15 of the UNCITRAL Model Law on Electronic Commerce: Article 15. Time and place of dispatch and receipt of data messages (1) Unless otherwise agreed between the originator and the addressee, the dispatch of a data message occurs when it enters an information system outside the control of the originator or of the person who sent the data message on behalf of the originator. (2) Unless otherwise agreed between the originator and the addressee, the time of receipt of a data message is determined as follows: (a) if the addressee has designated an information system for the purpose of receiving data messages, receipt occurs: (i) at the time when the data message enters the designated information system; or (ii) if the data message is sent to an information system of the addressee that is not the designated information system, at the time when the data message is retrieved by the addressee; (b) if the addressee has not designated an information system, receipt occurs when the data message enters an information system of the addressee. 132

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(3) Paragraph (2) applies notwithstanding that the place where the information system is located may be different from the place where the data message is deemed to be received under paragraph (4). (4) Unless otherwise agreed between the originator and the addressee, a data message is deemed to be dispatched at the place where the originator has its place of business, and is deemed to be received at the place where the addressee has its place of business. For the purposes of this paragraph: (a) if the originator or the addressee has more than one place of business, the place of business is that which has the closest relationship to the underlying transaction or, where there is no underlying transaction, the principal place of business; (b) if the originator or the addressee does not have a place of business, reference is to be made to its habitual residence. (5) The provisions of this article do not apply to the following […].

Effectiveness of Revocation C5.  According to Article 2:202 para. 3 PECL a revocation of an offer is ineffective in some cases, for instance if the offer states a fixed time for its acceptance. This rule is not suitable for the revocation of an application for insurance. It follows from Article 2:303 PEICL that restrictions on the freedom to revoke an application for insurance are not valid as long as there is no acceptance on the part of the insurer. The applicant might have an interest in contracting alternative insurance cover. Although directly or indirectly the applicant might have promised not to revoke the application before acceptance by the insurer, he is free to do it. This means that the only way of avoiding revocation is for the insurer to effect its acceptance as quickly as possible.

Notes The Roles of Offeror and Offeree N1. Legislative rules about how the roles of offeror and offeree are settled are normally not given. However, practice and jurisprudence give some answers as to the normal model. Most countries regard the applicant as the offeror, while the insurer is the offeree. This is the situation in Austria (see Basedow/Fock-Lemmel 1014), France (see Basedow/Fock-Völker 466), Germany (see Basedow/Fock-Lemmel 321), Greece (see Basedow/Fock-Papathoma-Baetge 577 and Rokas, Eisigiseis paras. 62 ff.), Ireland (see Basedow/Fock-Rühl 1393), Italy (see Basedow/Fock-Brunetta d’Usseaux 667), the Netherlands (Basedow/Fock-Fock 828), Poland (see Kowalewski 239-240) and the United Kingdom (see Rust v Abbey Life Assurance Co [1978] 2 Lloyd’s Rep 386; The Zephyr [1984] 1 Lloyd’s Rep 58, 72, per Hobhouse J.; Basedow/Fock-Rühl 1393). But this is just a mode reflecting the typical way of contracting; it is subject to exceptions. The model appears to be more open, allowing both parties to adopt the role of the offeror or offeree, in Denmark, Finland and Sweden (cf. Basedow/Fock-Scherpe 920-921 and for Sweden Bengtsson 23), the Netherlands (see Basedow/Fock-Fock 828) and Switzerland (see Basedow/Fock-Bälz 1209), although at the end of the day in all these countries the applicant is considered to be the offeror in the normal case. The type of insurance involved as well as the particulars of the process of acceptance by the insurer may vary the normal model.

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N2. A clear exception can be found in Belgium, where the insurer is considered to be the offeror who sends the policy contract to the applicant. By signing the policy, the applicant concludes the contract (see Fontaine, para. 112; Basedow/Fock-Fock 233). In order to accelarate the contracting process, insurance practice appears to make use of policies which the insurer has signed before even knowing the identity of the applicant and his particular risk; such pre-signed policies become binding when the applicant signs them, see art. 4 para. 2 IA 2014. While the rules of the insurance contract act reflect these practices they apparently do not exclude different ways of formation of the insurance contract (Basedow/Fock-Fock 238).

The Binding Nature of an Offer N3. National contract laws differ as to whether and at what point in time an offeror is bound by the offer made. While the laws of German and Nordic tradition generally consider the offer as binding, those of romanic and common law tradition mainly decline such legal effect, unless it is explicitly stipulated. As a consequence, admitting a revocation has very different significance in these two groups of countries: where an offer is binding, a revocation tends to be considered as a disturbance. Where the offeror remains free as a matter of law, he simply makes use of a right he has anyway. N4. An offer to take or to give insurance is not binding in Ireland (see Basedow/Fock-Rühl 1394) and in the United Kingdom (see Canning v Farquhar (1886) 16 QBD 727; Basedow/Fock-Rühl 1394). France has taken the same stance, although under general French contract law the offeror is bound for a reasonable time to maintain his offer (see Basedow/Fock-Völker 467). In the Netherlands, the offer of the applicant is not binding unless it includes a term for acceptance, or irrevocability results otherwise from the offer (see Basedow/Fock-Fock 829). In these countries the latest point in time for the revocation is generally considered to be the acceptance of the offer (see for France Basedow/Fock-Völker 467). In Portugal, the proposal is irrevocable after having been received by or known to the insurer (this is a general rule of contract law, art. 230 CC). N5. The opposite rule, namely the binding character of the insurance offer, can be found in Austria (see Basedow/Fock-Lemmel 1014), Denmark (see Basedow/Fock-Scherpe 921; Lando/ Beale 167), Finland (see Hoppu/Hemmo 91-92 and Lando/Beale 167), Germany (s. 145 CC, see Basedow/Fock-Lemmel 321-322), Greece (see Basedow/Fock-Papathoma-Baetge 578 and Rokas, Eisigiseis paras. 62 ff.), Poland (see art. 66 CC), Sweden (cf. Lando/Beale 167), Switzerland (art. 1 paras. 1 and 2 ICA: the applicant is bound to his offer for a period of 14 days, or four weeks if a medical check is requested, see Basedow/Fock-Bälz 1210). In Italy, where the principal rule of general contract law declines a binding nature of an offer (art. 1328 CC), there is an exception for offers given by applicants of insurance. Here the applicant is bound to his offer for a period of 15-30 days; due to counter-exceptions for life assurance, the practical application of this rule is essentially for indemnity insurance (see art. 176 of the Code of Private Insurance for life assurance and Basedow/Fock-Brunetta d’Usseaux 668-669). N6. Belgium represents a mixed system: while the applicant’s proposal for insurance is explicitly declared to be non-binding (art. 4 para. 1 IA 2014), the insurer’s offer incorporated in the policy sent to the applicant is said to be irrevocable for a reasonable time (see Fontaine, para. 113). A system according to which the insurer is bound by his offer for 15 days, while the applicant is not, also exists in Spain (see Bataller/Latorre/Olavarria 178 and Basedow/Fock-Schlenker 1285).

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Article 2:303 Cooling-off Period22 (1) The policyholder shall be entitled to avoid the contract by giving written notice within two weeks after receipt of acceptance or delivery of the documents referred to in Article 2:501, whichever is the later. (2) The policyholder shall not be entitled to avoid the contract when (a) the duration of the contract is less than one month; (b) the contract is prolonged under Article 2:602; (c) it is a case of preliminary insurance, liability insurance or group insurance.

Comments Introduction C1.  The Solvency II Directive (2009/138/EC) and the Distance Marketing Directive (2002/65/EC) provide a model for a cooling-off period. In principle, Article 2:303 follows this model. C2.  The object of granting the policyholder a cooling-off period is to give him a period of time after receipt of all material information, including the standard terms, in order to appraise the contract of insurance offered to him and hence make a well-informed decision whether it meets his needs.

Structure of the Rule C3.  Article 2:303 para. 1 entitles the policyholder to avoid the contract by giving notice in writing within a cooling-off period of two weeks. However there are circumstances where the granting of a cooling-off period is not appropriate for the type of insurance in question or because in certain important situations third parties would be harmed by the exercise of a right to withdraw. The relevant types of insurance are listed in Article 2:303 para. 2.

Avoidance C4.  In accordance with the Distance Marketing Directive (2002/65/EC) a choice is made in favour of retroactive avoidance of the contract: the policyholder is entitled to avoid the contract ab initio. The consequences of avoidance are governed by Article 4:115 PECL: either party may claim restitution of whatever it has supplied under the contract, provided it makes concurrent restitution of whatever it has received. In relation to insurance it means the insurer is entitled to restitution of any payment of insurance money while the policyholder is entitled to restitution of any payment of premium. The insurer is not entitled to claim reimbursement of any expenses in relation to the conclusion of the contract.

22

This Article is modelled on the Distance Marketing Directive (2002/65/EC).

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Commencement of the Cooling-off Period C5.  Inherent in having a cooling-off period is that it should not begin before the policyholder has received the information necessary to properly appraise the contract of insurance and hence make a well-informed decision whether it meets his needs. As to the information required reference is made to the documents mentioned in Articles 2:201 and 2:501.

Timeliness of Notice to Withdraw C6.  In line with the Distance Marketing Directive (2002/65/EC) it is enough that the notification is sent before the deadline expires.

The Exceptions to the General Rule C7.  As already mentioned above, there are circumstances where the granting of a cooling-off period is inappropriate given the character of the cover agreed. There are two particular groups where this is the case: The first group includes cases where cover has been granted for very short periods, see below Comments 8 to 10. In a second group of cases avoidance of the contract by the policyholder may do harm to third parties who may rely on the existence of cover, see below Comments 11 to 13. These considerations underlie the enumeration of exceptions to the policyholder’s right of avoidance contained in para. 2. Insurance services are financial services for the purposes of the Distance Marketing Directive (2002/65/EC). In so far as insurance contracts are agreed upon as distance contracts within the meaning of that Directive, the policyholder has a right to withdraw from the contract within 14 calendar days, see art. 6. While the Directive provides for some exceptions from this basic rule of withdrawal, the list laid down in Article 2:303 para. 2 does not simply copy the exceptions of the Directive. As will be explained below, the Directive insufficiently takes account of some particular features of certain insurance contracts which require further exceptions. C8.  The exception laid down in para. 2(a) is justified by the short duration of the contract. In short term insurance contracts a right of avoidance would create a disproportionate uncertainty about the validity of the contract. Moreover, the policyholder is not substantially prejudiced due to the low premiums for such short term contracts. Art. 6 para. 2(b) of the Distance Marketing Directive (2002/65/EC) contains a similar exception. C9.  Preliminary cover is equally of a short duration. In some Member States it will be agreed for a fixed term of two weeks, four weeks or two months, in others it is of unlimited duration, but agreed with the understanding that it will end as soon as the main insurance contract takes effect after a short lapse of time. The taking out of preliminary cover may be a precondition for the policyholder obtaining certain public licences. Thus, cars will only be admitted to public use if there is motor liability insurance which will usually be taken out on a preliminary basis. If the policyholder were allowed to avoid the contract within a period of two weeks, the purpose of this requirement, for example the protection of third party victims of potential traffic accidents, would be undermined, because such victims would be unprotected. While the Distance Marketing Directive (2002/65/EC) does not contain an explicit exception from the right of withdrawal for preliminary cover, the gen-

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eral principle underlying art. 6 para. 2(b) would apply to preliminary insurance as well; the time limitation of the Directive’s exception to insurance policies of less than one month’s duration is inappropriate here. C10.  The exception laid down in Article 2:303 para. 2(b) for contracts prolonged under Article 2:602 flows from the consideration that the policyholder could already make use of a cooling-off period when he concluded the initial contract. There is no legitimate interest in having another period of reconsideration at the beginning of the prolonged contract. This is reflected by art. 1 para. 2 of the Distance Marketing Directive (2002/65/EC) which excludes successive operations from the scope of the Directive altogether. C11.  The two remaining exceptions laid down in Article 2:303 para. 2(c) concern liability insurance and group insurance. Liability insurance is taken out, in many cases, for the protection of third parties. The protection of third parties is the main or even exclusive purpose of the many laws and regulations, adopted at the level of both the Community and of the Member States, which prescribe compulsory liability insurance. But even where liability insurance is voluntary, it often serves the interest of third parties. For instance, landlords will often ask their tenants to take out liability insurance; they may even make the conclusion of the rental agreement dependant upon the proof of such cover. As pointed out in the context of preliminary cover above in Comment 9, the avoidance, by the policyholder, of a liability insurance contract would essentially impair the interest of third parties who would not even be informed of such avoidance. C12.  The situation is similar in the case of group insurance. Here, the policyholder takes out the insurance on behalf of the members of a group. Avoidance of the contract by the policyholder would interfere with the rights and interests of those group members who are not party to the insurance contract. It follows that the exception does not apply where the group members have concluded individual insurance contracts under a general framework agreement. C13.  The Distance Marketing Directive (2002/65/EC) does not take account of the rights and interests of third parties who may rely on the validity of contracts of financial services concluded between a consumer/policyholder and an insurer. Frictions with the Directive will be rare in the case of group insurance which is unlikely to be agreed upon in a distance contract. This is different in respect of various types of liability insurance, however. For the reasons set forth above, the solution of the Directive cannot be applied here.

Notes Community Law N1. Under art. 186 of the Solvency II Directive (2009/138/EC), which replaces art. 35 Life Assurance Consolidation Directive (2002/83/EC), the policyholder of an individual life assurance contract has a right to cancel the contract which can be exercised in a period of 14 to 30 days from the time he is informed of the conclusion of the contract. This right is limited to life assurance. The right to cancellation in life assurance is supplemented by a right of withdrawal under

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art. 6 of the Distance Marketing Directive (2002/65/EC) which includes insurance (art. 2(b)), but which is limited to the distance marketing of financial services to consumers (art. 1 of the Distance Marketing Directive (2002/65/EC)). This Directive was to be implemented by national legislators by 9 October 2004 (art. 21 para. 1 of the Distance Marketing Directive (2002/65/EC)).

Implementation for Life Assurance and Similar Products N2. In implementing the Life Assurance Consolidation Directive (2002/83/EC) (and its predecessor), most Member States such as Austria (s. 165a ICA), Belgium (art. 9 para. 1 of the Royal Decree of 14 November 2003 on Life Assurance), France (the third sentence of art. L. 132-5-1 para. 2 ICA, Basedow/Fock-Völker 495), Italy (art. 117 of the Code of Private Insurance), Luxembourg (art. 100 ICA) and Spain (art. 83a ICA) have limited the right of cancellation to life assurance contracts, closely adhering to the Directive. Sweden is a country where there is no need at all for a particular cooling-off period in life assurance. The policyholder has been given a right to terminate all kinds of personal insurances at any time with immediate effect (s. 5 of Ch. 11 ICA). N3. Other countries have extended the right beyond life assurance to personal accident or health insurance or to long-term insurance contracts in general (Poland: art. 812 para. 4 CC; Portugal: art. 118 para. 1a ICA; United Kingdom: ICOBS 7.1.1. At common law, see Sun Fire Office v Hart (1889) 14 App Cas 98; Clarke 18-3E; Beatson/Burrows/Cartwright 52 f.; Ireland: for the common law, see Carna Foods v Eagle Star [1997] 2 IR 193) or for consumers (Austria: s. 5c ICA).

General Right of Withdrawal N4. Even where statutory insurance law grants a right of cancellation only in life assurance, insurance industry associations sometimes recommend that the insurers accord a general right of cancellation for all sorts of long-term insurance contracts. Finland provides for a general right of termination for insurance contracts (s. 12 ICA), while Denmark opts for a general right of cancellation in consumer insurance (Chapter 4a of the Act No. 451 of 9 June 2004 on Certain Consumer Contracts, for all life-insurance contracts: art. 97a ICA). A similar stance is taken in Germany, Greece and the Netherlands where the right of policyholders to avoid insurance contracts extends to other branches of insurance and all modes of conclusion of an insurance contract (s. 8 German ICA; art. 8 para. 3 Greek ICA, art. 4:20 para. 2 Dutch ISA in conjunction with art. 60 para. 2 and 61 para. 2 of the Dutch Decree on the Supervision of the Conduct of Financial Enterprises).

Exception for Short-Term Insurance Contracts N5. If a right of avoidance is established, it is normally excluded for (certain) short-term insurance contracts. Art. 6 para. 2(b) of the Distance Marketing Directive (2002/65/EC) exempts travel and baggage insurance policies or similar short-term insurance policies of less than one month’s duration from the scope of the right of withdrawal granted by art. 6 para. 1 of that Directive. Art. 186 para. 2(a) of the Solvency II Direcitve (2009/138/EC) states that the Member States need not apply the right of cancellation granted by art. 186 para. 1 of that Directive for individual life assurance to contracts of six months’ duration or less. Similar provisions restricting the right of avoidance to long-term insurance contracts can be found in s. 8 para. 3 German ICA, the first

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and second sentences of art. 8 para. 3 Greek ICA, art. 117 para. 4 of the Italian Code of Private Insurance, art. 812 para. 4 Polish CC, art. 118 para. 1 Portuguese ICA, ICOBS 7.1.3 (United Kingdom) and the recommendations of Dutch insurance associations (Basedow/Fock-Fock 838).

Exception for Prolongation of Pre-Existing Contracts N6. An exception for the prolongation of a pre-existing insurance contract is a case where, because of the status of the policyholder or the circumstances in which the contract is concluded, the policyholder does not need the special protection of the right of cancellation in accordance with art. 186 para. 2(b) of the Solvency II Directive (2009/138/EC) because he should already be aware of the contents of the insurance contract which he has decided to prolong.

Exception for Preliminary Cover N7. An exception for preliminary cover can be found in s. 8 para. 3 German ICA. Furthermore, preliminary or provisional insurance contracts come quite close to contracts whose performance has been fully completed by both parties at the consumer’s express request before the consumer exercises his right of withdrawal, thus justifying an exclusion of the right of avoidance by analogy to art. 6 para. 2(c) of the Distance Marketing Directive (2002/65/EC). Similarly, cases of preliminary or provisional insurance, liability insurance or group insurance do not fall under the right of cancellation of art. 186 of the Solvency II Direcitve (2009/138/EC) because they either do not concern life assurance (for example liability insurance), individual insurance (group insurance) or the circumstances in which the contract is concluded suggest that the policyholder does not need the special protection of a right of cancellation, art. 186 para. 2(b) of the Solvency II Direcitve (2009/138/EC). An exception for group insurance contracts, namely a restriction of the right of cancellation to individual insurance contracts is provided for not only in art. 186 para. 1 of the Solvency II Direcitve (2009/138/EC), but also mirrored in the respective national provisions implementing that Directive (for example s. 165a para. 3 Austrian ICA, art. 100 Luxembourg ICA, art. 83a Spanish ICA).

Article 2:304 Abusive Clauses23 (1) A term which has not been individually negotiated shall not be binding on the policyholder, the insured or the beneficiary if, contrary to the requirements of good faith and fair dealing, it causes a significant imbalance in his rights and obligations arising under the contract to his detriment, taking into account the nature of the insurance contract, all the other terms of the contract and the circumstances at the time the contract was concluded. (2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term. If not, the unfair term shall be substituted by a term which reasonable parties would have agreed upon had they known the unfairness of the term. (3) This Article applies to terms that restrict or modify cover but it applies neither to (a) the adequacy in value of the cover and the premium, nor to (b) terms that state the essential description of the cover granted or the premium agreed, provided the terms are in plain and intelligible language.

23

This Article is modelled on the Unfair Contract Terms Directive (93/13/EEC).

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(4) A term shall always be regarded as not individually negotiated when it has been drafted in advance and the policyholder has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract. The fact that certain aspects of a term or one specific term have been individually negotiated shall not exclude the application of this Article to the rest of a contract if an overall assessment of the contract indicates that it is nevertheless a pre-formulated standard contract. When an insurer claims that a standard term has been individually negotiated, the burden of proof in this respect shall be incumbent on the insurer.

Comments Unfair Contract Terms Directive (93/13/EEC) C1.  Article 2:304 restates the rules contained in arts. 3, 4 and 6 of Unfair Contract Terms Directive (93/13/EEC) as well as Article 4:110 PECL and adapts them to the context of the Principles of European Insurance Contract Law. It has been formulated to take into account the particularities of insurance contracts, which deal with insurance as an intangible service. In accordance with art. 7 para. 1 of the Directive, this provision is intended to ensure that adequate and effective means exist to prevent the continued use of unfair terms in insurance contracts.

Persons Protected under Article 2:304 C2.  Going beyond the scope of the Directive, Article 2:304, like Article 4:110 PECL, applies the judicial review to commercial contracts (compare art. 3 of the Directive). The restriction to consumer contracts is not appropriate in insurance law because policyholders need protection against insurers, no matter whether they are consumers or not. Insurers commonly draft the terms of the insurance contracts in advance, so that policyholders have no opportunity to negotiate the terms.

Core terms C3.  Recital 19 of the Directive explicitly says that in insurance contracts, the terms which clearly define or circumscribe the insured risk and the insurer’s liability shall not be subject to review since those terms are taken into account in calculating the premium paid by the consumer. However, this does not mean that every term that deals with the insured risk and the insurer’s liability is exempted from the fairness test. While the English text of the Directive gives the impression that every term that defines the insured risk or the insurer’s liability is taken into account in calculating the premium and thus has to be exempted from the fairness test, the German version of the Directive (“soweit”) shows that an exemption should be made only if the term actually has been considered in the calculation of the premium. To provide an effective protection of the policyholder’s rights, the number of terms exempted from the fairness test must be restricted. The Principles of European Insurance Contract Law are based on the assumption that the Directive is applicable to insurance contracts and they provide for a more comprehensive review than the minimum standards of the Directive.

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C4.  Thus for the purpose of the Principles of European Insurance Contract Law, only core terms are exempted from the fairness test. Such terms are protected from court intervention. In a competitive insurance market the essential elements of any insurance contract, namely the scope of insurance cover and the premium paid, are matters for market forces and the agreement of the parties. These core terms are described in Article 2:304 as terms that state the essential description of the cover granted or the premium agreed. This description appears more appropriate to the insurance contract than the vaguer terms used in the Directive (“main subject matter of the contract”). In this context, the relevant terms are those that give a crucial definition or circumscription of the type and subject of insurance, the insured risk, the insurer’s liability, the insurance benefit, the sum insured, the insured interest or the insurable value. Terms restricting, changing, elaborating or modifying the insurer’s obligation to perform are, however, not core terms and therefore subject to review under Article 2:304. If, for example, a policyholder takes out professional indemnity insurance, this would imply the exclusion of general liability as part of the crucial definition of the “type and subject of insurance”. This implicit exclusion would therefore not be subject to review. However, if a term of the policy excludes liability for pure economic loss, such a term would be subject to review. C5.  However, core terms are only exempted from the fairness test if they are drafted in plain and intelligible language to a reasonable holder of a policy of that type (Article 2:304 para. 3; this reinforces the general requirement for documents to be plain and intelligible under Article 1:203 para. 1). Freedom of contract can only be effective, if the policyholder has the opportunity to understand the terms that are crucial for his decision to take out the particular insurance contract.

Individually Negotiated Terms C6.  Terms that have been individually negotiated are also excluded from the fairness test (Article 2:304 para. 1). If both parties, the insurer and the policyholder, have agreed on an individually negotiated term, their freedom of contract has to be respected and the term may not be submitted to review under Article 2:304. C7.  A term will only be considered as individually negotiated if the policyholder had a real opportunity to influence the formulation and the content of the term. This is why Article 2:304 para. 4 states that terms which were drafted by the insurer in advance are to be considered as not individually negotiated. Furthermore, if parts of a term or a single term are negotiated individually, the rest of the term or the contract, as appropriate, may still be considered as not individually negotiated. In addition, Article 2:304 para. 4 places the burden of proving that a standard term has been individually negotiated in a particular case on the insurer.

Fairness Test C8.  The unfairness of a term is assessed by an overall evaluation of the interests involved. For that purpose Article 2:304 uses the criteria of “good faith” and “fair dealing” as general guidelines. Furthermore, it makes explicit that a violation of good faith and fair dealing must lead to a “significant imbalance” of the protected parties’ “rights and obligations”

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to their detriment. These criteria stem from the Unfair Contract Terms Directive (93/13/ EEC), art. 3 paras. 1 and 3. It is not always easy to draw a sharp line between them. They frequently overlap, meaning that a term violating “good faith” and “fair dealing” at the same time causes a “significant imbalance” in the protected parties’ rights and obligations. Nevertheless, the fairness test under Article 2:304 para. 1 must always take account of all the criteria mentioned.

Grey List C9.  The Unfair Contract Terms Directive (93/13/EEC) is supplemented by an annex containing an indicative list of terms that can be considered to be unfair (a “grey” list). The list is not exhaustive. Conversely a term in the list may not always be unfair but such a term would certainly need further scrutiny. The list of terms in the annex of the Directive may be relevant to insurance contracts and may be considered when applying Article 2:304 just as it is considered to be an appropriate guideline for the interpretation of Article 4:110 PECL. For that purpose the list is reprinted below.

Sanctions C10.  Under Article 2:304 para. 1 an unfair term does not bind the policyholder, the insured or the beneficiary. This provision, which is based on art. 6 para. 1 of the Directive, ensures that an unfair term cannot be enforced against any of them, but would allow any of them to rely on such a term if it would be to their advantage in an appropriate case. C11.  If a term is unfair, the remainder of the contract remains in force if this is possible and appropriate (first sentence of Article 2:304 para. 2). Otherwise the term has to be replaced by a term that reasonable parties would have chosen instead of the unfair term (second sentence of Article 2:304 para. 2). For that purpose it depends on what a reasonable insurer and a reasonable holder of a policy of the type in question would have agreed upon at the time of conclusion of the contract had they known about the unfairness of the term.

Burden of Proof: Unfairness C12.  The assessment of unfairness is a matter of value judgments which are based on certain facts taken into account by the judge. The burden of proof for these facts establishing a case of significant imbalance in the parties’ rights and obligations lies with the policyholder, insured or beneficiary subject to alleviations under the national laws of civil procedure. C13.  The Annex to the EC Directive mentions the following clauses:

1. Terms which have the object or effect of: (a) excluding or limiting the legal liability of a seller or supplier in the event of the death of a consumer or personal injury to the latter resulting from an act or omission of that seller or supplier; (b) inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the seller or supplier or another party in the event of total or partial non-performance or inadequate performance by the seller or supplier of any of the contractual obligations, 142

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including the option of offsetting a debt owed to the seller or supplier against any claim which the consumer may have against him; (c) making an agreement binding on the consumer whereas provision of services by the seller or supplier is subject to a condition whose realization depends on his own will alone; (d) permitting the seller or supplier to retain sums paid by the consumer where the latter decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the seller or supplier where the latter is the party cancelling the contract; (e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation; (f) authorizing the seller or supplier to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract; (g) enabling the seller or supplier to terminate a contract of indeterminate duration without reasonable notice except where there are serious grounds for doing so; (h) automatically extending a contract of fixed duration where the consumer does not indicate otherwise, when the deadline fixed for the consumer to express this desire not to extend the contract is unreasonably early; (i) irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract; (j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract; (k) enabling the seller or supplier to alter unilaterally without a valid reason any characteristics of the product or service to be provided; (l) providing for the price of goods to be determined at the time of delivery or allowing a seller of goods or supplier of services to increase their price without in both cases giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded; (m) giving the seller or supplier the right to determine whether the goods or services supplied are in conformity with the contract, or giving him the exclusive right to interpret any term of the contract; (n) limiting the seller’s or supplier’s obligation to respect commitments undertaken by his agents or making his commitments subject to compliance with a particular formality; (o) obliging the consumer to fulfil all his obligations where the seller or supplier does not perform his; (p) giving the seller or supplier the possibility of transferring his rights and obligations under the contract, where this may serve to reduce the guarantees for the consumer, without the latter’s agreement; (q) excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, unduly restricting the evidence available to him or imposing on him a burden of proof which, according to the applicable law, should lie with another party to the contract. 2. Scope of subparagraphs (g), (j) and (l) 143

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(a) Subparagraph (g) is without hindrance to terms by which a supplier of financial services reserves the right to terminate unilaterally a contract of indeterminate duration without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof immediately. (b) Subparagraph (j) is without hindrance to terms under which a supplier of financial services reserves the right to alter the rate of interest payable by the consumer or due to the latter, or the amount of other charges for financial services without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof at the earliest opportunity and that the latter are free to dissolve the contract immediately. Subparagraph (j) is also without hindrance to terms under which a seller or supplier reserves the right to alter unilaterally the conditions of a contract of indeterminate duration, provided that he is required to inform the consumer with reasonable notice and that the consumer is free to dissolve the contract. (c) Subparagraphs (g), (j) and (l) do not apply to: - transactions in transferable securities, financial instruments and other products or services where the price is linked to fluctuations in a stock exchange quotation or index or a financial market rate that the seller or supplier does not control; - contracts for the purchase or sale of foreign currency, traveller’s cheques or international money orders denominated in foreign currency; (d) Subparagraph (l) is without hindrance to price-indexation clauses, where lawful, provided that the method by which prices vary is explicitly described. C14.  For the matter of insurance contracts, only a few of the terms in the list above become relevant. These are namely24

(a) Terms that mislead the insured consumer about the contract: (i) “Hidden terms”: This is, for example, a term irrevocably binding the insured to terms with which the insured had no real opportunity of becoming acquainted before the conclusion of the contract (para. 1(i) on the grey list). In this context “acquaintance” first of all requires intelligibility of the terms. The more complex they are, the less intelligible they become and the harder it will be for the insurer to prove that the insured had a real opportunity of understanding them. The praxis of some insurance outlets like travel agencies selling travel insurance to offer scant summaries of cover will not be sufficient. A “hidden term” can also be one that remits to a legal provision which is not quoted in the contractual terms. Another example is important terms hidden in long documents, perhaps with small print (“unfair surprises”). (ii) “Entire agreement” clauses, some of which fall within the grey list category of terms “limiting the […] supplier’s obligation to respect commitments undertaken by his agents” (para. 1 on the grey list). For example: “All terms of the contract of insurance are contained in this policy. No representations are made or given by the Company save as appear herein.” Otherwise the insured could not rely on what the selling agent had said about the policy terms. Besides that this category also includes terms saying that when completing the pro24

The list of terms that concern insurance context as well as the examples given have been taken over with a few adaptions from Clarke 19-5A4.

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posal, the insurer’s agent is acting not on behalf of the insurer, as most proposers would (reasonably) expect, but on behalf of the applicant. (b) Terms that excuse improper performance of contractual obligations: (i) Terms excluding liability for delay in handling and paying claims are terms “inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the […] supplier […] in the event of total or partial non-performance or inadequate performance by […] the supplier of any of the contractual obligations” (para. 1(b) on the grey list). (ii) Terms “obliging the insured to fulfil all his obligations where the insurer does not perform his” (para. 1 on the grey list). (c) Terms erecting barriers to redress: These are terms “excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy” (para. 1(q) on the grey list), including: (i) A term enabling the insurer to mount a technical defence. Such might be a term requiring notice of loss in an unduly short period of time. (ii) A term requiring “proof satisfactory to the insurer”, if it allows the insurer to make unfair demands on the claimant consumer. (iii) A “reverse burden clause”, whereby the insurer has merely to allege that the loss claimed is excepted rather than covered to put upon the claimant the burden of proving otherwise. (iv) Arbitration clauses: the insured is required to take disputes exclusively to arbitration not covered by legal provisions. Such clauses are considered to be potentially unfair as the insured is likely to be no match for the insurer in the arbitral process – any more than in a foreign court. (v) Any other term the effect of which is to enable the insurer to be slow in paying a claim. (d) Terms that allow the insurance supplier to cancel the contract, at least when the insured has no equivalent right (para. 1(g) on the grey list). (i) Terms that have the effect of allowing the insurer to cancel the contract without reasonable notice except where there are serious grounds for doing so. Thus terms with a cancellation period that does not give the insured enough time to seek alternative cover. (ii) Terms whereby insurers are entitled to cancel cover but to retain premium. (e) Terms that allow the insurer to vary an insurance contract unilaterally without a valid reason specified in the contract (para. 1(j) on the grey list). This includes terms that entitle the insurer to vary the premium unilaterally during the insurance period or to assign the contract to another insurer. (f) Terms that allow disproportionate penalties for breach by the consumer (para. 1(d) and (e) on the grey list).

Notes Implementation of EU Law N1. Article 2:304 para. 1 is modelled on art. 3 para. 1 and art. 4 para. 1 of the Unfair Contract Terms Directive (93/13/EC). Accordingly, all Member States have meanwhile implemented equivalent rules, which also apply to insurance contracts as far as they qualify as consumer contracts as defined in the Directive.

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N2. In comparison, the methods of implementation of the Directive vary greatly corresponding to the concepts of civil legislation and consumer protection as generally advocated in the Member States. In some countries, the provisions serving to implement the Directive can be found as parts of the civil code (Luxembourg, the Netherlands, Germany, Poland), in others as part of consumer statutes (Austria, France, Greece, Italy, Spain), in the statutes on market practices (Belgium), as part of statutes on pre-formulated contracts (Portugal), in a statute on consumer contracts (Sweden) or on general contract law (Denmark), or in specific statutory instruments as in the United Kingdom and in Ireland (cf. Münchener Kommentar-Basedow, vor § 305 BGB para. 23). N3. The implementing provisions of the national laws are as follows: s. 6 of the Consumer Protection Act (Austria); art. 73 of the Act of 6 April 2010 on Market Practices and Consumer Information and Protection, presently incorporated into the Code of Economic Law, art. VI, 82 (Belgium); s. 36 of the Contract Act (Denmark); s. 1 of Ch. 3 of the Consumer Protection Act (38/1978) (Finland); art. L. 132-1 of the Consumer Code (France); s. 307 CC (Germany); Law on Consumer Protection (Greece); European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (Ireland); arts. 33 to 38 of the Consumer Code (Italy); art. 6:233 CC (the Netherlands); art. 385(1) CC (Poland); Royal Legislative Decree on Consumer and User Interests (Spain); Act on Contractual Conditions in Consumer Relationships (Sweden); and the Unfair Terms in Consumer Contracts Regulations 1999 (United Kingdom). For surveys of the implementation processes, see: Report on the Implementation of the Unfair Contract Terms Directive; and Münchener Kommentar-Basedow, vor § 305 BGB paras. 22 f. (including the implementing provisions and acts of the new Member States); for national reports on the implementation: see Alexandridou 173 ff.; Alpa 181 ff.; Balate 143 ff.; Bernitz 13 ff.; Davo 157 ff.; El Vinger 185 ff.; Hondius 193 ff.; Lete 205 ff.; Monteiro 197 ff.; Posch 135 ff.; Reich 165 ff.; Wilhelmson 151 ff.; and Willett 223 ff.

Additional and Broader Provisions on the Fairness of Insurance Terms N4. However, the aforementioned list of implementing provisions and acts does not give a precise account of the extent to which the fairness of insurance contracts may be reviewed. In nearly all countries, contingent upon their approach to consumer protection and their way of implementing the Directive, additional or broader rules are applicable when abusive clauses are scrutinised. In order to reach a higher level of protection, some countries have either established general rules on pre-formulated standard contracts, or they have extended the review of the fairness of the contract as a matter of general contract law or insurance contract law. N5. As an example of the latter approach, the Scandinavian countries traditionally allow for more extensive judicial review of contract terms as a matter of general contract law (cf. for a comparison with the Swedish law preceding the implementation of the Unfair Contract Terms Directive (93/13/EC): Bernitz 13-27). The respective provisions are s. 36 of the Swedish and the Danish Contract Acts. It shall be noted, however, that even though these rules apply to contracts in general, the review of the fairness is stricter if a consumer or a “weaker” party is involved, see s. 36 para. 2 of the Swedish Contract Act. N6. In a similar vein, the civil codes of several Member States contain provisions enabling the courts to review abusive clauses as part of pre-formulated standard contracts irrespective of their

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incorporation into commercial or consumer contracts. Frequently, such provisions also apply to insurance contracts, see for example for Italy: art. 1341 para. 2 CC; for Germany: s. 307 CC; for Austria: s. 879 para. 3 CC. N7. Even before the Unfair Contract Terms Directive (93/13/EC), Belgium had enacted legislation designed to ensure the fairness of the contract specifically in respect of insurance contracts, art. 14 of the Royal Decree of 22 February 1991 on Insurance Supervision (see Fontaine, paras. 63 ff.).

Non-Negotiated Contracts, Article 2:304 paras. 1 and 4 N8. Article 2:304 para. 1 only applies if the contract has not been individually negotiated as defined in para. 4. Para. 4 is virtually identical to art. 3 para. 2 of the Unfair Contract Terms Directive (93/13/EC) and, accordingly, already implemented in the Member States as far as consumer insurance contracts are involved, see the references in Note 3. N9. The Scandinavian countries traditionally assess the fairness of the contract regardless of the circumstances of its conclusion. In other words, case-related negotiations do not foreclose the application of a rule such as Article 2:304 (cf. for Finland: Wilhelmsson 155). This goes without saying where the review of the insurance term is based on a provision of the (general) Contract Act, as is the case in Denmark and Sweden (respective art. 36 of the Contract Acts, see above Note 5). In a similar vein, the Belgian Royal Decree of 22 February 1991 on Insurance Supervision, above at Note 7, provided for an application irrespective of the negotiated or non-negotiated character of a clause. The Dutch Civil Code applies the test of fairness to clauses which have been drafted to be included into a number of contracts, regardless of the aspect of negotiating (art. 6:231(a)). N10.  Under French law, too, the aforementioned provision art. 132-1 of the Consumer Code on abusive clauses applies regardless of whether the contract has been negotiated or not. As to the scope, it should be recalled, however, that art. 132-1 of the Consumer Code, as the name of the code suggests, is not applicable to all contracts, but only to those made by consumers. The Cour de cassation has held that it shall not be applied when the insurance contract was taken out in pursuance of the insured’s business (Cass. civ. 1er, 23.2.1999, RGDA 1999, 325). In Belgium, the aforementioned provision of art. 73 of the Act of 6 April 2010 on Market Practices and Consumer Information and Protection is applicable to contracts concluded with consumers regardless of whether the contract has been negotiated or not.

Exceptions from Judicial Review, Article 2:304 para. 3 N11.  In accordance with Article 2:304 para. 3, many national laws provide for exemptions from review for those terms of the contract which are identified to be essential for the conclusion of the contract itself (“essentialia negotii”). Such rules have been introduced in France (art. L. 132-1 para. 6 of the Consumer Code), the Netherlands (art. 6:231 CC), and Poland (the second sentence of art. 385(1) para. 1 CC). In other countries, the limits of the scope of review have been established by the courts, for Germany: BGH, 13.7.2005, Versicherungsrecht 2005, 1417; Münchener Kommentar-Wurmnest, § 307 BGB paras. 12 f.; for Italy: Volpe Putzolu 514. It remains disputed

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and unclear in some other countries whether exceptions to the scope of review are made by the courts: cf. Basedow/Fock-Lemmel 1030 f. for Austria.

Consequences of Invalidity of a Clause, Article 2:304 para. 2 N12.  The continuation of the contract, as provided for under para. 2, is modelled on art. 6 para. 1 of the Unfair Contract Terms Directive (93/13/EC) and has been implemented accordingly in all Member States. This rule follows from the consideration that the judicial review of a contract term is meant to protect the policyholder. This purpose would be defeated if the invalidity of the term led to the invalidity of the whole contract. N13.  For the same reason, it is added in the second sentence that if the contract is not capable of being continued without the unfair term, it “shall the substituted by a term which reasonable parties would have agreed upon had they known the unfairness of the term”. While this rule exceptionally burdens the court with the task of rewriting the contract in respect of the invalid term, it is an inescapable consequence of the judicial review of contract terms which are essential to the agreement of the parties.

Section Four: Retroactive and Preliminary Cover Article 2:401 Retroactive Cover (1) If, in the case of cover granted for a period before the contract was concluded (retroactive cover), the insurer knows at the time of the conclusion of the contract that no insured risk has occurred, the policyholder shall owe premiums only for the period after the time of conclusion. (2) If, in the case of retroactive cover, the policyholder knows at the time of the conclusion of the contract that the insured event has occurred, the insurer shall, subject to Article 2:104, provide cover only for the period after the time of the conclusion of the contract.

Comments Issues of Risk C1.  Insurance contracts must cover a risk by definition (see Article 1:201 para. 1). From an objective point of view a risk is lacking in contracts granting retroactive insurance, because at that point in time the insured event has either materialised or not.

Nevertheless, Article 2:401 allows retroactive cover as long as, at the time of contracting, there is subjective uncertainty in that the parties are unaware whether the insured event has materialised or not. C2.  Retroactive cover does not concern cases where the insurance relates to uncertainty about future developments while both parties are aware of the occurrence, in the past, of events which give rise to those future developments. Thus, parties may conclude an insurance contract covering the future depreciation of goods leased in the past. Or they may, after the occurrence of a fire, take out insurance relating to the amount of loss which has been

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caused by that fire but which is uncertain and difficult to asses. In a claims-made liability policy the uncertainty of future claims made by third parties against the policyholder may be insured even for those cases where the event giving rise to those claims has occurred before the conclusion of the insurance contract. In such cases, the insured event is a future occurrence. Therefore, Article 2:401 is not applicable. Nonetheless, the events that occurred in the past have to be notified to the insurer in accordance with Article 2:101.

Knowledge of the Insurer C3.  If an insurer grants cover to a policyholder knowing that an insured event has not occurred at the time the contract is formed, it should not be entitled to collect the premium for the retroactive cover knowing that it would never have to pay. However, such a contract will not be void because it may at the same time provide the policyholder with cover for the future. In such cases the policyholder must be protected by retaining that cover and the insurer should be entitled to collect the premium for the period after contract formation.

Knowledge of the Policyholder C4.  In contrast, the contract is void if the policyholder, at the time of contract formation, knows, by actual knowledge or knowledge imputed in accordance with Article 1:206, that the insured event has already occurred. Moreover, in such cases the transaction is fraudulent and the insurer should not be bound. C5.  If, at the time of contracting, both parties are aware that the insured event has already occurred, the contract is not a contract of insurance as defined in Article 1:201. However, the contract may be upheld as another type of contract, such as a contract of settlement, under general contract law. Payments are sometimes agreed by the parties when the scope of a policy is unclear or inadequate but the insurer wishes to pay to secure or retain the customer. C6.  If the policyholder does not know but has reason to know that the insured event has materialised, Article 2:401 para. 2 will not apply. However, in such cases the policyholder may have violated his pre-contractual information duties under Article 2:101. As a consequence, the insurer may invoke the sanctions imposed by Articles 2:102 to 2:105.

Notes General Permission for Retroactive Cover N1. Policies providing for retroactive cover are permitted under most European laws. In Austria and Germany, s. 2 para. 1 and s. 2 para. 2 Austrian and German ICA are explicit and correspond to Article 2:401 para. 1 and Article 2:401 para. 2 PEICL, respectively. Under the Greek ICA, any interest may form the object of an insurance contract. This includes past risks provided that the policyholder, insured or beneficiary is not aware when concluding the contract that the insured event has already occurred, see Basedow/Fock-Papathoma-Baetge 599, Chatzinikolaou-Aggelidou 282 ff., and Rokas, paras. 414 ff. In the Netherlands, art. 7:925 CC leaves open the possibility of retroactive cover, see Wansink/Kamphuisen/Kalkman 27. Spanish insurance law allows for ret-

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roactive cover if there is uncertainty as to whether the risk has materialised, art. 6.2 ICA and in marine insurance, see art. 422 of the Spanish Law of Maritime Navigation. N2. In France, however, art. 121-15 para. 1 ICA stipulates a special rule for indemnity insurance: If, at the moment the contract is made, the damage has already occurred (for example the insured object has already perished), the retroactive clause is void. This would imply that policies covering putative risks are not admissible in indemnity insurance. However, art. 121-15 ICA can be interpreted as implicitly referring to the knowledge of the parties. The insurability of putative risks is accordingly recognised by the Cour de Cassation, cf. Lamy Assurances, para. 110(e). Clauses providing for retroactive cover are referred to as clauses de reprise du passé; for a similar approach see also art. 806 para. 2 Polish CC. In general, such clauses limit cover to past risks not known by either party, or are at least construed in such way, cf. Lamy Assurances, para. 1287. Finally, the Cour de Cassation has recognised in a number of judgements that insurance of past risks is only invalid when the policyholder knew, at the time of the conclusion of the contract, that the insured risk had already materialised, cf. Lamy Assurances, para. 110(d). N3. When a policy is void under aforementioned conditions, the policyholder may recover his premiums, art. 12115 para. 2 French ICA. Art. 121-15 para. 3 ICA provides for a special punitive provision: when a party to the contract acted in bad faith, it must pay the other party a sum equivalent to double the annual insurance premium.

Sector-Specific Permission for Retroactive Cover N4. Other countries permit retroactive policies for specific branches of insurance. The most common sectoral retroactive insurance policies are to be found in marine insurance, see for Spain already above Note 1. N5. In Belgium, art. 79 IA 2014 prohibits retroactive cover as a general rule. Belgian marine insurance law makes an exception, however: According to art. 219 ComC, Book II, any insurance contract concluded after the arrival or the loss of goods insured is void if the policyholder knew of the loss, or the insurer knew of the arrival. This, in turn, means that retroactive insurance is valid if both parties contracted in good faith. When land insurance contracts for putative risks are void under art. 79 IA 2014, payments have to be refunded in general, see Fontaine, para. 234. If the policyholder contracted in bad faith, no refund is due. When the policyholder acted in gross negligence, the insurer may keep the proportion of the premium that corresponds to the time elapsed until he knows of the realisation of the risk, art. 79 para. 3 IA 2014. N6. In Italy, the statutory provisions provide for similar results. Land insurance contracts granting retroactive cover are void, see Basedow/Fock-Brunetta d’Usseaux 690. Only in marine insurance may the parties agree to cover a putative risk, cf. art. 514 of the Code of Navigation. Art. 514 para. 1 of the Code of Navigation provides that the insurance is void if the risk never existed or ceased to exist, and the parties knew of this fact beforehand. It is presumed, until the contrary is proved, that the news of cessation of the risk arrived without delay either at the location of the conclusion of the contract, or the location where the policyholder agreed to the contract, see art. 514 para. 2 of the Code of Navigation. Pursuant to art. 514 para. 3 of the Code of Navigation. the insurer who contracted unknowingly is entitled to the premium only if he can deliver proof

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that the policyholder knew of the above-mentioned circumstances. When proof is not delivered, the insurer in good faith may recover only his costs. N7. For the United Kingdom and Ireland, see Basedow/Fock-Rühl 1440 ff. In the United Kingdom, s. 6(1) of the Marine Insurance Act 1906 sanctions cover “lost or not lost” although the insured “may not have acquired his interest until after the loss” and thus in effect retroactive cover; however, this does not apply if at the time of contracting the insured was aware of the loss and the insurer was not. Otherwise, to recover, he must have an interest at the time of loss: Anderson v Morice (1876) 1 App Cas 713 embodied in s. 6(2). The same is true of the Republic of Ireland, where the Marine Insurance Act is also law. Thus, retroactive marine insurance policies would be admissible under the same conditions. Beyond this special clause, retroactive cover is discussed neither in the United Kingdom nor in Ireland, cf. Basedow/Fock-Rühl 1441. However, it seems permissible in both countries. N8. In Switzerland, the general rule is laid down in art. 9 ICA. Under the said rule, retroactive cover is prohibited in principle. Retroactive fire and transit insurance contracts are exempted by art. 10 ICA. Such policies are void only if both parties knew, at the time of the conclusion of the contract, that the risk insured has or has not occurred, as the case may be, art. 10 ICA. If the insurer knew that no insured risk has occurred, the policyholder is not bound by the contract; the insurer may claim or recover neither premium nor costs, see art. 10 para. 2 ICA. Conversely, when the policyholder knew the insured event had occurred, the insurer is not bound by the contract and may recover its costs, art. 10 para. 3 ICA. N9. The insurability of putative risks seems uncertain under the laws of Luxembourg. Pursuant to art. 32 ICA, a policy is void, when the risk, at the time the contract is concluded, has already occurred or has never existed, see also Bisenius 57. However, art. 37 para. 1 ICA stipulates that the commencement of cover is determined by the will of the parties. Reading arts. 32 and 37 ICA together, one might construe the law as allowing for retroactive policies when the parties are in uncertainty as to the realisation of the risk. The legislative motives, however, do not comment on this question, cf. Basedow/Fock-Völker 783.

Article 2:402 Preliminary Cover (1) When concluding a preliminary insurance contract, the insurer shall issue a cover note containing the information specified in Article 2:501(a), (b), (d), (e) and (h) if relevant. (2) Articles 2:201-2:203 and, subject to para. 1 above, Article 2:501 do not apply to preliminary cover.

Comments Preliminary Cover C1.  An applicant usually requests immediate cover of the risk. However, an insurer will usually not accept the risk without a risk evaluation which can take time. This is why the institution of preliminary cover has been developed in insurance practice. It allows the insurer to evaluate the risk carefully without a final assumption of the risk. In turn, the ap-

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plicant enjoys preliminary cover that allows him to wait for the final decision of the insurer without anxiety.

Evidencing the Preliminary Cover C2.  In practice, preliminary cover granted orally by insurance agents has turned out to be hard to prove. In order to provide the policyholder with a reliable piece of evidence the insurer is obliged to put the preliminary cover in writing. Under the Principles of European Insurance Contract Law writing includes electronic documents (see Article 2:301 Comment 6). However, in the case of preliminary cover, the writing is not required to contain more than a minimum of information. This minimum includes the name and address of the contracting parties, the insured and the beneficiary (see Article 2:501(a) and (b)), the subject matter of the insurance and the risks covered (Article 2:501(d)), the sum insured and any deductibles (Article 2:501(e)) as well as the contract period and the liability period (Article 2:501(h)). Such a requirement does not excessively burden the insurer. At the same time the information is sufficient to prove the existence and extent of the cover.

Exclusion of Articles 2:201 to 2:203 C3.  Articles 2:201 to 2:203 (insurer’s pre-contractual duties) do not apply to contracts granting preliminary cover because duties of this kind could be a disincentive to the granting of preliminary cover. It is in the own interest of the policyholder that the granting of preliminary cover will not be excessively burdened.

Notes Survey N1. Only few national statutes deal with preliminary cover. The subject appears to be left to the parties’ contractual arrangements, and most legislators seem to trust that the problems arising in the context of preliminary cover will not lead to serious disputes in view of the main insurance contract to be concluded between the same parties. But the main insurance contract may not be concluded at all or not between the same parties, cf. for Sweden Hellner, part 5.2.1. In the absence of legal rules on preliminary cover, the outcome of a dispute arising from such a preliminary agreement may therefore be very difficult to predict. In particular mandatory requirements concerning pre-contractual information duties for insurance contracts, if applied to preliminary cover, may put in question the validity of the latter which is often agreed by oral or other speedy means of communication. In some Member States, national statutes deal with this issue. The other problems addressed relate to the standard terms governing the preliminary cover and to its relation to the main contract.

Form and Information Requirements: Germany, Greece N2. In Germany, s. 7 ICA and further regulations place the insurer under an obligation to provide certain information to the applicant before the latter agrees to the (main) insurance contract; the parties are not permitted to derogate from this rule to the detriment of the applicant. While

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the insurer must basically provide the same information for a cover note, as can be inferred from the first sentence of s. 49 para. 1 ICA, this provision allows the parties to agree on the transfer at a later stage, namely either at the time when the applicant makes a request to that effect, or together with the policy. Where no contract terms are communicated to the applicant at the time of conclusion of the preliminary cover agreement that cover is subject to the terms habitually employed by the insurer, see s. 49 para. 2 ICA. Under Greek law as well the policyholder can waive the right to be supplied with the information according to art. 2 para. 7 ICA. Furthermore, the insurer is under an obligation to provide the policyholder with a preliminary cover note in writing.

France N3. In France, preliminary cover agreements are exempted from the formal and information requirements for insurance contracts, see art. 112-3 para. 4 ICA and Lamy Assurances, para. 431. However, proof of the existence of the preliminary cover is hardly conceivable if the parties do not observe at least written form, cf. Lamy Assurances, para. 432. Only when cover notes are issued under the cross-border provision of insurance services as defined in art. 351-1 ICA does statute provide for a minimum content. In such rare cases, the cover note must contain the name and address of the agency or branch which offers cover, and, in the case of motor liability insurance, additionally the head office and national representative, see art. 112-7 para. 3 ICA. N4. The jurisprudence of the Cour de Cassation has further established minimum contents for cover notes, albeit indirectly. As a starting point, the Cour de Cassation established, as a general rule, that preliminary cover must be granted by the general policy terms and conditions of the insurer. This rule, however, is complemented by the general principle that only clauses brought to the attention of the policyholder may be opposed to him, Cass. civ. 1re, 7.3.1989, n° 87-10.266, RGAT 1989, 546-548. If lower court judges find that certain terms and conditions were not brought to the attention of the policyholder, and if the insurer is unable to prove otherwise, it is held that such terms and conditions may not be invoked against the policyholder, see Lamy Assurances, para. 433.

Belgium N5. Belgian law distinguishes three types of preliminary cover, subject to different rules, namely preliminary cover during, before and after formation of the main insurance contract. Art. 55, 5° IA 2014 defines the term demande d’assurance, which refers to preliminary cover during contract formation. Such demande d’assurance is “a form emanating from the insurer by which the insurer offers to take in charge the risk preliminarily, at the request of the policyholder”. Preliminary cover in this sense is thus embedded in the formation of the main policy. As the terms and conditions of such demande d’assurance and the main policy may vary considerably, the demande d’assurance and the main policy demand/offer must be signed separately, see the seventh sentence of art. 57 para. 2 IA. N6. When preliminary cover is granted before or after contract formation, the term of demande d’assurance does not apply. Rather, Belgian law speaks of couverture provisoire in general. This term encompasses preliminary cover granted before a future main policy and is also used to denote a definitive main insurance contract between the parties, but issued in a preliminary docu-

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ment, so as to give the insurer time to draft the main policy in further detail. As such preliminary cover is not linked directly to contract formation, it is not subject to the requirements of art. 57 para. 2 IA 2014, cf. Fontaine, para. 188. This is not to say that a couverture provisoire, namely preliminary cover before or after contract formation, is not subject to any formal requirements. Art. 64 para. 1 IA 2014 establishes an indirect requirement, in that proof of any form of insurance contract is admissible only in writing, save for avowal or oath.

Luxembourg N7. According to the second sentence of art. 9 para. 3 ICA, the cover note and the insurance offer must be issued as separate documents. The third sentence of art. 9 para. 3 ICA provides for the same information as Article 2:402 para. 1 PEICL. Additionally, the insurer must disclose the basis of the pricing system, see the sixth indent of the third sentence of art. 9 para. 3 ICA and Bisenius 41.

United Kingdom N8. In the United Kingdom, preliminary cover may be granted by way of a cover note. A written note, however, is not essential as preliminary or “interim” cover ranges from an oral agreement to formal documentation, see Birds 5.6, Clarke 12-3, Colinvaux 1-47. When temporary cover is granted neither in the form of a document specifying the terms and obligations nor a document incorporating the future terms and obligations of the main policy, the terms of the latter policy would still be decisive, given a general proposition that the application for insurance is construed to refer to the standard terms contained in the insurer’s usual form of policy, see Birds 5.6.3 ff., Clarke 12-4, Colinvaux 1-52. In such cases, though, the policyholder may not be aware of the terms which govern his claim, for example a notice duty. Accordingly, it has been held by the Court of Appeal that the beneficiary of preliminary cover, if not informed beforehand, is not bound by the terms of the policy itself, in particular the notice duty: Re Coleman’s Depositories Ltd [1907] 2 KB 798. Special rules apply to cover notes issued by brokers, see Birds 5.6, Clarke 12-2, Colinvaux 1-31.

Terms of the Cover Note N9. Since the parties may conclude a valid preliminary insurance contract without any reference to contract terms, it may be difficult to establish the terms applicable to the cover note. As pointed out above, several national statutes provide for the application of the terms habitually employed by the insurer in such cases or limit their application to what could reasonably be foreseen by the applicant, see Notes 2, 3 and 8 above. The Principles of European Insurance Contract Law do not contain such a rule since they are meant to apply only if the parties so agree, see Article 1:102 PEICL. Moreover, it would simply reflect general contract law as laid down in the Principles of European Contract Law which would fill gaps of the Principles of European Insurance Contract Law anyway, see Article 1:105 para. 2 PEICL. Under the interpretation rule of Article 5:102 PECL, the usages, previous dealings and good faith have to be considered when filling the gap of a contract; this would not lead to results which differ from those achieved by the national laws mentioned above.

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Article 2:403 Duration of Preliminary Cover (1) When an applicant for an insurance contract is granted preliminary cover, that cover shall end no sooner than at the time when the cover under the insurance contract is agreed to begin or at the time the applicant receives notice from the insurer definitively rejecting the application, as the case may be. (2) When preliminary cover is granted to a person who does not apply for an insurance contract with the same insurer, the cover may be granted for a period less than that stated in Article 2:601 para. 1. Such cover may be cancelled by either party giving two weeks notice.

Comments Duration of the Preliminary Cover C1.  The purpose of preliminary cover is to enhance the pre-contractual relationship between the applicant and the insurer. This purpose is only fulfilled if the cover does not end before the contractual negotiations. If negotiations fail because the insurer is unwilling to accept the risk, the reason for the preliminary cover vanishes and Article 2:403 para. 1 second alt. provides for the preliminary cover to end at that time, though parties may agree on a longer duration. If, however, the application is accepted by the insurer and the insurance contract is concluded, it may still be necessary for the applicant to enjoy preliminary cover. This is the case whenever the commencement of the cover under the ultimate insurance contract is delayed by clauses requiring the policyholder to pay the first premium in order to obtain cover (see Article 5:101). In order to avoid gaps in the cover period in such cases, the preliminary cover should remain in force for the period of payment of the first premium (which is at least two weeks according to Article 5:101(b)). It should, however, lapse if payment is not made upon expiry of the period. This is why Article 2:403 para. 1 first alt. mentions the time, when cover under the ultimate insurance contract should begin, as the end of the preliminary cover unless parties have agreed on a longer duration. C2.  Article 2:403 para. 1 only applies to cases in which a preliminary cover is granted because the applicant has filed an application. If in particular circumstances this is not the case, preliminary cover should end at the time agreed. Furthermore, such preliminary cover may be cancelled by either party giving two weeks notice. This right of cancellation allows the insurer to break-off dealings with a customer who has no serious intention of going through with the whole transaction.

Notes Germany N1. The German ICA regulates the duration of preliminary cover using a special and very detailed provision: The preliminary insurance contract ceases no later than at the time when cover under a further preliminary contract or the main insurance contract commences, see the first sentence of s. 52 para. 1 ICA. The same rule applies when the holder of the cover note subsequently concludes the main insurance contract with a different insurer, see the first sentence of s. 52

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para. 2 ICA. The preliminary insurer has to be notified of the subsequent contract, see the second sentence of s. 52 para. 2 ICA. If the main insurance contract made with the insurer issuing the cover note fails to operate because of a revocation or an objection by the holder of the cover note, the preliminary insurance contract ceases at the latest when the revocation or objection reaches the insurer, see s. 52 para. 3. Where the preliminary insurance contract was entered into for an indefinite period, either party may terminate the contract without notice, see the first sentence of s. 5 para. 4 ICA. However, the insurer’s termination only becomes effective two weeks after receipt, see the second sentence of s. 52 para. 4 ICA.

France N2. In France, the decisions of the Cour de Cassation have continually stressed the temporary nature of preliminary cover, see Lamy Assurances, para. 430(b), citing judgments rendered in 1994, 1999 and 2001. Where a term is specified in the cover note, cover ends at the deadline agreed upon; the compensation of losses arising from risks materialised subsequently may not be claimed by the policyholder, see Lamy Assurances, para. 430(b). French insurance law thus lacks a mandatory provision of the nature of Article 2:403 para. 1 PEICL. Under French insurance law, the duration of preliminary cover is determined independently from the state of negotiations on the main policy, Cass. civ. 1er, 9.11.1999, n° 9714.252, RCA 2000, Commentaires, n° 105. Thus, preliminary cover may end before a subsequent main policy is established between the parties. This leads to uncertainties over damages occurring subsequently in cases when no clear preliminary term was fixed, and a later contract has not been concluded. The Cour de Cassation has decided that the burden of proof that the risk materialised after expiry of the preliminary contract lies with the insurer, Cass. civ. 1er, 25.10.1994, n° 92-18.447, RGAT 1994, 1098-1100.

Section Five: Insurance Policy Article 2:501 Contents When concluding the insurance contract, the insurer shall issue an insurance policy, together with the general contract terms as far as they are not included in the policy, containing the following information if relevant: (a) the name and address of the contracting parties, in particular of the head office and the legal form of the insurer and, where appropriate, of the branch concluding the contract or granting the cover; (b) the name and address of the insured and, in the case of life insurance, the beneficiary and the person at risk; (c) the name and address of the intermediary; (d) the subject matter of the insurance and the risks covered; (e) the sum insured and any deductibles; (f) the amount of the premium and the method of calculating it; (g) when the premium falls due as well as the place and mode of payment; (h) the contract period, including the method of terminating the contract, and the liability period; (i) the right to revoke the application or avoid the contract in accordance with Article 2:303 in the case of non-life insurance and with Article 17:203 in the case of life insurance; (j) that the contract is subject to the PEICL;

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(k) the existence of an out-of-court complaint and redress mechanism for the applicant and the methods of having access to it; (l) the existence of guarantee funds or other compensation arrangements.

Comments Insurance Policy C1.  Like most national legal systems, the Principles of European Insurance Contract Law provide the policyholder with a right to an insurance policy issued by the insurer (Article 2:501). However, the validity of the contract does not depend on the issue of the policy. The insurance policy must contain at the very least the information specified in Article 2:501(a) to (l).

Evidence C2.  In some countries the law requires the insurance contract to be evidenced in writing in order to be enforceable. However, rules of this kind are not found in most countries, whether for insurance contracts or other kinds of contract. Accordingly, the Principles of European Contract Law do not contain such a rule and the Rome I Regulation (593/2008) (art. 18 para. 2) is to similar effect. Therefore, the Principles of European Insurance Contract Law do not require evidence in writing either (see also Article 2:301).

Parol Evidence Rule C3.  National laws sometimes provide for further legal consequences from the mere fact that a written document has been issued. A prominent example is the parol evidence rule in the UK. This rule and similar rules of national law should not be applied in the context of the Principles of European Insurance Contract Law without taking into account the particular weight given to oral communication under the Principles of European Insurance Contract Law (see Article 1:205). Note, however, that Article 2:502 has similar effect to the parol evidence rule.

Preliminary Insurance Contracts C4.  In order to ensure complete protection of the policyholder, Article 2:402 para. 1 deals with preliminary insurance contracts. The document required is similar to an insurance policy. The information to be provided is, however, restricted to information relevant in the pre-contractual phase. In this way, transparency interests of the applicant are balanced with the general interest to ease or at least to avoid unreasonable burdens for insurance transactions.

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Notes Issue of a Document N1. The insurer’s duty to issue an insurance policy is a common principle in European insurance acts, for example in s. 3 para. 1 Austrian and German ICA; art. 64 para. 1 Belgian IA 2014; art. 7:932 Dutch CC; s. 6 para. 1 Finnish ICA; art. 112-3 French ICA; art. 2 paras. 2 and 3 Greek ICA; art. 1888 para. 2 Italian CC; art. 809 para. 1 Polish CC; arts. 32 ff. Portuguese ICA; art. 5 Spanish ICA; art. 11 para. 1 Swiss ICA. N2. In England and Wales, there is no general rule of common law requiring an insurance document in non-marine insurance (Roberts v Security Co [1897] I QB 111, CA; Murfitt v Royal Insurance Co [1922] 38 TLR 334; Birds 88 ff., Clarke 11-2A1 and 14-1). But most insurance contracts are recorded in a policy.

Information to Be Provided – Detailed Requirements N3. Very similar to the list of information presented in Article 2:501 – with only a few exceptions and some additional requirements –, are the pertinent regulations in Belgium (art. 64 para. 2 IA 2014; additionally required: the date of conclusion of the contract); France (art. 112-4 ICA; the policy must also state the name and the address of the Insurance Supervisory Authority and the terms of rescission, art. 113-12 ICA; even more specific requirements in life assurance, see art. R. 132-4 ICA); Greece (art. 1 paras. 2 and 3 and art. 2 paras. 3 and 4 ICA: the policy must contain among other things the exceptions to cover, the place and date of issue and a note that the contract is governed by general and special insurance terms and conditions, if applicable); Luxembourg (art. 16 para. 2 ICA: instead of the law applicable, the policy has to name the competent venue; additionally to be stated: the conditions and the way of rescission and that automatic renewal of the contract is only possible for one year at a time, art. 38 ICA); Poland (art. 12a of the Act on Insurance Activity, regarding the contents of general contract terms); Portugal (art. 37 ICA, providing that particular pieces of information – for example in relation to the scope of the cover as well as the right to avoid or rescind the contract – must be prominent) and Spain (art. 8 ICA: information on the insurance concept chosen, and the amount of administrative costs and taxation must be included). N4. Since the main function of the policy is to record the insurance contract and to give evidence of its particulars, it shall describe its content (s. 3 para. 1 Austrian and German ICA, see Bruck/ Möller-Knops, § 3 VVG para. 3; art. 7:932 Dutch CC; art. 1888 Italian CC; see Donati/Volpe Putzolu 177; La Torre-Benini art. 1888 no. 3; art. 37 para. 2 Portuguese ICA; art. 11 para. 1 Swiss ICA). Likewise the practice in England (Halsbury 226).

Mixture: General Provision with Some Details N5. Some national laws have chosen a more general approach requiring only a document that contains “written confirmation of the contract” or a document “that sets out the main content of the contract”; such formulae may be supplemented with more detailed requirements, see s. 6 Finnish ICA: detailed requirements in personal insurance; see art. 809 para. 1 Polish CC as compared with art. 12a of the Polish Act on Insurance Activity regarding general contract terms;

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see also ss. 2 and 4 of Ch. 2 (consumer insurance) and ss. 2 and 4 of Ch. 10 (personal insurance) Swedish ICA.

Means of Proof N6. Depending on the national law of civil procedure the policy may acquire a particular relevance as a means of proof. It may be an indispensable tool for proving the insurance contract, while in other countries it will provide conclusive evidence of the contract without, however, being necessary for its proof. N7. In some Member States, proof of the insurance contract and its content is limited to evidence in writing, which would at least require the party bearing the burden of proof to furnish some documentary evidence to start with, a so-called commencement de preuve par écrit. In respect of insurance contracts in particular, such a requirement of written evidence of the insurance contract is established for example in Belgium (art. 64 para. 1 IA 2014), in Greece (art. 2 paras. 1 and 2 ICA), in Italy (art. 1888 para. 1 CC) and in Luxembourg (art. 16 para. 1 ICA). N8. In common law jurisdictions, the insurance contract may be proven by any means. But the policy has a particular significance: under the parol evidence rule “a document which looks like the whole of the contract, namely a document that contains all the terms of the kind one would expect in that kind of contract and which has a degree of formality that suggests the document is significant to those who made it […] a presumption that that is the whole of their contract and evidence will not be admitted to add to, vary or contradict that document” (Birds 5.4, Clarke 11-2A1 and 14-1; see also MacGillivray 11-037). There can be no doubt that a policy is such a document.

Constitutive Effect N9. Unlike in all other European laws, insurance contracts in Scotland are considered as obligationes litteris and must therefore be constituted in writing (Colinvaux (1990) 1-22). In contrast to that, some legal orders explicitly define the policy to have no constitutive effect, see the notes on Article 2:301 and for example for France art. 112-3 para. 4 ICA.

Issue of General Contract Terms N10.  Terms and conditions applicable to the insurance contract are also part of the agreement. Consequently, the insurer must furnish the policyholder with this specific information as well. This shall be done either by means of a document (see for example for Austria s. 5b para. 2(2) and para. 4 ICA, for Germany s. 305 CC and s. 7 para. 1 ICA, for Greece art. 2 paras. 4 and 6 ICA, for Poland art. 12a Act on Insurance Activity, for Spain art. 3 para. 1 ICA) or by including them in the policy or by making them available in another manner (Greece: art. 2 para. 6 ICA; Luxembourg: art. 17 ICA). N11.  The rule prevailing in England provides that when the insurer comes to issue the policy, he has to issue it with the terms and conditions usually attached to his policy, insofar as these are not inconsistent with the express terms of the parties’ preliminary contract (S E Lancs Insurance Co v Croisdale (1931) 40 Ll. L. R. 22, 24; furthermore MacGillivray 2-010; Clarke 11-1A3).

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Cover Notes N12. Several legal systems explicitly consider the foregoing provisions as equally applicable to preliminary cover notes, for example: Greece (art. 2 paras. 2 and 3 ICA). Some other countries, however, require less information to be included in a cover note, for example art. 9 para. 3 Luxembourg ICA. Occasionally, it is merely laid down that a cover note has to be issued, see for example for Spain art. 5 ICA. See also the notes on Article 2:402.

Written Form N13. By requiring a written policy, Article 2:501 is again in line with many European insurance statutes, for example Austria and Germany (s. 3 para. 1 ICA); France (art. L. 112-3 para. 1 ICA); Greece (art. 2 paras. 1 and 2 ICA); Italy (art. 1888 para. 2 CC; see also arts. 166 to 185 of the Code of Private Insurance); Luxembourg (art. 16 para. 2 ICA); the Netherlands (art. 7:932 CC); Poland (art. 809 para. 1 CC); Portugal (art. 32 para. 2 ICA); Spain (art. 5 ICA) and Switzerland (art. 11 para. 1 ICA). See further the Electronic Commerce Directive (2000/31/EC) (art. 10 para. 3). N14. In England and Wales, no insurance policy is required by law except in marine insurance (s. 22 of the Marine Insurance Act 1906). However, the effect of the parol evidence rule is that, in practice, insurance contracts have to be in writing: see Clarke 11-2A1; 14-1.

Article 2:502 Effects of the Policy (1) If the terms of the insurance policy differ from those in the policyholder’s application or any prior agreement between the parties, such differences as have been highlighted in the policy shall be deemed to have been assented to by the policyholder unless he objects within one month of receipt of the policy. The insurer shall give the policyholder notice in bold print of the right to object to the differences highlighted in the policy. (2) If the insurer fails to comply with para. 1, the contract shall be deemed to have been agreed on the terms in the policyholder’s application or the prior agreement of the parties, as the case may be.

Comments C1.  The policy is a document evidencing the contract. Often it is also used as a tool for concluding the contract: Some jurisdictions hold that the insurer tacitly accepts the application by sending the policy to the policyholder. In other jurisdictions the policy is an offer by the insurer to the prospective customer who accepts the proposal by signing the policy. In both cases there is a risk that the terms of the policy depart from what was requested by the applicant or from prior agreement. Often the insurer will intentionally issue the policy with new or modified terms as a consequence of its risk evaluation. It is in the interest of lowering transaction costs in the insurance sector to allow an insurer to issue the policy on different terms. At the same time the policyholder must be protected against unsuspected changes of terms in the policy. Under general contract law such changes could even lead to an absence of agreement that

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might affect the whole contract and leave the policyholder unprotected. Article 2:502 serves to prevent such situations. C2.  Article  2:502 serves the interests of both the insurer and the policyholder in an even-handed way. It does so by giving constitutive effects to the policy if certain conditions are met: The policy will be deemed to be agreed upon by the parties if (i) the insurer has highlighted every variation of the policy from the application or prior agreement, (ii) the policyholder does not object to the variation within one month of receipt of the policy and (iii) the insurer has informed the policyholder in writing and in bold print about his right to object to the variations. From the rationale outlined in Comment 1 it follows that the term “policy” as used in Article 2:502 includes all documents attached or incorporated thereto such as the general contract terms as mentioned in Article 2:501. C3.  In some jurisdictions the policy is required to be signed or is normally signed by the policyholder. By signing the policyholder accepts the contents of the policy as the final agreement even if its terms depart from those of a previous application or agreement. Article 2:502 does not prohibit such practice. However, Article 2:502 grants special protection to the policyholder also in those cases. C4.  By providing special protection, Article 2:502 replaces national rules with similar effects such as the parol evidence rule.

Notes Legal Presumption of Approval N1. The presumption introduced in Article 2:502 para. 1 is already the state of the law in Austria and Germany (s. 5 para. 1 ICA), Greece (art. 2 para. 5 ICA); Poland (art. 811 para. 1 CC, with small differences); Portugal (art. 35 ICA); Spain (art. 8 para. 3 ICA) and Switzerland (art. 12 para. 1 ICA). N2. In the United Kingdom, the regulation is slightly different although achieving the same results: A policy inconsistent with the policyholder’s application is regarded as a counter-offer (Canning v Farquhar (1886) 16 QBD 727; Harrington v Pearl Life Co (1914) 30 TLR 613; Allis-Chalmers Co v Fidelity & Deposit Co (1916) 114 LT 433 (HL)). Accordingly, the policyholder can reject it or ask for renegotiations. If he does not, the content of the policy is deemed to be accepted. Only in exceptional cases can the policyholder who kept the policy without noticing the alterations claim that the insurer is estopped from relying on these alterations since the insurer’s conduct made the policyholder reasonably believe that his application was fully accepted (Freeman v Cooke (1848) 2 Exch 654, 663; Smith v Hughes (1871) LR 6 QB 597, 607). These circumstances are not easily proved by the policyholder. N3. However, the fiction that the policy has been approved takes effect only in case a proposal has been made, not in cases in which a contract has been concluded informally or in which a “common intention” has already existed before the delivery of the policy. In the latter cases, the

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policy is merely of probative value and the contents can be disproved. The policyholder is then entitled to sue on the earlier agreement or to seek a rectification of the policy (MacGillivray 2-025). More or less the same applies in the Netherlands: a policy, expressing an acceptance which deviates from the offer, is considered to be a new offer and a rejection of the original offer, unless the deviation refers to points of minor importance. In that case the policy is considered to reflect the agreed coverage unless the offeror objects to the differences without delay (art. 6:225 CC)

Term for Contradiction N4. The statutes mentioned in Note 1 all require that if the policyholder is to object that must be done within one month after receipt of the divergent policy (s. 5 para. 1 Austrian and German ICA; art. 2 para. 5 Greek ICA demands the objection to be in writing; art. 811 para. 1 Polish CC: minimum 7 days; art. 35 Portuguese ICA; art. 8 para. 3 Spanish ICA; art. 12 para. 1 Swiss ICA: four weeks). N5. In the United Kingdom, rectification can be sought after a loss has occurred (Henkle v Royal Exchange Assurance Co (1749) 1 Ves Snr 317; Eagle Star and British Dominions Ins Co v Reiner (1927) 27 Ll. L. R. 173; Bates (Thomas) & Son Ltd v Wyndham’s (Lingerie) Ltd [1981] 1 All ER 1077 (CA); for a recent and helpful statement of the law see T & N Ltd v Royal & Sun Alliance plc [2003] 2 All ER (Comm) 939 at [133] ff, per Lawrence Collins J). In any case, the insured must not have sued on the uncorrected policy before because this would be deemed an approval (Foster v Mentor Life Assurance Co [1854] 3 E & B 48, 65; Xenos v Wickham (1866) LR 2 HL 296, 324, per Lord Cranworth; Baker v Yorkshire Fire Assurance Co [1892] 1 QB 144; Dawsons Ltd v Bonnin [1922] 2 AC 413, 431-432, per Viscount Cave).

Preconditions for Presumption N6. In order to make this provision more protective to the policyholder, the presumption only takes effect under certain conditions, for example if the insurer has informed the policyholder about this specific consequence at the time of delivering the document by means of an additional note or an especially highlighted perceptible endorsement in the policy itself (s. 5 paras. 1 and 2 Austrian and German ICA; moreover, the particular variations must be pointed out separately, s. 5 para. 2 Austrian and German ICA) or if the insurer has duly informed the policyholder about the variations and about the right of the latter to object (art. 2 para. 5 Greek ICA; in addition, the insurer has to issue a separate printed specimen of the notice of objection). N7. Some statutes stipulate that the insurer only has to insert this very rule into the policy (the second sentence of art. 8 para. 3 Spanish ICA; art. 12 para. 2 Swiss ICA: the exact wording of this provision has to be included).

Signature as Means of Protection N8. Italian law contains a rule saying that if the content of the policy is not identical to the policyholder’s proposal, the policy is deemed expressly accepted if the policyholder signs the document (see Donati/Volpe Putzolu 180). If, however, the insurer has already accepted the policyholder’s proposal and then issues a diverging policy, the principal proposal prevails.

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Legal Presumption of Contract in Accordance with Application N9. If the insurer’s performance fails to meet the requirements established as preconditions for the fictitious approval of the – altered – policy, the insurance contract is regarded as having been agreed upon in accordance with the application. This rule is already known in Austria and Germany (s. 5 para. 3 ICA), as well as in Greece (art. 2 para. 5 ICA) and Poland (art. 811 para. 1 CC).

Section Six: Duration of the Insurance Contract Article 2:601 Duration of the Insurance Contract (1) The duration of the insurance contract shall be one year. The parties may agree on a different period if indicated by the nature of the risk. (2) Para. 1 does not apply to personal insurance.

Comments Comparative Survey C1.  Practices in insurance differ considerably as to the time-span of contractual commitments. In the USA insurers tend to conclude short-term contracts which give them liberty to adjust premiums to changing interest rates on the capital market. While insurance terms have gone down to less than one year and in some sectors of standardised consumer insurance even to three months some states have felt the necessity to enact legislation providing for a minimum duration of insurance contracts. A similar trend has never been observed in Europe. Where brokers have a strong market position they attach great importance to periodical renewal of insurance contracts which allows them to keep contact with their clients and to adjust the contracts to market conditions. Therefore, in countries such as Spain and the UK one year contracts are conventional although national legislation provides for a much longer maximum term (Spain) or does not fix any term whatsoever (UK).

In other European countries insurers have traditionally tried to extend the duration of contractual commitments as much as possible. By tying their customers for many years they improved the bases of their calculations without losing the ability to adjust the premiums which is often specifically allowed by contract clauses. C2.  More recent developments in Europe are characterised by the adoption of maximum terms of insurance contracts. Various states have taken the view that the policyholder has to be protected against long-term contracts which tie the customers for a period of time going beyond the foreseeable future.

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Structure of the Rule C3.  Article 2:601 para. 1 is conceived as a mandatory provision which purports, as a general rule, to forbid the conclusion of insurance contracts for a period of less or more than one year. Admittedly, a specific provision on a minimum term is not required to cope with practical needs existing in Europe at present.

But the rapid development of capital markets and the experience of the United States suggest that a rule against ultra-short insurance terms should be adopted in time. By way of exception insurance terms of less than one year (or more than one year) may be agreed upon if the insured risk is of such a nature that a shorter insurance period is appropriate, for example travel insurance or the insurance of exhibition equipment. The provision does not deal with the term of insurance contracts that are covered by that exception. C4.  Limitation of the insurance term can be achieved in different ways. The parties may either be allowed to make contracts for a longer or even unlimited period of time if they are given an inalienable right to terminate the contract by unilateral declaration when the maximum time-span expires. Alternatively it is possible to invalidate a contract clause which provides for a longer term; in that case the need for an extension of the insurance cover can be served by a rule on the renewal of the policy. While the former model has been followed in some States such as France, Germany and Austria, other countries including Belgium and Sweden have preferred the establishment of a maximum contract term. While both solutions have their merits, the Principles of European Insurance Contract Law prefer the latter for its clarity and because it reduces problems connected with the adjustment of the policy; see below Article 2:602 Comments 2 and 3.

Duration of the Contract Period C5.  The Principles of European Insurance Contract Law establish a maximum contract term of one year in Article 2:601 and a provision for automatic prolongation in Article 2:602. The term of one year is in line with more recent legislation in the field, in particular with the laws of Belgium, France, Luxembourg and Sweden. Under Finnish law the policyholder is even entitled to terminate an insurance contract at any time during the insurance period. The Proposal for a Council Directive on Insurance Contract Law provided for a maximum term of three years, and Austria has adopted this rule for a termination by a consumer. In Germany a one-year term is fixed for motor liability insurance, but the general rule was five years and is now three years under the new ICA of 2007. The one-year term thus reflects the general legislative trend towards shorter contract terms in several Member States and the prevailing practice in others. It also avoids a number of inconveniences that longer terms may give rise to such as the need for an adjustment of conditions and premium, premature termination and so on.

Effects of Violation C6.  The limitation of contractual freedom by Article 2:601 para. 1 raises the question as to the legal consequences of a contract that provides for a longer or a shorter insurance term not covered by this provision. In the national legal systems the issue is not dealt with by

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insurance contract laws, but by general principles of private law. This method can equally be applied in the context of Article 2:601. Under Article 4:116 PECL the effect of avoidance is limited to the terms affected by the ground of avoidance unless it would appear unreasonable to uphold the remaining contract. Consequently, an insurance contract providing for an invalid term of five years would be regarded as a contract without a defined period. The establishment of the period of insurance would be a matter of interpretation under Article 5:101 PECL; under Article 2:601 the term would be one year.

Personal Insurance C7.  In health and life insurance the demand for insurance cover is different. Since health inevitably gets worse in the long run, short-term insurance entails the risk of a steady rise in the level of premiums over the years and of an eventual loss of insurance cover altogether in old age. Therefore, personal insurance is characterised by contracts of indefinite duration or – in some sectors of life assurance – by long-term policies, and legislation in many countries even restricts the insurer’s right to terminate such contracts. The model of the short-term policy adopted by the Principles of European Insurance Contract Law cannot be applied to personal insurance which is used in Article 2:601 as a synonymous expression covering health and life insurance (see also Article 13:101).

Notes Maximum Period N1. Much European legislation provides for protection against excessively long contract periods. Some statutes allow for termination after the expiry of a given period, others limit the duration of the contract period itself. Thus, the rule in the first sentence of Article 2:601 para. 1 corresponds to the laws of Belgium, Portugal and Sweden (the first sentence of art. 85 para. 1 Belgian IA 2014; art. 40 Portuguese ICA; s. 3 of Ch. 3, s. 4 of Ch. 8 Swedish ICA). The rule in the second sentence of Article 2:601 para. 1 is to be found only in the law of Sweden (the second sentence of s. 3 of Ch. 3 ICA). N2. In all other legal systems in Europe, subject to unilateral rights of termination, the duration of the insurance contract is a matter for the policy itself to provide. However, the period that is commonly fixed is different. In Denmark, Ireland, Spain, and the United Kingdom insurance contracts usually expire after one year (see for Denmark Basedow/Fock-Scherpe 991, Sørensen 98; for Ireland Basedow/Fock-Rühl 1508; for Spain Basedow/Fock-Schlenker 1367, Bataller/Latorre/ Olavarria 186; for Portugal Vasques 233; for the United Kingdom Birds 5.7.1, Clarke 18-3A), whereas they may run for an indefinite period in Austria, Germany, Greece, France, Luxembourg, the Netherlands, Poland, and Switzerland (see Basedow/Fock-Basedow/Fock 123 f.). For Italy, even if in principle there is no maximum period, when the period of a non-life insurance contract is longer than five years the policyholder can always terminate it (see art. 1899 CC, as modified by Law of 23 July 2009, no. 99). Specific rights of termination are provided in the event of premium variations. N3. In practice, however, the difference between the former and the latter countries is minor: To

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avoid undue hardship that might result from an indefinite insurance period, the laws of Austria, Germany, Greece, France, Italy, Luxembourg and the Netherlands allow either party to terminate the contract after a certain period of time has elapsed (see Basedow/Fock-Basedow/Fock 123 f.). In France and Luxembourg termination of the contract is possible every year on the anniversary of the policy (art. L. 113-12 para. 2 French ICA; art. 38 para. 2 Luxembourg ICA). The same is basically true for Austria, Germany and Greece: A contract made for an indefinite period may be cancelled at the end of every premium term which is one year unless the parties provide for a shorter term (ss. 8 para. 2, 9 Austrian ICA; ss. 11 para. 2 and 12 German ICA; art. 8 paras. 2 and 6 Greek ICA). In the Netherlands, insurance contracts running for more than five years may be terminated every five years (art. 7:940 para. 2 CC). In Austria, cancellation of contracts made for a definite period of more than three years is allowed after three years and every following year (s. 8 para. 3 ICA, which only applies to consumers within the meaning of the second sentence of s. 1 para. 1 of the Consumer Protection Act), in Germany, too, after three years and every following year (s. 11 para. 4 ICA). In Italy, both parties are allowed to terminate at the end of each year insurance contracts that run for an indefinite period, except where specific economic advantages have been given to the policyholder for a pluriennal contract: in this case, the policyholder can terminate the contract after five years, otherwise he will lose the economic benefits; in any case, the rule does not apply to life insurance (see new art. 1899 as modified by Law of 23 July 2009, no. 99). In Finland, the contract may be cancelled by the policyholder at any time (s. 12 ICA, unless the agreed duration of the insurance contract is shorter than 30 days). A look at the more recent enactments reveals a general trend to shorter maximum periods.

Personal Insurance N4. The rule in Article 2:601 para. 2 is in accordance with the law of Belgium (art. 85 para. 1(4) IA 2014) and the Netherlands (art. 7:940 para. 2 CC). A similar rule applies in Spain for life assurance (art. 22 para. 3 ICA). In Denmark, Ireland and the United Kingdom, where most insurance contracts expire after one year even though there is no corresponding rule of law, personal insurances, in particular life and health insurances, run for a longer period of time (see Basedow/Fock-Basedow/Fock 124 f.; see for Ireland Basedow/Fock-Rühl 1508; Vasques 233; for the United Kingdom Birds 5.7, Clarke 11-4B; Basedow/Fock-Rühl 1508). In Portugal and Sweden, on the other hand, the duration of personal insurance is also limited to one year unless the parties agree otherwise (for Portugal, this follows from the fact that the rule on duration is contained in the general part of the ICA (título I) which applies equally to indemnity insurance and personal insurance; for Sweden, see s. 2 of Ch. 11 ICA).

Article 2:602 Prolongation (1) After the one-year period referred to in Article 2:601 has expired the contract shall be prolonged unless (a) the insurer has given written notice to the contrary at least one month before the expiry of the contract period stating the reasons for its decision; or (b) the policyholder has given written notice to the contrary at the latest by the day the contract period expires or within one month after having received the insurer’s premium invoice whichever date is later. In the latter case, the one month period shall only start to run if it has been clearly stated on the invoice in bold print. (2) For the purposes of para. 1(b) notice shall be deemed to be given as soon as it is dispatched.

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Comments The Need for Prolongation C1.  The time limitation for insurance contracts established in Article 2:601 has to be accommodated with the need felt by the vast majority of insurers and their customers to maintain business relations over longer periods of time. A complete renegotiation of all insurance contracts every year which would follow from the general rules on contract law appears inappropriate.

Policyholders who, for reasons of absence, sickness and so on, cannot be contacted by the insurer would remain without insurance cover. Moreover, the general renegotiation of all policies would be excessively costly given the small number of policies which are not renewed in practice. The national legal systems of Member States therefore facilitate prolongation by two types of solution: they either mandate a prolongation of the policies by operation of law, or they allow for contract clauses which provide for such prolongation. The practical difference between the solutions is not great. Article 2:602 adopts the former model which takes precedence over the time limitation laid down in Article 2:601.

Prolongation and Renewal C2.  The prolongation is to be distinguished from renewal in the sense of a new agreement for the purposes of the applicant’s or the insurer’s information duties, of the duty to issue certain documents in relation to the conclusion of the contract, of the consequences attached to the non-payment of the first premium and of other obligations in relation to the formation phase of the contract. If, however, one of the parties gives notice in accordance with Article 2:602 and a new contract is made between the same parties afterwards, it will depend upon the particular circumstances of the case whether the rules of law relating to the formation stage of the contract apply.

Adjustment of Contract C3.  As a consequence of prolongation by operation of law, a contract incorporating the conditions of the preceding year remains in effect. However, in long-term insurance there is often a practical need for the adjustment of premium or contract clauses for a change of risk or market conditions. Under the regime of one-year policies the insurer will use the annual notice of prolongation for such adjustment. Article 2:602 allows the insurer to send at the same time a reasoned notice of termination and a proposal for a modified contract. If the notice lacks the statement of reasons required, the contract will be prolonged nonetheless on the same terms and conditions as in the previous year.

Form of Notice C4.  As regards the notice referred to in subparas. (a) and (b) it must be made in writing for reasons of clarity. This includes means of communication that provide a record readable by both sides, as defined by Article 1:301 para. 6 PECL. In particular, messages sent by telegram, telex, telefax and e-mail are equivalent to written statements under that rule.

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In order to be valid the insurer’s notice has to set forth the reasons for the insurer’s decision not to prolong the contract. This information is meant to equip the policyholder with knowledge that might be useful for him when applying for coverage with another insurer. The reasons given are not subject to judicial review unless they are against good faith or public policy. Thus, reference to the policyholder’s ethnic origin may invalidate the notice under general principles.

Term of Notice C5.  The term laid down for the notice of termination given by the insurer differs from that fixed for the policyholder. This difference is based on the consideration that continuous insurance cover is of vital importance to the vast majority of policyholders in many sectors of insurance. Therefore, the term established for the insurer’s notice of termination must allow the policyholder to compare competing offers while he is still protected by the old contract and to negotiate for a smooth transition into the new one. Under Article 2:602 para. 1(a) the insurer’s notice must therefore be given one month before the expiration of the contractual term at the latest. On the other hand, there is no need to protect the insurer against a notice of termination given shortly before the end of the contractual term. It would even appear that a policyholder, who is reminded of the end of the contractual term only by the insurer’s invoice for the subsequent year which is sent just before the end of the term or even afterwards, should be allowed to compare competing offers for the usual period of one month which in practice would extend the original term of the contract. This particular favour takes account of the typical consumer who does not think of his insurance cover until he is reminded by the insurer’s notice for the following year. The notice period of one month does not start to run unless it has been clearly stated on the invoice. If the invoice does not contain this information, the policyholder may terminate the prolonged contract at any time during the subsequent annual period. C6.  The time limits established for the notice of termination should be computed along the lines laid down in Article 1:304 PECL, insofar as Article 2:602 does not provide for different solutions. Contrary to Article 1:303 PECL but in line with various Community acts in the field of consumer protection (see, for example, art. 11 para. 2 of the Consumer Rights Directive (2011/83/EU), art. 7 of the Timeshare Directive (2008/122/EC)) the deadline laid down for a policyholder’s notice shall be deemed to have been observed if the notice has been dispatched in time. In accordance with Article 1:303 PECL the insurer’s notice of termination becomes effective when it reaches the addressee, namely when it is delivered to the addressee or to his place of business or mailing address, or, if the addressee does not have a place of business or mailing address, to his habitual residence.

Notes Statutory and Contractual Prolongation N1. The rule in Article 2:602 corresponds to the laws of Belgium, Portugal and Sweden (the second sentence of art. 85 para. 1(1) Belgian IA 2014; art. 41 para. 1 Portuguese ICA: the contract is prolonged after the lapse of one year unless the parties have agreed otherwise; s. 4 of Ch. 3, s. 4 of

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Ch. 11 Swedish ICA). In Denmark, Finland (for non-life insurance), Ireland and Portugal, similar rules may be and usually are contractually stipulated (see Basedow/Fock-Basedow/Fock 125 f.; see for Denmark Lyngsø 158, Basedow/Fock-Scherpe 992, Sørensen 98; for Finland, see s. 16 ICA (non-life insurance); for Portugal Basedow/Fock-Schlenker 1193). The same is true for Austria, France, Greece, Italy, Luxembourg, the Netherlands and Switzerland as regards those insurance contracts that do not run for an indefinite period, but for a limited period of time only (see for Austria s. 8 para. 1 ICA, Basedow/Fock-Lemmel 1112, Schauer 301; for France Bonnard, Droit et pratique, para. 594, Lambert-Faivre, para. 240, Basedow/Fock-Völker 555-556; for Greece art. 8 para. 1 ICA ; for Italy art. 1899 CC, Basedow/Fock-Brunetta d’Usseaux 741, Steidl 150; for Luxembourg art. 83 para. 3 ICA, Bisenius 63, Basedow/Fock-Völker 813; for the Netherlands Clausing/ Wansink 136, Basedow/Fock-Fock 896; for Switzerland art. 47 ICA, Basedow/Fock-Bälz 1263). In Poland, similar rules apply for compulsory insurance (see the Act on Compulsory Insurance); the Polish Civil Code does not cover issue of prolongation at all.

Period of Prolongation N2. In most countries, the prolongation of the contract will be for a limited period of time only. In Belgium, Greece, Portugal, Sweden and Spain, the contract will be prolonged for one year (art. 85 para. 1(1) Belgian IA; art. 8 para. 1(b) Greek ICA; art. 41 para. 1 Portuguese ICA; s. 4 of Ch. 3 Swedish ICA; the second sentence of art. 22 para. 1 Spanish ICA). The same effect is achieved in Austria, Germany, Luxembourg and Switzerland where the insurer may not invoke a contractual clause insofar as it provides for prolongation of more than one year (s. 8 para. 1 Austrian ICA; s. 11 para. 1 German ICA; art. 83 para. 3 Luxembourg ICA; art. 47 Swiss ICA). In Italy, the prolongation of the contract will be for two years (art. 1899 para. II CC). In the Netherlands the same rule as for the initial period of contract applies to the prolongation of the contract (art. 7:932 para. 2 CC).

Prolongation and Renewal N3. In Belgium, Denmark, Germany, the Netherlands, Portugal and Sweden, the prolongation is classified as a continuation of the original contract (see for Belgium Basedow/Fock-Fock 293294; see for Denmark Basedow/Fock-Scherpe 992; for Germany Bruck/Möller-Johannsen, § 11 VVG para. 10, Basedow/Fock-Lemmel 436, and Prölss/Martin-Armbrüster, § 11 VVG para. 2; for Portugal Basedow/Fock-Schlenker 1193 [still valid for the new ICA], Vasques 233; for Sweden Basedow/Fock-Scherpe 992 [still valid for the new ICA]). In Ireland and the United Kingdom, it is seen as the making of a new contract (see for Ireland Basedow/Fock-Rühl 1508; for the United Kingdom Stokell v Heyward [1897] 1 Ch 459; Birds 5.7, Clarke 11-4B, Basedow/Fock-Rühl 1508). Therefore, both the insurer and the policyholder have to fulfil the duties that are imposed before conclusion of any insurance contract, such as the duty to disclose material circumstances (Lambert v Cooperative Insurance Society Ltd [1975] 2 Lloyd’s Rep 485, see Basedow/Fock-Basedow/ Fock 125 f.). The law in Belgium, France, and Greece regarding this point is unsettled (see for Belgium Basedow/Fock-Fock 295, Fontaine, para. 407; for France Lamy Assurances, para. 511; Lambert-Faivre, para. 242, Picard/Besson, para. 166, Basedow/Fock-Völker 556; and for Greece Rokas, paras. 272 ff.).

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Article 2:603 Alteration of Terms and Conditions (1) In an insurance contract liable to prolongation under Article 2:602, a clause which allows the insurer to alter the premium or any other term or condition of the contract shall be invalid unless the clause provides that (a) any alteration shall not take effect before the next prolongation, (b) the insurer shall send written notice of alteration to the policyholder no later than one month before the expiry of the current contract period, and (c) the notice shall inform the policyholder about his right of termination and the consequences if the right is not exercised. (2) Para. 1 shall apply without prejudice to other requirements for the validity of alteration clauses.

Comments The Need for a Rule for Alteration C1.  Article 2:602 provides for a prolongation of one-year contracts by operation of law. Other contracts may include a clause to automatically prolong (or renew). In these circumstances, there may be a need for adjustments and for some mechanism that allows a modification of the premium or the conditions of the contract.

The Need for a Special Rule for Insurance Contracts C2.  Before deregulation within the European Community, following from the implementation of the Third Generation of Insurance Directives (92/49/EEC and 92/96/EEC), modification of contracts was mostly the function of alteration clauses. In most countries, such clauses and the way they were used by the insurers had to be approved by the supervisory authority. C3.  Since deregulation prior approval of alteration clauses is no longer allowed. Furthermore, the consent of the supervisory authority is no longer required for the use of contractual rights of alteration. Today alteration clauses can only be vetted ex post under the rules on unfair contract terms. However, these rules offer no particular guidance on the validity of alteration clauses.

Therefore, to take into account the specific features of insurance contracts, several national legislators have passed statutory provisions setting minimum standards for the validity of alteration clauses.

The Concept Underlying Article 2:603 C4.  There are at least two ways to deal with the problem by legislation: One is to specify the requirements for a valid alteration clause (for example Sweden), the other is to set minimum standards for such a clause (for example Finland). C5.  Article 2:603 adopts the second solution. This is in line with the traditional solutions in the national legal systems of several Member States.

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Furthermore, it is very difficult to specify requirements for the validity of alteration clauses in all types of insurance contracts, as they may be different. Thus, the scope of alteration allowed (premium adjustments only or also amendment of other terms and conditions) or the conditions of the market may require an “independent expert” to review and approve each alteration. Moreover, depending on the type of insurance, it might be necessary to set limitations on the contents of an alteration clause in order to protect the interests of the policyholder effectively. Therefore, a flexible approach is required and Article 2:603 only sets minimum requirements for alteration clauses, not excluding additional requirements laid down in the general law on unfair contract terms.

Minimum Standards for an Alteration Clause C6.  In general, the policyholder is sufficiently protected by the requirements stated in Article 2:603. The requirement of written notice, which must be in clear terms and in the language in which the contract was negotiated (Article 1:203 para. 1), ensures transparency of the alteration procedure. The policyholder’s right to terminate the contract ensures that no alteration will be unilaterally imposed by the insurer. The policyholder is thus put in a position to consider the alterations intended by the insurer and whether or not to exercise his right to terminate the contract.

Notes Article 2:603 para. 1 N1. In most European countries, the insurer may reserve the right to alter the insurance contract in the manner referred to in Article 2:603 para. 1 (art. 42 para. 1 Luxembourg ICA; s. 19 Finnish ICA. See for Austria Basedow/Fock-Lemmel 1075 f.; for Belgium Basedow/Fock-Fock 270; for Denmark Basedow/Fock-Scherpe 974; for Italy Basedow/Fock-Brunetta d’Usseaux 713; for Ireland Basedow/Fock-Rühl 1467; for Switzerland Basedow/Fock-Bälz 1241). Only the law of Sweden provides for a statutory right to alter the terms and conditions of the insurance contract, in conjunction with prolongation, irrespective of any alteration clause contained in the contract (s. 5 of Ch. 3 ICA). In Germany, such a statutory right to alter the terms and conditions exists only for life occupational disability insurance and health insurance (ss. 163, 164, 176 and 203 paras. 2 and 3 ICA), for all other contracts the insurer may contractually reserve the right (Wandt, para. 210). In the Netherlands, the insurer may as a condition precedent to the prolongation of an individual contract of insurance propose to alter the premium and/or the conditions of the contract. In case the policyholder refuses to accept this proposal, the insurer may terminate the contract. Art. 7:940 para. 4 CC limits a contractual right for the insurer to alter the terms and conditions of all policies belonging to the same category during the period of contract where the alteration is detrimental to the policyholder (en-bloc clauses). In Poland there is no statutory regulation of alterations of contract of this kind. In the UK, for example in respect of PHI or LTC insurance, insurers may reserve a right to vary the premium. There the understanding would be that the insurer is entitled to take account of changes, namely in practice, increases in the cost of

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matters for which there is no published (price) index. Analogy with cases in which lenders have retained a right to vary interest rates suggest that the insurer must exercise this right in good faith; in that regard see Director General of Fair Trading v First National Bank [2001] UKHL 52, [2002] 1 AC 481, [2002] 1 Lloyd’s Rep 489. N2. In all European legal systems, such clauses are regulated by the general rules of contract law or of the law on general contract terms (s. 6 para. 1(5) of the Austrian Consumer Protection Act; ss. 307 and 308 para. 4 German CC; arts. 371 and 372 Greek CC. See for Germany Wandt, paras. 215 ff.; for Denmark Basedow/Fock-Scherpe 974; for Finland Basedow/Fock-Scherpe 974). In addition, some legal systems have minimum requirements for such clauses (s. 19 Finnish ICA; s. 5 of Ch. 3 in conjunction with s. 6 of Ch. 2 Swedish ICA; art. 42 Luxembourg ICA). Those rules usually state formal requirements for the validity of such clauses that are similar to the ones mentioned in Article 2:603 para. 1. Only very few countries have established further requirements (ss. 172 and 178f Austrian ICA for health and life insurance; s. 19 Finnish ICA). In Belgium, France, Greece, Ireland, the Netherlands, Switzerland, and the United Kingdom, there are no special rules stating minimum requirements for such clauses (see for Belgium Basedow/Fock-Fock 270; for Ireland Basedow/Fock-Rühl 1467; for the United Kingdom Basedow/Fock-Rühl 1467, where, generally, unilateral alteration of terms agreed post contract is not permitted by law).

Article 2:603 para. 1(a) – Commencement of Alteration N3. Only the laws of Finland, Luxembourg and Sweden provide a rule relating to the time the clause takes effect that is similar to the rule of Article 2:603 para. 1(a). According to s. 19 para. 2 Finnish ICA, an alteration takes effect at the commencement of the insurance period which next follows after a month has elapsed from the date on which the insurer dispatched the notification of the changed conditions to the policyholder. The same rule applies in Sweden under s. 5 of Ch. 3 ICA. Art. 42 para. 2 Luxembourg ICA provides that any alteration of the premium shall not take effect before the next annual premium is due.

Article 2:603 para. 1(b) – Notice N4. Most legal systems in Europe require an insurer who wishes to alter the premium or the conditions to give written notice to the policyholder before the expiration of the current contract period. However, the national laws differ with regard to the period of time the notice has to be given in advance. The law of Finland requires a period of one month as does Article 2:603 para. 1(b), see the third sentence of s. 19 para. 2 ICA. In some countries the period is longer: in Luxembourg, the notice has to be given three months in advance (the first sentence of art. 42 para. 3 ICA). In Belgium, motor policies usually provide that the insurer has to give notice to the policyholder 90 days before the next premium is due (see Basedow/Fock-Fock 270). In Sweden, the rule is flexible: the insurer has to give notice no later than concurrently with the invoice for the prolonged insurance policy; the prolonged policy runs for the period and on the conditions specified by the insurer (s. 5 of Ch. 3 ICA).

Article 2:603 para. 1(c) – Right of Termination N5. In most legal systems in Europe and sometimes subject to further requirements, the policyholder has a right to terminate the contract either by law (s. 12 Finnish ICA, s. 40 German ICA;

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the second sentence of art. 42 para. 3 Luxembourg ICA) or by the terms of the policy itself (see for Belgium Basedow/Fock-Fock 270 and for the United Kingdom Sun Fire Office v Hart (1889) 14 App Cas 98; Clarke 18-3E2. According to the second sentence of s. 19 para. 2 Finnish ICA, the insurer must remind the policyholder of this right). However, only in Luxembourg is the insurer required to inform the policyholder about his right to terminate the insurance contract as provided in Article 2:603 para. 1(c) (the second sentence of art. 42 para. 3 ICA).

Article 2:604 Termination after the Occurrence of an Insured Event (1) A clause providing for termination of the contract after an insured event has occurred shall not be valid unless (a) it grants the right to terminate to both parties and (b) the policy is not one of personal insurance. (2) Both the provision for termination and the exercise of any right to terminate must be reasonable. (3) Any right to terminate shall expire if the party in question has not given written notice of termination to the other party within two months after becoming aware of the insured event. (4) The insurance cover shall terminate two weeks after notice in accordance with para. 3.

Comments The Need for Termination C1.  The insurance contract is characterised by deficits of information on both sides: while the insurer is often ignorant about the particulars of the risk, the policyholder has little knowledge of the insurer’s practices concerning the handling of claims. The occurrence of an insured event is the moment of truth and either party may wish to terminate the contract.

Statutory and Contractual Rights to Terminate C2.  Although that wish to terminate is less urgent under a regime of short-term policies it is still not necessarily absent. Some countries such as France and Germany grant the right to terminate a contract in their statutes. The matter can be left to the contract, however, given the strong incentive for insurers to cut short their commitment once they know the true extent of the risk. Contrary to many older national laws there must be a safeguard, however, against one-sided clauses. In accordance with more recent statutes such as the law of Belgium the option of termination must be granted to both parties.

For the reasons indicated in Article 2:601 Comment 7 personal insurance cannot be subject to this type of optional termination.

Time Limits C3.  Certainty in contractual relations requires that the option of termination be granted only for a short time. The period of two months allows for a preliminary assessment of the damage and its causes, and of the insurer’s practice with regard to the handling of claims.

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Other Rights to Terminate C4.  National insurance contract laws grant the right of termination in a number of other cases such as non-payment of premium, misinformation about the risk, aggravation of risk and non-notification of such alteration, transfer of the insured goods or property, death or insolvency of the policyholder and so on. The Principles of European Insurance Contract Law deal with some of these types of termination in the event of non-compliance with contractual duties in the context of the duty in question; other types of termination have little importance under a regime of short-term policies. It should also be borne in mind that a party is entitled to terminate a contract under general principles, if the other party’s non-performance is fundamental; see Article 9:301 PECL.

Application to Group Insurance C5.  For the meaning of Article 2:604 in the context of group insurances, see Article 18:203 para. 1.

Notes Article 2:604 para. 1 N1. The insurer’s right to terminate the insurance contract after the occurrence of an insured event provided for in Article 2:604 para. 1 is to be found in most European legal systems, except, for example, in Finland, and in Spain where a clause providing termination of the contract after the occurrence of an insured event is considered abusive (see Bataller/Latorre/Olavarria 186). It is usually of a contractual nature (see for Austria Basedow/Fock-Lemmel 1116; for Denmark Basedow/Fock-Scherpe 994; for France art. 113-12 ICA; for Germany Basedow/Fock-Lemmel 439; for Greece the second sentence of art. 8 para. 5 ICA; for Italy such a clause is allowed only if specifically agreed in non-consumer contracts, see art. 1341 CC and Basedow/Fock-Brunetta d’Usseaux 744, de Gregorio/Fanelli 106; in consumer contracts, such a clause, even if agreed, is considered to be unfair under the rules on unfair contract terms in the Consumer Code, see Cerini 74 and more recent case law; for Luxembourg Basedow/Fock-Völker 814; for the Netherlands art. 7:940 para. 3 CC; for Portugal see art. 117 ICA; for the United Kingdom Tyrie v Fletcher (1777) 2 Cowp 666; Birds 5.7.1, Clarke 18-3C, Rose 10.38 ff., Basedow/Fock-Rühl 1510). Only in Austria and Germany and only for some sorts of insurance contracts is the right to terminate based on the law (ss. 96, 113 and 158 Austrian ICA; ss. 92 and 111 German ICA). N2. Few countries impose restrictions on the validity of the insurer’s right to terminate the insurance contract similar to the ones provided for in Article 2:604 para. 1. The restriction laid down in Article 2:604 para. 1(a) comes close to the laws of Belgium, Greece, the Netherlands and Portugal. Under these legal systems, clauses like the ones referred to in Article 2:604 para. 1(a) are valid. However, by operation of law the right to terminate the contract is also granted to the policyholder (the first sentence of art. 86 para. 1 Belgian IA 2014; the second sentence of art. 8 para. 5 Greek ICA; art. 7:940 para. 3 Dutch CC; art. 117 Portuguese ICA: subject to party agreement).

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N3. The restriction of Article 2:604 para. 1(b) is to be found in the laws of Belgium, Luxembourg and the Netherlands (art. 86 para. 2 Belgian IA 2014; art. 41 para. 1 Luxembourg ICA; art. 7:940 para. 5 Dutch CC). In Belgium, the right of the motor vehicle liability insurer to terminate the insurance contract is limited to those cases where the insurer is under the obligation to cover the damage suffered by the victim. In Austria and Germany, the right to terminate the insurance contract after the occurrence of an insured event does not apply to health insurance (s. 178i para. 2 Austrian ICA; s. 206 German ICA). In Portugal, clauses giving the insurer a right to terminate are excluded in life, health and indemnity insurance (art. 117 para. 3 ICA).

Article 2:604 para. 2 – Reasonableness N4. No country apart from the Netherlands has a specific rule that termination must be reasonable as required by Article 2:604 para. 2 (see Basedow/Fock-Basedow/Fock 128-129). According to art. 7:940 para. 3 CC, the insurer may only terminate on the grounds stated in the contract, which are of such a nature that it can no longer be required to be bound by the contract. However, the exercise of the right of termination may be barred in particular cases under general principles like abuse of rights, estoppels, and so on.

Article 2:604 para. 3 – Expiration of the Right of Termination N5. In all European countries, the right to terminate the insurance contract upon the occurrence of an insured event is lost if it is not exercised within a certain period of time. However, the time limits imposed are usually different from the ones fixed by Article 2:604 para. 3. In Denmark, the right to cancel the insurance contract expires 14 days after the policyholder has given notice of the occurrence of an insured event or – in the absence of such notice – 14 days after the insurer received knowledge of the insured event (see Lyngsø 149, Basedow/Fock-Scherpe 994). In Belgium and Portugal, the right to terminate the insurance contract must be exercised within one month after payment of the claim or the insurer’s refusal to pay (the second sentence of art. 86 para. 1 Belgian IA 2014, art. 117 para. Portuguese ICA). In France, the insurer will not be allowed to cancel the contract if it has known about the occurrence of the insured event for more than one month and still accepts the insurance premium (the second sentence of art. R. 113-10 para. 1 ICA). In Austria and Germany, insurer and policyholder lose the right to terminate the contract one month after they have – with or without success – terminated negotiations about the payment of the claim (s. 96 para. 2 and the first sentence of s. 158 para. 2 Austrian ICA; the first sentence of s. 92 para. 2 and the first sentence of s. 111 para. 2 German ICA). In the United Kingdom the point is governed, if at all, by the terms of the policy.

Article 2:604 para. 4 – End of Cover N6. In most Member States the insurance cover ends some time after the policy has been terminated upon occurrence of the insured event. However, most of the countries provide for a longer period of time than Article 2:604 para. 4. In France and the Netherlands, the insurance cover ends one month from the date on which notice of termination was given to the other party (the first sentence of art. R. 113-10 para. 1 French ICA; art. 7:940 para. 3 Dutch CC). In Austria and Germany, the same rule applies where the insurer terminates the contract (s. 96 para. 2 and s. 158 para. 2 Austrian ICA; s. 92 para. 2 and s. 111 para. 2 German ICA). On the other hand, if the policyholder terminates the contract he may choose that the termination takes effect either

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immediately or at any other moment within the stipulated insurance period (the third sentence of s. 96 para. 2 and s. 158 para. 2 Austrian ICA; the third sentence of s. 92 para. 2 and s. 111 para. 2 German ICA). In Belgium, cover ends after three months (art. 84 para. 2 together with art. 86 para. 1(2) IA 2014). However, termination becomes effective one month after notification where there is a suspicion of fraud, but only if the insurer has secured a criminal prosecution of the suspect (art. 86 para. 1(3) IA). In Greece, the termination, if initiated by the insurer, shall not take effect until the lapse of thirty days from the date on which such notice of termination was communicated to the policyholder; or fifteen days, if the insurer can point to a breach by the policyholder of his disclosure duties (see the third sentence of art. 8 para. 5 and the first sentence of art. 3 para. 7 ICA). A period shorter than that laid down in Article 2:604 para. 4 is to be found only in the laws of Greece and the Netherlands and only for the special case of fraud; according to art. 7:940 para. 3 Dutch CC, if the policyholder makes a fraudulent claim, insurance cover will terminate immediately, on the date of notification, while, according to the second sentence of art. 3 para. 7 Greek ICA, in case of intentional breach by the policyholder of its disclosure duties, the termination should take immediate effect.

Section Seven: Post-contractual Information Duties of the Insurer Article 2:701 General Information Duty Throughout the contract period the insurer shall provide the policyholder without undue delay with information in writing on any change concerning its name and address, its legal form, the address of its head office and of the agency or branch which concluded the contract.

Comments The Need for Information During the Period of Insurance Cover C1.  Article 2:701, like Article 2:702, deals with the duty of the insurer to keep the policyholder informed during the contract period (for similar duties concerning the initial stage of the contract see Articles 2:201 and 2:501). It is important for the policyholder to be informed accurately in order that he can assert his contractual rights properly. Insurers should at least provide policyholders at all times with clear and accurate information as to the essential features of the insurance product held. The two provisions of Section 7 distinguish information duties imposed by law from those which are triggered by the policyholder’s request. The former concern only basic data needed by the policyholder for the purposes of communication. The latter deal with the insurance product as such.

Information to Be Given in All Cases C2.  Article 2:701 is in line with art. 185 para. 5 of the Solvency II Directive (2009/138/EC). The duty to inform should, however, not be limited to life assurance but applies to all types of insurance contracts. Nevertheless, post-contractual information duties are extended in case of life insurance in accordance with Article 17:301.

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C3.  Compared with a duty to inform when requested (see Article 2:702), a duty to inform spontaneously should be more restricted in view of the burden it puts on the insurer. Under such a duty, the insurer must contact all its policyholders. Therefore, a duty to inform spontaneously should be limited to changes considered to be so important that all policyholders need to be aware of them. C4.  Policyholders must therefore be informed of any change in the registered name of the insurer or in its corporate structure; in the address of its head office and, where appropriate, of the agency or branch which concluded the contract. This will enable them to contact the insurer if they deem it necessary.

Information about Changes in the Contract C5.  Contrary to the Solvency II Directive (2009/138/EC), art. 185 para. 5, Article 2:701 does not require information about a change in the general contract terms (see, however, Article 17:301 para. 2 concerning life insurance). This is covered by Article 2:603 para. 1(b) and (c) (“Alteration of Terms and Conditions”). For the same reason Article 2:701 does not include a duty to send information about any other essential changes in the contract.

Updating Information C6.  Article 2:701 does not oblige the insurer to update information previously given. Such a duty would either follow from the operation of Article 2:603 para. 1(b) and (c), which requires information about changes in the contract, or from the application of the principle of good faith.

Manner of Communication C7.  The information required under Article 2:701 must be given in writing and without undue delay. This is flexible enough to allow the insurer to produce the information in the normal course of business.

Notes Survey N1. Post-contractual information duties of the insurer are subject to detailed provisions in the Member States. Information duties may be contained in supervisory law as well as in insurance contract law. In Austria, Belgium, the Netherlands and the United Kingdom, post-contractual information duties of the insurer are a matter of insurance supervision. In other countries, such as France, Finland, Germany, Luxembourg and Sweden, they are regulated in the complex of insurance contract law.

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Life Insurance N2. Art. 185 para. 5(b) of the Solvency II Directive (2009/138/EC), which replaces art. 36 of the Life Assurance Consolidation Directive (2002/83/EC), provides that, during the period of the contract, the policyholder shall be informed of any changes concerning the insurer’s name and address, its legal form, the address of its head office and of the agency or branch which concluded the contract. This mirrors Article 2:701 PEICL. In case of an additional contract between the parties, or when changes occur in the legal framework, the insurer, pursuant to Art. 185 para. 5(c) of the Solvency II Directive (2009/138/EC), must provide the policyholder with information on all central aspects of the contract as set out in art. 185 para. 3(d) – (j) of the Solvency II Directive (2009/138/EC). Finally, the insurer must annually inform the policyholders on the state of their bonuses, Art. 185 para. 5(d) of the Solvency II Directive (2009/138/EC). N3. As these requirements are contained in a directive, they were enacted by national legislatures or are mirrored in pre-existing law of Member States. In Austria, specific post-contractual information duties in life assurance contracts are imposed by s. 18b para. 2 ISA. For Belgium, see art. 15 para. 2(b) of the Royal Decree of 22 February 1991 on Insurance Supervision and arts. 19 and 20 of the Royal Decree of 14 November 2003 on Life Assurance. In Italy, post-contractual information duties in life assurance are contained in arts. 182 ff. and regulations by council authorities, see Basedow/Fock-Brunetta d’Usseaux 674. For Luxembourg, see the third and fourth indents of art. 17 para. 1 ICA. For Poland, see art. 13 of the Act on Insurance Activity and Kowalewski 201. N4. For France, see art. L. 132-22 ICA. The provision distinguishes between life assurances for less than €2000 and life assurance at or above €2000, see Bonnard, para. 788. Under the rules for the latter, the insurer must inform the policyholder annually about: the repurchase value, guaranteed capital, the premium, as well as average investment yields and bonuses, the latter information being subject to further definition by way of executive decree. Under the rules for cover below €2000, the above-mentioned annual information is required on demand by the policyholder. N5. In the Netherlands, post-contractual information duties for life and non-life insurance contracts are set out in art. 4:20 para. 3 ISA in conjunction with arts. 73 and 75 of the Decree on the Supervision of the Conduct of Financial Enterprises.

Legal Expenses Insurance N6. Art. 204 of the Solvency II Directive (2009/138/EC), which replaces art. 7 of the Legal Expenses Insurance Directive (87/344/EC), calls for special post-contractual information duties in legal expenses insurance. Whenever a conflict of interest arises or a disagreement over the settlement of dispute occurs, the insurer, or, when appropriate, the claims settlement office shall inform the policyholder of the right to choose a lawyer, and the possibility of having recourse to alternative dispute resolution services. N7. In France, the requirements of the Legal Expenses Insurance Directive (87/344/EC) were transposed in arts. L. 127-5 and R. 127-1 ICA. For Belgium, see art. 156, 2° and art. 157 para. 1 IA 2014 together with art. 8 of the Royal Decree of 12 October 1990 on Legal Expenses Insurance.

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For the Netherlands, see art. 4:69 ISA. For the United Kingdom, see regulation 9 of the Insurance Companies (Legal Expenses Insurance) Regulations 1990. For Austria, see s. 158k para. 3 and s. 158l para. 2 ICA. For Ireland, see regulation 10 of the European Communities (Non-Life Insurance) (Legal Expenses) Regulations 1991. For Germany, see the second sentence of s. 128 ICA. For Luxembourg, see art. 23 of the Grand Ducal Regulation of 20 December 1991 on Insurance, now integrated into art. 96 ICA.

Further Post-contractual Information Duties under National Law N8. Some Member State laws establish information duties more or less similar to Article 2:701 PEICL. For Austria, see s. 9a para. 5 ISA. For Belgium, see art. 15 para. 2(a) of the Royal Decree of 22 February 1991 on Insurance Supervision. In Germany, s. 6 para. 1(1) of the Regulation on Duties of Information Relating to Insurance Contracts of 18 December 2007, which is based on s. 7 paras. 2 and 3 ICA, corresponds to Article 2:701 PEICL. According to s. 6 para. 1(2) of the Regulation, the insurer shall also inform about changes of fundamental contractual provisions, related costs, methods of payment, and, finally, changes in the duration of the contract, when these are caused by changes in the law. In the Grand Duchy of Luxembourg, the first indent of art. 17 para. 1 ICA corresponds to Article 2:701 PEICL. As in German law, the second indent of art. 17 para. 1 ICA further obliges the insurer to inform about changes of fundamental contractual provisions, rights of termination, costs, methods of payment, and finally, changes in the duration of the contract, when these arise from changes in the law. N9. For Finland, see s. 7 para. 1 ICA. The insurer shall dispatch to the policyholder an annual statement detailing the sum insured and any such circumstances concerning the insurance as are of manifest importance to the policyholder. For Sweden, see s. 5 para. 1 of Ch. 2 ICA: During the entire period of insurance and in conjunction with renewal of the insurance policy, the insurer shall, to a reasonable extent, inform the policyholder of circumstances relating to the insurance which are of importance to the policyholder. N10. In the United Kingdom, post-contractual information duties are covered in the Insurance Conduct of Business Sourcebook in the Financial Services Authority’s Handbook. The general rule is set out in ICOBS 6.1.6: information duties may apply pre-contract conclusion and post-contract conclusion, so as to enable customers to make an informed decision; the duties may include matters such as mid-term changes and renewals. ICOBS 6.3.3(1) corresponds to Article 2:701 PEICL. Furthermore, under ICOBS 6.3.3(2), the insurer must inform about changes in benefits, contract term, means of terminating the contract, methods and duration of payment and changes in the premium for each benefit, when such changes arise from change in policy conditions or an amendment of the applicable law. Specific post-contractual information duties for protection policies are provided for by ICOBS 6.4.11. N11. For France, where general post-contractual information duties have been developed by the courts, see Lamy Assurances, para. 47. General post-contractual information duties are unknown to the law of Switzerland. Information duties pursuant to arts. 3 and 3a Swiss ICA are limited to the pre-contractual phase.

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Article 2:702 Further Information upon Request (1) On the policyholder’s request, the insurer shall provide the policyholder without undue delay with information concerning (a) as far as can reasonably be expected of the insurer, all matters relevant to the performance of the contract; (b) new standard terms offered by the insurer for insurance contracts of the same type as the one concluded with the policyholder. (2) Both the policyholder’s request and the insurer’s response shall be in writing.

Comments Purpose C1.  The duty to inform also serves to promote competition in the insurance sector. If insurers were not obliged to keep policyholders informed about any essential change concerning their contract, policyholders would not be able to compare the product they are holding with other products on the market in order to evaluate if a change of product could be advantageous to them. Article 2:702 therefore grants the right to the policyholder to request information about several aspects of the insurance product itself, for example, the beginning or the end of the term, the substance of the contract or the question whether certain conduct is covered by the insurance.

Limits C2.  Such a duty should, however, not enable policyholders to overburden insurers with requests for information. To this end Article 2:702 para. 1(a) limits the duty to matters relevant to the performance of the contract and only to the extent that can reasonably be expected of insurers. Therefore, policyholders can only request information concerning essential elements of the contract which are of manifest importance to them such as the general contract terms or steps to be taken after the occurrence of an insured event. In such cases no fee can be charged by insurers. This does not rule out the possibility of charging for other kinds of information.

Information on Changes in Standard Terms of Insurance C3.  Article 2:702 para. 1(b) has to be distinguished from 2:603. While the latter provision deals with alteration of the terms of the policyholder’s own contract, the former addresses changes in standard terms offered by the insurer on the market. The possibility of long-term insurance contracts (see Article 2:601) and of the automatic prolongation of insurance contracts as provided for by Article 2:602 have to be reconciled with policyholders’ legitimate interest in obtaining the best product for their needs. The duty under Article 2:702 para. 1(b) is intended to enable policyholders to compare their current product with the one the insurer is offering to new customers and with other products on the market. The insurer may fulfil this duty by informing policyholders of the changes that were made and in addition sending the new standard terms of insurance in question. In view of the considerable costs incurred by providing such information, insurers will have to furnish it only upon the

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request of interested policyholders. Sending it out to all others would generate cost without promoting competition.

Manner of Communication C4.  As to the manner of communication see Article 2:701 Comment 7. In the context of Article 2:702 “without undue delay” requires insurers to answer very promptly where necessary and possible.

Remedies C5.  While the Principles of European Insurance Contract Law do not explicitly provide any remedy if the insurer does not comply with the request, several possibilities exist: for example, policyholders may claim damages if they suffer loss from the breach of the information duty; they may also complain to a supervisory authority or insurance ombudsman.

Note Article 2:702 PEICL requires further information only on request by the policyholder. Such a rule is not unknown to national law. For Sweden, see s. 5 para. 2 of Ch. 2 ICA: The insurer shall, at the policyholder’s request, provide information regarding the premium and other terms and conditions of the insurance policy. For Germany, see s. 7 para. 4 ICA: on the policyholder’s request, the insurer must transmit a copy of the contract and applicable standard terms. For the Netherlands, see art. 4:20 para. 5 ISA, which entitles the legislator to restrict post-contractual information duties in explicitly mentioned cases to information requested for by the policyholder.

Chapter Three: Insurance Intermediaries Article 3:101 Powers of Insurance Agents (1) An insurance agent is authorised to perform all acts on behalf of the insurer that according to current insurance industry practice are within the scope of his employment. Any restriction of the agent’s authority shall be clearly notified to the policyholder in a separate document. However, the authority of the insurance agent shall at least cover the actual scope of his employment. (2) In any event the authority of the insurance agent shall include the power: (a) to inform and advise the policyholder, and (b) to receive notices from the policyholder. (3) Relevant knowledge which the insurance agent has or ought to have in the course of his employment shall be deemed to be the knowledge of the insurer.

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Comments Legal and Contractual Authority of the Insurance Agent C1.  The legal authority vested in the insurance agent by the first sentence of para. 1 is designed to reflect the standard scope of employment of insurance agents which justifies expectations by policyholders of corresponding powers of the agent. The purpose of the rule is to establish conformity between the insurance agents’ role and their authority. The insurance agents’ role is directed at the promotion of the sale of insurance contracts by giving advice to policyholders about all matters relevant for their decision to buy insurance. The role usually includes support services to policyholders during the term of the insurance contract, such as proposing updates to the policy, gathering of information and providing assistance concerning claims. By contrast, the role usually does not include the granting of insurance cover on behalf of the insurer. C2.  The first sentence of para. 1 is not mandatory in the sense that it could never be derogated from by the insurer to the detriment of the policyholder. Any derogation would, however, need to be notified to the policyholder in a separate document. In this sense it is a formally cogent rule that allows an opting out but only by using a prescribed form and procedure. C3.  The insurer may grant additional powers to the agent, for example a power to conclude the insurance contract. A power of attorney of this kind is subject to the general provisions of the law of agency including the rules on implied and apparent authority; see Chapter 3 PECL. Authority according to Article 3:101 may therefore arise from the “apparent employment” of a person as an insurance agent. C4.  The role played by insurance agents may change in the course of time. The task of collecting premiums is a good example: whereas insurers formerly employed their agents to collect premiums, this business practice was given up because money transfers through banks, including e-banking, became a more convenient and secure mode of paying.

Minimum Authority C5.  The minimum extent of the authority which any insurance agent possesses is the actual scope of his employment. This scope of authority is mandatory and must not be restricted by the insurer even by obeying the formal requirements of the second sentence of Article 3:101 para. 1. The actual scope of the agent’s employment is a question of fact which requires proof by the policyholder. The insurer must, however, cooperate with the policyholder in providing the evidence of the terms of the agent’s employment. C6.  Insurance agents are expected to have wide powers in respect of the exchange of information. Therefore, para. 2 assigns to them as a minimum the power to render information and advice on behalf of the insurer and the authority to receive all notices from the policyholder. Since the provisions of the Principles of European Insurance Contract Law are mandatory in favour of the policyholder, the (minimum) powers set out in para. 2 cannot be limited or excluded by agreement of the parties.

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Imputation of the Agent’s Knowledge C7.  Para. 3 imputes relevant knowledge which the insurance agent has or ought to have acquired during the course of his employment with the insurer. Such a rule is an inevitable consequence of the insurance agent’s agency on behalf of the insurer and the insurer’s decision to delegate to the agent. Para. 3 corresponds to the imputation of knowledge of persons close to the policyholder, insured or beneficiary prescribed by Article 1:206. For para. 3 to be applicable a contractual assignment of the insurance agent’s authority to receive knowledge from the policyholder and transfer it to the insurer is not required. That is because the authority of the insurance agent arises by operation of law. Other than the employment as such, no special vesting of powers is needed.

Liability of the Agent C8.  The rule does not deal with the question of personal liability of insurance agents to the policyholder. Such questions are not within the scope of insurance contract law but are a matter of the professional liability of intermediaries.

Notes First Sentence of Article 3:101 para. 1 – Statutory Powers N1. The rule established in the first sentence of Article 3:101 para. 1 is the same as that in Switzerland (see art. 34 ICA). According to Greek law, the insurance intermediary has the powers and duties stated by statutory law but the insurer is bound by any other acts of the agent which are in accordance with normal insurance practice provided that the policyholder acted in good faith (Kiantos, Praktoras 161 and Rokas, paras. 1301 ff.). The laws of Austria, Germany, Poland, and Spain provide a list of certain activities which, in principle, are covered by the agent’s authority; thus the agent is deemed to be empowered to receive all applications, notifications and declarations concerning the insurance contract (see for Austria s. 43 para. 2 ICA, and Basedow/ Fock-Lemmel 1035; for Germany s. 69 ICA, Basedow/Fock-Lemmel 350; for Poland art. 4 of the Act on Insurance Mediation; for Spain art. 12 para. 2 of the Law on Mediation of Private Insurance and Reinsurance, Bataller/Latorre/Olavarria 142). The agent may have additional powers flowing from a contractual authorisation. N2. In Belgium, France, Luxembourg, Denmark, Finland, Portugal and the United Kingdom there is no statutory rule that determines the authority of the agent. Thus, its origin and scope are purely contractual in nature (see for Belgium Basedow/Fock-Fock 245; for France arts. 1984 ff. CC, Basedow/Fock-Völker 492; for Luxembourg arts. 1984 ff. CC, Basedow/Fock-Völker 778; for Portugal arts. 258 ff. CC, Basedow/Fock-Schlenker 1155; for the United Kingdom Birds 197 ff., Clarke 7-2 ff., Basedow/Fock-Rühl 1426). The Dutch Civil Code determines in Chapter 7:10.10 the legal position of the agent as defined in Article 1:202 para. 5 PEICL (see Asser/Clausung/ Wansink 47 ff.).

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Chapter Three: Insurance Intermediaries

Second and Third Sentences of Article 3:101 para. 1 – Contractual Limitations N3. Rules dealing with contractual limitations of the agent’s authority such as those in the second and third sentences of Article 3:101 para. 1 only make sense in legal systems that provide for a statutory basis of the agent’s authority. In Germany, standard terms providing for a limitation of the agent’s power to receive declarations addressed to the insurer are ineffective (s. 72 ICA). The same is basically true for Spain (see art. 12 para. 2 of the Law on Mediation of Private Insurance and Reinsurance, Bataller/Latorre/Olavarria 142). In other European countries, restrictions of the agent’s authority are either unusual (Basedow/Fock-Basedow/Fock 46) or do not raise legal problems because the power of the agent results from contract and not from statute.

Article 3:101 para. 2 – Minimum Powers N4. As a result of the Insurance Mediation Directive (2002/92/EC), as amended, European legal systems will require the insurance agent to provide the policyholder with information and advice (art. 12 of the Insurance Mediation Directive (2002/92/EC)). By implication the Directive confers also the power upon the agent to provide information and to give advice. N5. To date, the Directive has been implemented in Belgium, Germany, Greece, Finland, France, Luxembourg, Poland, Portugal, Spain, Switzerland, the United Kingdom and Ireland where the insurance agent is under an obligation to inform and advise the policyholder. (For Belgium see art. 273 IA 2014; for Germany see s. 61 ICA; for Greece see Rokas, para. 1277; for Finland see s. 5 ICA and ss. 19 to 22 of the Insurance Mediation Act (570/2005); for France Bonnard para. 184, Groutel 12, Basedow/Fock-Völker 481; for Luxembourg Bisenius 95, Rod 626, Basedow/ Fock-Völker 772; for Poland see for example art. 13 of the Act on Insurance Mediation; for Portugal see art. 29 ICA; for Spain art. 6 para. 1 of the Law on Mediation of Private Insurance and Reinsurance, Bataller/Latorre/Olavarria 133; for Switzerland Basedow/Fock-Bälz 1215; for the United Kingdom see, for example, ICOBS 5.1.20, Basedow/Fock-Rühl 1413 ff.; for Ireland s. 49(1) (b) and (4)(a) of the Insurance Act 1989, Basedow/Fock-Rühl 1413 f.). For the Netherlands, see arts. 4:23, 4:72 and 4:73 ISA which refer to the so-called independent insurance intermediary or broker and do not apply to the agent as defined in Article 1:202 PEICL.

Article 3:101 para. 3 – Imputation of the Agent’s Knowledge N6. The principle established in Article 3:101 para. 3 is well known in most European countries. In Germany, it has always been common legal practice that facts communicated to the insurance agent during the course of its employment are deemed to be communicated to the insurer; the agent is regarded as the insurer’s “eyes and ears” (see BGH 18.12.1991, BGHZ 116, 387 (390), BGH 23.5.1989, BGHZ 107, 322 (323), BGH 11.11.1987, BGHZ 102, 194 (197), Basedow/­FockLemmel 350). Today, the rule has been codified in s. 70 ICA. N7. Corresponding rules are also to be found in the laws of Austria, France, Greece, the Nordic Countries, Poland, Switzerland, the United Kingdom and Ireland (see for Austria the second sentence of s. 44 ICA, Basedow/Fock-Lemmel 1036; for France Lambert-Faivre, para. 186, Deschamps, para. 117, Basedow/Fock-Völker 492; for Greece art. 214 CC, Basedow/Fock-Papathoma-Baetge 594, Kiantos, Praktoras 161; for the Nordic Countries Dohr 54, Basedow/Fock-Scherpe 935; for Switzerland Basedow/Fock-Bälz 1221, Maurer 209, Roelli/Keller 162; for the United

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Kingdom Freeman & Lockyer v Buckhurst Park Properties Ltd [1964] 2 QB 480 (CA); British Bank of the Middle East v Sun Life Assurance Co of Canada (UK) Ltd [1983] 2 Lloyd’s Rep 9 (HL); Birds 12.3.3, CMS 1-35 ff., Basedow/Fock-Rühl 1430; for Ireland Buckley 25, Basedow/Fock-Rühl 1430). In Spain special rules concerning the so-called “passive representation” apply but lead to the same results in practice (see art. 12 para. 2 of the Law on Mediation of Private Insurance and Reinsurance, Bataller/Latorre/Olavarria 142).

Article 3:102 Agents of Insurers Purporting to Be Independent If an agent of the insurer purports to be an independent intermediary and acts in breach of duties imposed on such an intermediary by law, the insurer shall be liable for such breach.

Comments Rationale C1.  Policyholders trust agents purporting to be independent as though they really were independent. Article 3:102 protects the reasonable expectations of the policyholder that the independent intermediary acts in compliance with the duties imposed on such an intermediary by law. At the same time imposing liability deters insurers from taking advantage of “pseudo-brokers”. C2.  Intermediaries have to register either as being dependent or independent under the Insurance Mediation Directive (2002/92/EC) as amended. Insurers can be expected to monitor their own distribution network by inspecting the register. If they raise no objection to the agent’s registration as independent (“pseudo-brokers”) they should not be allowed to benefit from such a discrepancy between fact and appearance for which the agent is responsible. For the rule to apply, however, the insurer’s actual knowledge of the agent’s conduct or behaviour is not a requirement. The insurer is a guarantor that its agent shall comply with the obligations of independent intermediaries when purporting to be such.

Scope C3.  The rule only applies to persons who are employed by the insurers as agents. Thus, the existence of such an agency relationship has to be proven. Other persons who hold themselves out to be agents of the insurer may trigger the insurer’s liability under general rules of agency but are not covered by this Article. This applies, for example, to the former agent of an insurer who continues to conduct his business as if he were still an agent of the same insurer.

Actual Authority of “Pseudo-brokers” C4.  Since “pseudo-brokers” are employed by the insurer they hold the minimum authority granted by Article 3:101.

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Note An extension of the duties of insurance brokers to those insurance agents who act vis-à-vis the applicant as if they were insurance brokers can be found in particular in Austrian and German insurance law. Both laws subject such “pseudo-brokers” to the same duties as insurance brokers in order to protect the applicant who relies on their role as insurance brokers (for Austrian and German law, see Prölss/Martin-Dörner, § 59 VVG para. 147, OLG Oldenburg 13.1.1999, Versicherungsrecht 1999, 757, for similar views on Swiss law, see Honsell/Vogt/Schnyder-Fuhrer art. 34 VVG para. 43).

Chapter Four: The Risk Insured

Section One: Precautionary Measures Article 4:101 Precautionary Measures: Meaning A precautionary measure means a clause in the insurance contract, whether or not described as a condition precedent to the liability of the insurer, requiring the policyholder or the insured, before the insured event occurs, to perform or not to perform certain acts.

Comments General Remarks C1.  Section 1 of Chapter 4 PEICL on “The Risk Insured” deals with “Precautionary Measures” required by the insurance contract, a concept similar but not identical to that of “promissory warranties” in English law or contractual “Obliegenheiten” in German law. In order to avoid the consequences which have arisen in those countries over time the wording of the Principles of European Insurance Contract Law is inspired by art. 31 of the Finnish ICA. The section contains three articles dealing with the definition of the concept and sanctions for non-compliance, in particular termination of the contract and discharge of the insurer’s liability. C2.  Insurers use terms like “warranties” as a tool to limit the risk, to protect themselves against a temporary aggravation of risk and sometimes to avoid their obligations to the detriment of policyholders. As the Joint Consultation Paper on Insurance Contract Law (UK) indicates, the impact of these terms may defeat the insured’s reasonable expectation of cover, particularly in cases where there is a discharge from liability even in the absence of a causal connection between the breach and the loss. The Paper (p. 15 para. 73) gives the following illustration: “A policyholder who warrants to maintain a sprinkler system might expect that the insurer will not pay for fire damage while the sprinkler was not working. They would not expect the insurer to refuse a storm damage claim or a fire claim that arises after the sprinkler has been repaired”. In addition, policyholders are often not aware of the warranties imposed upon them in the terms of the policy or of the harsh consequences of a breach of warranty, as it is a matter of common knowledge that the “average” consumer or small businessman is not inclined to read the terms of the policy carefully. Therefore, the

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Principles of European Insurance Contract Law have established a new regime that seeks to be in accord with both insurers’ and policyholders’ reasonable expectations and to avoid the harsh consequences set forth above.

The Concept of Precautionary Measure C3.  According to Article 4:101 a precautionary measure means a clause in the insurance contract, whether or not described as a condition precedent to the liability of the insurer, requiring the policyholder or the insured, before the insured event occurs, to perform or not to perform certain acts. C4.  One of the major problems in identifiying a precautionary measure is that it is not always easy to draw the line between precautionary measures and other types of contractual terms which seek to limit the scope of cover. A certain conduct on the part of the policyholder can be required by a term phrased as a precautionary measure (“the policyholder must keep the vehicle in a roadworthy condition”), a condition precedent to the liability of the insurer (“cover is conditional on the vehicle being roadworthy”) or as an exception to the risk (no cover where “the vehicle is not in a roadworthy condition”). Article 4:101 is intended to cover all these situations. C5.  This does not rule out the possibility of incorporating terms which establish conditions precedent or exceptions to the insurer’s liability. However, to the extent that such clauses refer to specific conduct on the part of the policyholder or the insured intended to limit the risk they are to be treated as precautionary measures. For example, a term of the insurance contract excluding liability for fire caused by negligent handling of gas bottles in breach of specific regulations would be treated as a precautionary measure, whereas the exclusion of liability for fire caused by handling of gas bottles as such would be treated as an exclusion clause not covered by Article 4:101.

Notes General Remarks N1. It is worth noting that Community law does not regulate precautionary measures. Precautionary measures established contractually can be found in all European countries. In addition, insurance contract laws impose similar obligations on the insured, these obligations however binding the insured by statute. Such obligations are not discussed in the following notes. In light of the consequences of a breach, which range from automatic discharge to a right to termination (see notes on Articles 4:102 and 4:103), and the different requirements, such as causation, fault, and so on, precautionary measures must be distinguished from clauses specifying or delimiting the insured risk. Thus, most national insurance contract laws either provide for statutory definitions such as Article 4:101, or have established specific terminologies with regard to precautionary measures.

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Finland and Sweden N2. The Finnish ICA which has inspired Article 4:101 uses the notion of precautionary guidelines. These are defined in s. 31 para. 1 Finnish ICA, which is only applicable to indemnity insurance, as “provisions on devices, apparatuses, procedures or other arrangements introduced with an aim to prevent or restrict the occurrence of damage or loss” or “guidelines to the effect that the person using or managing the property insured shall have certain competence”. S. 31 para. 2 Finnish ICA sets forth that “the insured shall comply with the precautionary guidelines”. The Swedish ICA provides for a similar definition: s. 6 para. 2 of Ch. 4 ICA defines security provisions as “provisions set forth in the policy terms regarding pre-determined courses of action or facilities which are intended to prevent or limit loss or regarding certain pre-determined qualifications of the insured or its employees or other cooperating parties”.

Austria, Germany, Switzerland N3. Austrian, German and Swiss insurance contract law denote clauses aimed at by Article 4:101 PEICL as vertragliche Obliegenheiten, see for instance art. 29 Swiss ICA. The national provision most comparable to Article 4:101 PEICL is s. 28 para. 1 German ICA, specifying precautionary measures as vertragliche Obliegenheiten, which have to be performed before the occurrence of the insured event (“die von dem Versicherten vor Eintritt des Versicherungsfalles zu erfüllen sind”).

United Kingdom N4. Insurance law in the United Kingdom does not speak of precautionary measures as such. Contract terms which require performance of certain acts before the insured event occurs, may come in the form of warranties, more specifically promissory warranties, or conditions. The meaning of (promissory) warranties and conditions in insurance contract law differs from the meaning of these terms in the general law of obligations. In general, warranties and conditions in insurance contract law have the inverse meaning as in general contract law; warranties in insurance contract law denoting clauses of particular importance, see Birds 9.1 ff.; Basedow/Fock-Rühl 197. S. 32 of the Marine Insurance Act 1906 defines promissory warranties as promises by which “the insured undertakes that some particular thing will or will not be done or that some condition will be fulfilled”; see Birds 9.3 ff.; Clarke 20-5. This provision has been held to represent the state of law in all classes of insurance, see Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd, The Good Luck [1992] 1 AC 233. Also conditions in insurance contract are quite different from conditions in general contract law; see Clarke 20-1 ff.

France N5. French Insurance contract law does not contain a statutory provision comparable to Article 4:101 PEICL. In general terms, the clauses covered by Article 4:101 PEICL may be referred to as obligations de l’assuré avant sinistre. More specifically, they appear in the form of mesures de prévention (du risque), see Lamy Assurances, paras. 236 ff. Precautionary measures may be embedded in clauses providing for a discharge of the insurer. Such clauses are referred to as clauses de déchéance, see the second alternative in the fourth sentence of art. 112-4 ICA. There appears to be much uncertainty in French courts over the classification of contractually established pre-

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cautionary measures as clauses de déchéance or clauses on the delimitation of the insured risk, see Lamy Assurances, para. 239(b).

Belgium, Luxembourg and the Netherlands N6. Similar to French law, Belgian insurance contract law does not contain a statutory definition of precautionary measures. The terminology in (French-speaking) Belgium is similar to the French terminology. Precautionary measures aimed at preventing the materialisation of the insured risk are referred to as mesures de prévention, see Fontaine, para. 305. Art. 75 IA, although related, does not cover precautionary measures in the sense of Article 4:101 PEICL. The obligations covered by art. 75 IA only ensue after occurrence of the risk. Finally, art. 106 IA does cover precautionary measures, but only such precautionary measures to be taken under imminent danger that the risk will occur, and is limited in scope to indemnity insurance policies. Art. 27 Luxembourg ICA exactly corresponds to art. 75 Belgian IA 2014, with the sole difference of not being limited in scope to indemnity insurance. As with Belgian and Luxembourg law, the Dutch Civil Code does not refer to the subject of precautionary measures as defined in Article 4:101 PEICL. Art. 7:957 Dutch CC corresponds to art. 52 Belgian IA 2014 and is linked to measures to mitigate insured loss in the sense of Article 9:102 PEICL.

Spain N7. In Spain, obligations of the policyholder or the insured to perform certain acts, are referred to as cargas. Art. 17 ICA does not cover precautionary measures in the sense of Article 4:101 PEICL, as the obligations under this provision ensue only after the insured risk has materialised.

Poland N8. In Poland, the Civil Code does not contain a statutory definition of precautionary measures. The obligations of the policyholder or the insured covered by art. 826 CC take effect only after the insured risk has materialised. See Fuchs, Funkcja 35 ff. and Fuchs, Zakres 37 ff.

Greece N9. According to general law, the breach of a contractual precautionary measure cannot lead to loss of cover unless the insured is liable for the breach and there is a causal relation with the damage suffered, see Rokas, Eisigiseis paras. 155 ff.

Article 4:102 Insurer’s Right to Terminate the Contract (1) A clause which provides that in the event of non-compliance with a precautionary measure the insurer shall be entitled to terminate the contract, shall be without effect unless the policyholder or the insured has breached his obligation with intent to cause the loss or recklessly and with knowledge that the loss would probably result. (2) The right to terminate shall be exercised by written notice to the policyholder within one month of the time when the non-compliance with a precautionary measure becomes known or apparent to the insurer. Cover shall come to an end at the time of termination.

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Comments Termination and Non-Prolongation C1.  Article 4:102 allows the insurer to terminate while the contract period is still running compared to a non-prolongation according to Article 2:602. The right to terminate is limited to cases where the policyholder or the insured has breached his obligation with intent to cause the loss or recklessly and with knowledge that the loss would probably result. For the latter formula see Article 9:101 Comments 2 and 3. This limitation of the insurer’s right to terminate the contract is of limited relevance because according to Article 2:601 the contract period is one year only and the insurer may refuse prolongation according to Article 2:602 para. 1(a) where the policyholder or insured was in breach of precautionary measures.

Termination under Other Provisions C2.  If the insurer exercises its right of termination under Article 4:102 after the occurrence of an insured event this right may overlap with the right of termination under Article 2:604. There may also be an overlap with a right of termination under Article 4:203: If the breach of the precautionary measure occurs in the case of an aggravation of risk the insurer is entitled to terminate notwithstanding non-compliance with the strict requirements of Article 4:102 para. 1.

Manner of Termination C3.  The right to terminate must be exercised by written notice to the policyholder. “Written” statements are defined in Article 1:301 para. 6 PECL as including “communications made by telegram, telex, telefax and electronic mail and other means of communication capable of providing a readable record of the statement on both sides”. The right to terminate must be exercised within one month of the time when non-compliance with a precautionary measure becomes known or apparent to the insurer. The receipt of the notice of termination is relevant for determining the time limit (see Article 1:303 para. 2 PECL). Cover comes to an end at and from the time of termination.

Application to Group Insurance C4.  The application of Article 4:102 is modified as far as group insurances are concerned, see Article 18:203 para. 2.

Notes Ipso iure Avoidance or Declaration of Termination N1. Breach of a precautionary measure may give rise to a variety of consequences. Article 4:102 PEICL limits the effects of clauses which grant the insurer a right to terminate the contract. Under some insurance contract laws, however, compliance with a precautionary obligation is a

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condition precedent to the liability of the insurer. When such an obligation is breached, the risk has never been covered, the insurance contract has never commenced and a declaration of termination is obsolete. This may be the case in French law, see Lamy Assurances, paras. 236 ff. The same effect is known in the United Kingdom. The House of Lords held in Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd, The Good Luck [1992] 1 AC 233 (see also Basedow/Fock-Rühl 191), that breach of a warranty constitutes failure of a condition precedent to cover, and terminates the contract. Although the judgment concerned the Marine Insurance Act, it is widely acknowledged that its findings apply to all types of insurance contracts, see Birds 152 ff., Clarke 20-6C1 and Basedow/Fock-Rühl 194. This may be the case also in Polish law, see art. 826 para. 3 CC.

Termination ex tunc or ex nunc N2. With regard to the clauses covered by Article 4:102 PEICL, a further distinction must be drawn. Article 4:102 limits the effects of clauses providing for termination of the contract ex nunc. This must be distinguished from avoidance taking effect ex tunc. The Austrian and German ICA emphasise this distinction by explicitly banning clauses providing for a right to avoid, see s. 6 para. 4 Austrian ICA and s. 28 para. 5 German ICA respectively. The state of the law in the United Kingdom is comparable, equating in substance to an ex nunc effect. Although breach of a (promissory) warranty constitutes failure of a condition precedent (see above), duties which had fallen due before breach remain due; and procedural conditions for the settlement of earlier claims must still be performed, see Pawson v Watson (1778) 2 Cowp 785, De Hahn v Hartley (1786) 1 TR 343, Clarke 20-6C2. According to Dutch insurance contract law, the only consequence of breach of a precautionary measure is loss of coverage during the period of breach.

Causation: France and United Kingdom N3. When breach of precautionary obligations amounts to a failure of a condition precedent to cover, it is not necessary for the insurer to establish a causal relationship between the breach and the materialisation of the risk insured: for France, see Lamy Assurances, para. 239(a); for the United Kingdom, see Clarke 20-3 and Basedow/Fock-Rühl 187. The harsh results of this absence of a nexus requirement are mitigated in practice. In France, courts may refrain from classifying precautionary measures as conditions precedent to cover, and instead submit such clauses to the regime of the exclusion de garantie (in substance, a form of “clause de déchéance”), which requires causation to be established, see Lamy Assurances, para. 239(b) and the notes on Article 4:103, below. N4. In the United Kingdom, special rules apply for consumer and small business insurance. ICOBS 8.1.1(3) provides that insurers must not “unreasonably reject a claim (including by terminating or avoiding a policy)”; and ICOBS 8.1.1 provides that “rejection of a consumer policyholder’s claim is unreasonable, except where there is evidence of fraud, if it is for […] (3) breach of warranty or condition unless the circumstances of the claim are connected to the breach and unless certain other conditions are required in the case of a pure protection contract.” Note also the Consumer Insurance (Disclosure and Representations) Act 2012, s 6(2); Clarke 23-19A. Furthermore, insurance policies in the United Kingdom may contain clauses requiring a causal link between breach and loss.

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Causation in Other Member State Laws N5. Given the various exceptions in France and the United Kingdom, and in light of the other continental jurisdictions, the solution adopted by Article 4:102 PEICL reflects a growing European consensus. The various codifications subject a right of termination to: failure to comply with precautionary measures, see s. 6 para. 1 Austrian ICA, s. 15 para. 1(3) Finnish ICA and s. 28 para. 1 German ICA; material breach or other due cause, see s. 7 para. 1 of Ch. 3 Swedish ICA; failure to comply with a precautionary obligation aimed at reducing the risk or preventing the materialisation of the risk, see art. 29 Swiss ICA. Art. 29 para. 2 Swiss ICA clarifies that the insurer may not invoke such a termination clause when a nexus between the loss and the breach cannot be established. This requirement of causation is recognised by the other laws as well. Whether or not the respective countries provide for a separate provision on causality in their insurance codes as opposed to the criteria of the general law of obligations appears above all to be a matter of the onus of proof.

Fault: France, the Netherlands and United Kingdom N6. In France, when precautionary obligations are classified as conditions precedent to cover, fault of the insured in failing to comply is not a necessary condition, see Lamy Assurances, para. 239. For the same view in the Netherlands, see Asser/Clausing/Wansink 418 ff., and in the United Kingdom, see Basedow/Fock-Rühl 186 f. The results are mitigated in practice either by subjecting a breach of precautionary obligations to a different set of rules, such as the exclusion de garantie in France, see Lamy Assurances, para. 239(b), or through construction, leading to the conclusion that the precautionary obligation was not violated, see Clarke 20-6B for the United Kingdom.

Fault: Other European Laws N7. Under Article 4:102 para. 1, the policyholder or the insured must have acted with intent or recklessly and with knowledge that the loss would probably result. This formula is to be found in international transport conventions; see, for example, the Article 22 para. 5 of the Montreal Convention 1999. The formula is also mirrored in national insurance laws. Under the pertinent provisions, the insured/policyholder must have acted: at least negligently in Austria, see the second sentence of s. 6 para. 1 ICA; however, if breach of the precautionary obligation was merely negligent, and not grossly negligent, reckless or intentional, the insurer may only terminate the contract when the insured was initially advised against this consequence by way of a formal document, s. 6 para. 5 ICA. In Germany, the insured/policyholder must have acted intentionally, knowingly or through gross negligence, see s. 28 para. 1 ICA. Finnish law requires non-compliance to have occurred wilfully or through gross negligence, s. 15 para. 1(3) ICA. For United Kingdom law, see Clarke 19-2E.

Written Notice and Time Limits N8. In line with Article 4:102 para. 2 PEICL, the Austrian and German laws set a time limit, for the exercise of the right of termination, of one month from the time when non-compliance with a precautionary measure becomes known to the insurer, see the second sentence of s. 6 para. 1 Austrian ICA and s. 28 para. 1 German ICA respectively. The Nordic codifications are more flexible. Finnish law mandates exercise of the right of termination without undue delay, s. 15 para.

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2 ICA. Under Swedish law, the right to termination expires after unreasonable delay, s. 7 para. 2 of Ch. 3 ICA. According to s. 7 of Ch. 3 ICA, there is no time limit on the insurer’s right to terminate the contract when the insured or the policyholder acted fraudulently or in contravention to good faith. N9. Like the first sentence of Article 4:102 para. 2 PEICL, s. 15 para. 2 Finnish ICA and s. 7 para. 2 of Ch. 3 Swedish ICA mandate a written notice of termination.

End of Cover N10. The second sentence of Article 4:102 para. 2 PEICL seems to reflect an international consensus. With the exception of Finland, European insurance contract laws either provide for immediate end of cover or submit the question to the general law of obligations. S. 15 para. 2 Finnish ICA differs from the PEICL rule in that the policy remains valid one month after dispatch of the notice of termination.

National Peculiarities N11. Under the German ICA, when breach of a precautionary obligation relates to a severable part of the contract, the insurer may only terminate the contract in its entirety if proof is delivered by the insurer that it would not have concluded the remaining contract as it stands, s. 29 para. 1 ICA. Furthermore, if a severable breach, under s. 29 para. 1 ICA, gives rise to a partial termination by the insurer, the policyholder may terminate the remaining part of the contract. In the other European countries, the issue of severability would be a question of the general law of obligations. But it seems German law stands out in providing a subsequent right of termination for the policyholder.

Article 4:103 Discharge of the Insurer’s Liability (1) A clause that non-compliance with a precautionary measure totally or partially exempts the insurer from liability, shall only have effect to the extent that the loss was caused by the non-compliance of the policyholder or insured with intent to cause the loss or recklessly and with knowledge that the loss would probably result. (2) Subject to a clear clause providing for reduction of the insurance money according to the degree of fault, the policyholder or insured, as the case may be, shall be entitled to insurance money in respect of any loss caused by negligent non-compliance with a precautionary measure.

Comments General Remarks C1.  Article 4:103 deals with contract clauses which discharge the insurer from liability if the policyholder or insured is in breach of a precautionary measure. If there is no such clause the provision remains irrelevant because the Principles of European Insurance Contract Law do not discharge the insurer automatically. Article 4:103 seeks to limit the consequences

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of such clauses (see Article 4:101 Comment 2) for the policyholder or insured by requiring both causation and fault.

Causation C2.  Article 4:103 para. 1 is clear: non-compliance with a precautionary measure shall only have effect to the extent that the loss was caused by the non-compliance by the policyholder or insured. Non-compliance with a requirement of a sprinkler in full operation in a fire policy therefore may have the effect of excluding the insurer’s liability for loss caused by fire if the loss would have been avoided by a fully operating sprinkler. In addition, the insurer’s liability may be reduced if the loss caused by fire could not have been fully avoided by an operating sprinkler (for example in case of lightning) but has increased due to the absence of such a sprinkler. In that case the insurer’s liability would only be reduced as far as the non-compliance contributed to the extent of the loss. The onus of proving the prerequisites for a discharge of the insurer’s liability, including a causal link between non-compliance and loss, is on the insurer.

Fault C3.  As mentioned above, Article 4:103 introduces a second requirement for the discharge of the insurer’s liability: the loss must be caused with intent to cause the loss or recklessly and with knowledge that the loss would probably result, on the part of the policyholder or insured. For intent and recklessness see Article 9:101 Comments 2 and 3. C4.  Under Article 4:103 para. 2 the policyholder or the insured will be entitled to insurance money in respect of any loss caused by negligent but non-reckless breach of a precautionary measure. The basic philosophy is that insurance is taken out not just for accidental risks but also for cases of negligent behaviour. The parties may however deviate from the basic rule by an appropriate contract clause. Such a clause must satisfy the requirements of Article 1:203. The additional requirement that it has to be clear indicates that it must be in a very specific language in order to discharge the insurer in cases of negligence. If such a clause is applied in a specific case the discharge of the insurer from liability is limited by the degree of causation (Article 4:103 para. 1) and additionally by the degree of fault. If the fault is very slight there is no discharge, if the degree of fault comes close to recklessness the discharge may be almost complete.

Notes General Remarks N1. As Community law does not cover precautionary measures, comparisons can only be drawn to national provisions. An important distinction must be made between clauses providing for a discharge of the insurer (discharge clauses) and clauses excluding certain risks (exclusion clauses), as the two types of clauses are subject to different rules. Whereas discharge clauses generally require fault on the part of the policyholder/insured, exclusion clauses generally require neither causation nor fault to be established. In substance, however, both techniques often lead to the

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same result: the policyholder and/or the insured obtain only part of the insurance money or no insurance money at all.

Causation N2. Article 4:103 para. 1 PEICL stipulates that the loss must have been “caused by the non-compliance”. The same requirement applies under Article 4:103 para. 2 PEICL, as can be inferred as a matter of systematic interpretation.

France N3. In France, precautionary measures may either be classified as conditions precedent to cover (conditions de garantie) or as exclusionary clauses (clauses d’exclusion). The terminology in French insurance law can be misleading. Even though courts may hold precautionary measures to fall under the regime of the clauses d’exclusion, this regime, as it is applied, follows the rules of discharge clauses, see Lamy Assurances, para. 239(b): «On se place de la sorte dans le droit fil du mécanisme de la déchéance.» When precautionary measures are regarded as conditions precedent to the insurer’s liability, non-compliance as such bars any claim by the policyholder, see Lamy Assurances, para. 239(a). When precautionary measures, however, are submitted to the rules applying to discharge clauses, discharge of the insurer takes effect only when a causal link between breach and loss can be established, see Lamy Assurances, para. 239(b). Given the harsh consequences in the absence of a nexus requirement, it appears that there is a recent tendency in French jurisprudence to submit clauses providing for a discharge to the regime of discharge clauses, see Lamy Assurances, para. 239(b).

United Kingdom N4. If the policy stipulates for precautionary measures in the form of warranties, breach of such warranties automatically terminates the contract and discharges the insurer from its liability under the contract (see above, notes on Article 4:102, in particular the Good Luck case). Causation is not required. However, special rules apply for consumer and small business insurance. ICOBS 8.1.2 provides that an insurer may invoke non-compliance with a warranty only when there is evidence of fraud, or when the circumstances of the claim are sufficiently connected with the breach. Moreover, automatic termination being considered harsh, the effect of breach of warranty is to be moderated by the Insurance Act 2015, when it comes into force in 2016. Furthermore, to mitigate the harsh results of the absence of a nexus requirement, insurance policies in the United Kingdom may contain clauses requiring a causal link between breach and loss. For a recent example with respect to breach of warranty, see Bennett v Axa Insurance Plc [2003] EWHC 86 (Comm), [2004] Lloyd’s Rep IR 615.

Italy N5. In Italy, precautionary measures fall under the topic of perfection of cover. It is a condition precedent to the liability of the insurer that precautionary measures be complied with, see Basedow/Fock-Brunetta d’Usseaux 707.

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Belgium and Luxembourg N6. Art. 65 para. 1 Belgian IA 2014 stipulates that the insurer may only invoke a contractual discharge clause provided that a causal link be established between the occurrence of the insured event and the breach of a precautionary obligation, which must be one which is imposed by the contract (“une obligation determine impose par le contrat”). Art. 65 para. 2 IA 2014 authorises the government to further regulate questions of discharge. However, up to now no such regulation (arrêté royal) relating to art. 65 IA has been enacted. The provisions in the Luxembourg ICA are almost identical; see art. 18 Luxembourg ICA.

Austria and Germany N7. In Austrian law, discharge clauses may not be invoked if the breach of the precautionary measure had no impact on the occurrence of the insured event, see s. 6 para. 2 ICA. In Germany, causation is required by s. 28 para. 3 ICA. However, when the insured acted fraudulently, the insurer is discharged even without causal relationship, see the second sentence of s. 28 para. 3 ICA.

The Netherlands N8. According to the jurisprudence of the Dutch Supreme Court, the breach of a precautionary measure leads de iure to a loss of coverage during the period of breach, However the insured may prove a lack of causal relationship between the breach and a materialisation of the risk insured, in which case the respective claim has to be paid by the insurer (see Asser/Clausing/Wansink 418 ff.).

Further Objective Elements N9.  Further objective elements necessary for a discharge of the insurer are imposed by the laws of Austria and Germany. For Austria, see s. 6 para. 5 ICA: if non-compliance with a precautionary measure was merely negligent, discharge only takes effect if the insured was previously informed of this consequence by way of a formal document.

Fault N10.  Most European insurance laws require some degree of fault for a discharge of the insurer to take place. The United Kingdom and the Netherlands are the exceptions. Breach of precautionary obligations construed as warranties discharges the insurer regardless of the policyholder’s fault (see for the United Kingdom Basedow/Fock-Rühl 199 and for the Netherlands Asser/Clausing/Wansink 418 ff.), unless the wording of a warranty requires or implies it. In France, fault is not necessary for a discharge of the insurer, when precautionary obligations are held to constitute a condition precedent to cover (condition de garantie), see Lamy Assurances, para. 239(a). When precautionary measures are held to constitute an exclusion de garantie, and thus, in fact, a form of discharge clause, the party in breach must have acted with fault (faute), see Lamy Assurances, para. 239(b). It appears this encompasses all degrees of fault. N11.  Article 4:103 PEICL establishes a two-fold regime: intention or recklessness with “knowledge that the loss would probably result” has the consequence in law of total discharge of the

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insurer from liability under the contract, and according to Article 4:103 para. 1, degrees of fault below this level permit a proportionate reduction of insurance money, to the extent that they remain above the level of simple negligence, Article 4:103 para. 2.

Germany N12.  This regime corresponds to s. 28 para. 2 German ICA: When non-compliance with a precautionary measure is wilful, the insurer is discharged of his liability entirely, the first sentence of s. 28 para. 2 ICA. When non-compliance is grossly negligent, the insurer may reduce payment according to the degree of fault, the onus of proof for exculpation lying with the insured, the second sentence of s. 28 para. 2 ICA.

Finland N13. Similar results are provided by Finnish law, which combines a two-fold regime in a single provision. According to s. 31 para. 3 ICA, any compensation may be refused or reduced if the insured has wilfully or through negligence which cannot be considered slight failed to comply with a precautionary guideline as defined in s. 31 para. 1 ICA. S. 31 para. 4 ICA supplements special rules for general liability insurance policies: negligence must either be gross, or, where so provided in the policy, be caused by the use of alcohol or narcotics.

Austria N14.  For the necessity of fault in Austria, see the first sentence of s. 6 para. 1 ICA: a contractual provision exempting the insurer from liability when a precautionary obligation is breached shall be without effect when non-compliance can be excused. As a consequence the insurer is discharged entirely when non-compliance results from simple negligence. S. 6 para. 1a ICA provides for a proportionate reduction of insurance money; but it does not relate to precautionary measures in the sense of Article 4:101 PEICL.

Belgium and Luxembourg N15.  The first sentence of art. 65 Belgian IA 2014 leaves open the possibility for a partial discharge, but does not state a threshold degree of fault necessary for total discharge. For the degree of fault admissible, see the third sentence of art. 62 Belgian IA 2014. Pursuant to this provision, the insurer is not liable when the policyholder, the insured or the beneficiary acted either intentionally or with grave fault. For grave fault to result in a discharge, the relevant behaviour must be expressly and exhaustively mentioned in the contract. Although art. 62 IA 2014 is to be found in the section on the delimitation of the risk, the third sentence of art. 8 applies to discharge clauses as well, see Fontaine, para. 378. The law is construed as allowing for the exclusion of damages caused with a lesser degree of fault, see Fontaine, para. 379. Thus, any degree of fault on the part of the policyholder may lead to a (partial) discharge, as long as the obligations in question are clearly and exhaustively mentioned in the policy. N16.  The Luxembourg ICA contains an almost identical provision. Art. 18 ICA leaves open the possibility for partial discharge, but, like its Belgian counterpart, does not elaborate further on the fault – discharge ratio. Under art. 14 ICA, intentional causation of damage discharges the insurer

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entirely. Pursuant to the third sentence of art. 14 ICA, grave fault may also lead to a discharge, when the behaviour in question is expressly and exhaustively listed in the policy. Like its Belgian counterpart, art. 14 Luxembourg ICA is to be found in the section on the delimitation of the risk. However, the analogy to Belgian insurance law suggests that it is equally applicable to discharge clauses. Furthermore, the resemblance to Belgian law suggests that, as under the Belgian ICA, degrees of fault below grave fault may lead to (partial) discharge.

Section Two: Aggravation of Risk Article 4:201 Clauses Concerning Aggravation of Risk If the insurance contract contains a clause concerning aggravation of the risk insured, the clause shall be without effect unless the aggravation of risk in question is material and of a kind specified in the insurance contact.

Comments Allocation of Risk C1.  Insurers contract on the basis of their assessment of the risk at the time that the contract of insurance is concluded. Once a policy has been issued, they hope that the risk undergoes no significant aggravation or increase during the insurance period. Policyholders, however, do not want their activity during the period to be unduly restricted. Moreover, society, which has an interest in an effective and solvent insurance sector, also has an interest in fostering useful entrepreneurial activity. Insurance contract law seeks to balance these sometimes conflicting interests. C2.  In countries where the insurance period is usually one year or less, the law tends to favour policyholders: it does not provide any legal mechanism to enable insurers to change policy terms in the light of any significant aggravation of the risk during the period. On the one hand, the law in these countries does not countenance wilful or reckless conduct by policyholders resulting in loss but, on the other hand, it does not relieve insurers of poor underwriting. For the rest it is insurers who, for a limited period of time, bear the risk of the unexpected. In these countries attempts by insurers to establish an escape route in the policy by means terms such as promissory warranties or notification clauses have met with hostile and restrictive interpretation by the courts. In most countries in Europe, however, insurance periods are commonly longer than one year and the law does make some provision for policy change in the event of a significant aggravation of risk during the insurance period.

The Need for Rules of Law C3.  Under Article 2:601, except in the case of personal insurance, “the duration of the insurance contract” is one year but the “parties may agree a different period”, when appropriate to the particular risk. Moreover, Article 2:602 provides that in any event, unless one of the parties to the contract gives notice to the contrary, the one-year period provided for in Article 2:601 shall be “prolonged”. This being so, the issue of aggravation of risk cannot

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be ignored because even in the countries with law to provide for aggravation of risk, the rules tend to differ; and because, the nature of the issue is such that it is not covered by the Principles of European Contract Law, rules are needed. In the Principles of European Insurance Contract Law the response to this need is not to prescribe rules for all cases of aggravation of risk but for cases in which, as is likely, policies contain terms on the issue, and to establish minimum safeguards for policyholders. Note that the relevant rules of the Principles of European Insurance Contract Law do not apply to personal insurance, such as life and health insurance, for which different and more appropriate rules are to be prescribed in due course.

Aggravation of Risk C4.  Aggravation of risk is defined in Article 4:201, in which the reference to what is “material” envisages the corresponding delimitation of the duty of disclosure stated in Article 2:103(b). An aggravation which is due to natural wear and tear of property insured in indemnity insurance or to the increasing age of the person insured in life assurance is not material. The further requirement, that the aggravation of risk be “of a kind specified in the contract of insurance”, is to meet the need to alert and inform policyholders about what is a material aggravation of risk, and assumes that reasonable policyholders read their policy. Reference might have been made, as does the law in some countries, to elements of risk which are the subject of questions in the application. However, reference to the policy was preferred as being an intuitive and convenient reference point for policyholders.

Clauses C5.  When the aggravation of risk is such that insurers wish to reconsider the risk and decide whether to continue cover and, if so, on what terms, they usually seek to achieve that wish by means of policy clauses. One possibility in the past has been the inclusion of promissory warranties. The Principles of European Insurance Contract Law neuter such clauses in Articles 4:101 ff., insofar as failure to take precautionary measures required by the policy does not entitle insurers to terminate the cover, except when failure occurs with intent to cause the loss or recklessly and with knowledge that loss or damage would probably result. Another possibility hitherto has been a policy term that simply entitles insurers to terminate cover in the event of aggravation of risk. Such clauses are not prohibited altogether by the Principles of European Insurance Contract Law but are regulated by Article 4:203.

Notes Information Requirements N1. In many countries a duty to inform the insurer of an aggravation of risk is imposed on the policyholder by law, for example, in Germany (s. 23 para. 2 ICA), in Italy (art. 1898 para. 1 CC), in Poland (art. 815 CC) and in Switzerland (arts. 28 ff. ICA); some reservations concerning life assurance, see Kowalewski 197. In other countries, notably common law countries such as the United Kingdom as well as the Netherlands, there is no such requirement. Indeed the basic position is to the contrary (Pim v Reid (1843) 6 M & G 1; Kausar v Eagle Star Insurance Co Ltd [1997]

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CLC 129). Although a similar duty may be imposed by the contract of insurance (Birds 7.17), the courts are inclined to construe against such a duty: Clarke 20-5A4. See for the Netherlands Asser/ Clausing/Wansink 410 ff.

Material Aggravation of Risk N2. A rule limiting the effect of contract clauses to cases of material aggravation, such as that in Article 4:201, is found, for example, in art. 113-4 para. 1 French ICA, s. 27 German ICA, art. 4 para. 1 Greek ICA, art. 1898 para. 1 Italian CC (as interpreted by commentaries) and art. 11 Spanish ICA.

Aggravation Specified in the Contract N3. A further limitation of contract clauses on the aggravation of risk laid down in Article 4:201 is the requirement that the aggravation shall be specified in the contract of insurance. A similar rule can be found in Denmark (s. 45 para. 1 ICA). A rule of this kind designed to assist the policyholder who is ignorant of matters that might influence insurers, is not common in other national laws of insurance in Europe, however, experience in various countries indicates that such a rule is desirable in the interest of the private policyholder.

Article 4:202 Duty to Give Notice of an Aggravation of Risk (1) If a clause concerning aggravation of the risk insured requires notification of an aggravation, notification shall be given by the policyholder, the insured or the beneficiary, as appropriate, provided that the person obliged to give notice was or should have been aware of the existence of the insurance cover and of the aggravation of the risk. Notice by another person shall be effective. (2) If the clause requires notice to be given within a stated period of time, such time shall be reasonable. Notice shall be effective on dispatch. (3) In the event of breach of the duty of notification, the insurer shall not on that ground be entitled to refuse to pay any subsequent loss resulting from an event within the scope of the cover unless the loss was a consequence of the failure to notify the aggravated risk.

Comments The Need for Notification C1.  If insurers are to be in a position to decide how to respond to an aggravation of risk, they must first be made aware that an aggravation has occurred. For insurers to monitor individual risks is not likely to be cost efficient in most cases, so in practice they often insert a policy clause requiring policyholders to notify them of an aggravation of risk of which they are or should be aware. This is the situation dealt with by Article 4:202.

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The Manner of Notification C2.  When a policy duty of notification is triggered, Article 4:202 provides some means of ensuring that policyholders are given a reasonable time in which to respond, and are allowed to do so in a reasonable manner. In particular, the duty does not have to be performed personally but can be delegated. Moreover, given that in law notice or notification may be effective either on receipt or on dispatch, Article 4:202 para. 2 favours policyholders, like other provisions of the Principles of European Insurance Contract Law such as Articles 2:602 and 6:101, by stating that dispatch of the notice is sufficient for this purpose. They know when a notice has been dispatched but in many cases can be less sure when it has been received. Moreover, in the event of dispute, dispatch is easier for policyholders to prove than receipt by the insurer. Provided that a reasonable mode of transmission is employed, risks associated with the medium are for insurers to bear rather than policyholders. C3.  What is a reasonable time in which to notify aggravations of risk, as with notice of loss clauses, depends on the particular circumstances. Insurers want notice as soon as possible in order to reach a decision before loss occurs. However, policyholders must be given time to appreciate that the notice clause has been triggered. When the aggravation of risk is one intentionally brought about by a policyholder, the time may be relatively short. When the aggravation of risk has not been brought about by the policyholder but by forces of nature or by a third party, which may be the case of increased risk of flooding or subsidence for example, the time may well be longer, even though these are changes of which policyholders are likely to be aware. Awareness is central to this provision, and in that regard the rule reflects the current rule found in many countries in Europe, in which the law provides for aggravation of risk.

Breach C4.  Breach of the duty of notification on the part of policyholders does not necessarily have serious consequences for insurers. Thus, Article 4:202 para. 3 seeks to nullify policy clauses whereby, in the event of breach, cover is automatically terminated. Concerning the possibility of termination see Article 4:203. In that regard the intention behind Article 4:202 is that the legal consequences of breach should be related and proportionate to the breach. In particular, as provided by Article 4:202 para. 3, insurers are not on that ground entitled to refuse to pay any subsequent loss resulting from an event within the scope of the cover but not a consequence of the lack of notification. Other losses resulting from events within the scope of the cover may be a consequence of the aggravation of risk but not of the lack of notification; Article 4:203 para. 3 applies to such losses.

Notes Notice in Reasonable Time N1. A rule such as that in Article 4:202 para. 1 requiring the policyholder to notify the insurer is found in Germany (s. 23 paras. 2 and 3 ICA: notification “without delay”, as interpreted by courts and commentators) and Switzerland (art. 30 para. 1 ICA “without delay”). In Greece and

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Portugal, the policyholder ought to give notice within 14 days from the moment when he learns about the aggravation (see art. 4 para. 1 Greek ICA and art. 93 para. 1 Portuguese ICA). In Sweden s. 3 of Ch. 4 ICA (covering consumer insurance) explicitly allows the insurer to include in the contract a clause to the effect that the policyholder shall inform the insurer about an important change in circumstances of a type specified in the contract.

Insurer’s Duty to Pay Insurance Money N2. A rule such as that in Article 4:202 para. 3 requiring the insurer to pay insured losses unconnected with the aggravation of risk, is found, for example, in Denmark (s. 55 para. 2 and s. 45 para. 3 ICA) and in Germany (s. 26 para. 3(1) ICA). The same is true of Portugal. Under the Portuguese ICA, the insurer may refuse payment only in respect of losses resulting from the aggravation of risk (see art. 94 para. 1 ICA). Swedish law enables the insurer to reduce the insurance money in accordance with what is reasonable in light of the significance which the fact would have had for the insurer’s risk assessment, whether such disregard was intentional or negligent, and other circumstances. For business insurance the all-or-nothing principle applies, see s. 10 of Ch. 8 ICA.

Article 4:203 Termination and Discharge (1) If the contract provides that, in the event of an aggravation of the risk insured the insurer shall be entitled to terminate the contract, such right shall be exercised by written notice to the policyholder within one month of the time when the aggravation becomes known or apparent to the insurer. (2) Cover shall expire one month after termination or, if the policyholder is in intentional breach of the duty under Article 4:202, at the time of termination. (3) If an insured event is caused by an aggravated risk, of which the policyholder is or ought to be aware, before cover has expired, no insurance money shall be payable if the insurer would not have insured the aggravated risk at all. If, however, the insurer would have insured the aggravated risk at a higher premium or on different terms, the insurance money shall be payable proportionately or in accordance with such terms.

Comments Reconsideration of the Risk by Insurers C1.  When a material aggravation of risk, as defined in Article 4:201, occurs during the insurance period, insurers may, subject to Article 4:203, rely on any policy term that entitles them to terminate the contract. Generally speaking the decision to terminate or not is a decision that the Principles of European Insurance Contract Law leave to the market, provided that the aggravation is indeed material and that policyholders are not unduly prejudiced. In particular, policyholders must not be left in undue uncertainty about what their insurer will decide.

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Time for Policyholders to Find Alternative Cover C2.  In the event of termination policyholders must have time in which to find alternative cover. Thus, Article 4:203 para. 1 states that insurers must exercise their right to terminate by notice to the policyholder within one month of the time when they were or should have been aware of the aggravation. In the Principles of European Insurance Contract Law there is a presumption in favour of policyholders, sometimes expressed, for example in Article 2:102 para. 2, that notice from insurers is not effective until receipt of notice. C3.  Exception is made for cases in which policyholders are “in intentional breach of the duty of notification at the time of termination”, for example when they may well have sought to deceive the insurer concerned about the level of risk in order to avoid an increase in premium. In such circumstances, policyholders should have contemplated the possibility of having to seek alternative cover, if available, and do not merit a further month’s cover while they do so.

Discharge C4.  Article 4:203 para. 3 contains a rule parallel to Article 2:102 para. 5 (breach of the applicant’s pre-contractual information duty). When the policyholder neither knows nor ought to know about the aggravation of the risk, he should not be unduly prejudiced. Thus, Article 4:203 para. 3 provides that in such an eventuality the insurance money shall remain payable to a policyholder in full. The same is true when the policyholder knows or ought to know about the aggravation of the risk, as long as there is no causal connection with the loss. However, when the policyholder knows or ought to know and there is also a causal connection, the insurance money payable is qualified in the way set out in Article 4:203 para. 3 and in the same way as in Article 2:102 para. 5.

Application to Group Insurance C5.  The application of Article 4:203 para. 1 is modified as far as group insurances are concerned, see Article 18:203 para. 2.

Notes Expiry of Cover N1. A rule permitting the insurer to terminate cover in the event of aggravation of risk is found in many countries, although the period after which termination takes effect and insurance cover ends, varies: 7 days in Denmark (s. 47 ICA), 10 days in France (art. 113-4 para. 2 ICA), 15 days in Greece (art. 4 para. 2 and the first sentence of art. 3 para. 7 ICA), one month in Belgium (art. 81 para. 1(2) IA 2014) and Luxembourg (art. 34 para. 1(3) ICA). In Italy termination takes effect immediately or after 15 days depending on the degree of aggravation (art. 1898 para. 3 CC). The United Kingdom is the exception: no termination at all on that ground.

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Discharge N2. As with other cases of breach of a duty of the policyholder, national laws exhibit a gradual change from the all-or-nothing principle to a proportionate reduction of the insurance money, when the insured event occurs before the termination of the insurance contract. In the case of a fraudulent increase of risk the insurer will generally be entitled to withhold payment completely, see for Germany s. 26 para. 1 ICA; for Greece art. 4 para. 2 in conjunction with art. 3 para. 6 ICA; for Portugal art. 94 para. 1(c) ICA; for Spain the second sentence of art. 12 para. 2 ICA; in Sweden (consumer insurance), where the policyholder fails to notify the insurer about the increase in risk, insurance money may be reduced in accordance with what is reasonable, taking into account, among other factors whether the failure is intentional. N3. The rule emerging from national laws in respect of a breach of the notification duty is in line with Article 4:203 para. 3: it is the proportionate reduction of the insurance money. The first step will be the hypothetical ascertainment of the premium that would have been due had the policyholder complied with his duty of notification. The insurance money will then be reduced in the proportion established between that hypothetical premium and the actual premium. Rules of this kind can be found in Belgium (art. 81 para. 3(b) IA 2014); France (art. 113-9 para. 3 ICA); Greece (art. 4 para. 2 in conjunction with art. 3 para. 5 ICA); Luxembourg (art. 34 para. 3(b) ICA); Portugal (art. 94 para. 1(b) ICA); Spain (the third sentence of art. 12 para. 2 ICA). Some of these provisions entirely exclude payment if the insurer, being aware of the increased risk, would not have insured it at all. N4. Yet another group of national laws provides for a reduction of the insurance money in accordance with the degree of fault of the policyholder. This relates to Finland (with regard to indemnity insurance only, s. 26 para. 3 ICA), Germany (the second sentence of s. 26 para. 1 ICA) and Sweden (the second sentence of s. 3 para. 1 of Ch. 4 and s. 2 of Ch. 4 ICA).

Section Three: Reduction of Risk Article 4:301 Consequences of the Reduction of Risk (1) If there is a material reduction of risk, the policyholder shall be entitled to request a proportionate reduction of the premium for the remaining contract period. (2) If the parties do not agree on a proportionate reduction within one month of the request, the policyholder shall be entitled to terminate the contract by written notice given within two months of the request.

Comments Purpose and Scope C1.  Article 4:301 deals with situations in which there is a material reduction of the risk under the insurance contract, but one that does not arise from compliance with any precautionary measures required by the policy in accordance with Article 4:101 ff. A material reduction of the risk subject to Article 4:301 could occur as a result not only of action by

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policyholders (or other persons insured) but also as a result of action by third parties or other causes. C2.  Examples of such action include the installation of security measures that are not required by the terms of a household insurance policy, such as burglar alarms, special locks or smoke detectors. Policyholders should be encouraged to take voluntary steps to reduce risks, and the prospect of a lower premium held out by Article 4:301 provides a degree of encouragement. Examples of third party action include the construction of flood defences by government where insured property is situated in an area prone to flooding. C3.  Article 4:301 para. 1 is not meant to encourage good risk management but considerations of fairness suggest that policyholders should have the possibility of paying less for the cover on request. Any overpayment of premium for the past is a loss which lies where it falls – on the policyholder in question. Article 4:301 para. 1 is concerned only with material reductions of risk that occur after conclusion of the contract. C4.  By extension, this provision should also apply to the situation where a policyholder over-estimated the risk when completing the application for insurance; for example the application for a property about to be purchased states that there is no alarm system, but when the purchase is completed the policyholder discovers that in fact there is such a system. If the property is over-valued, Article 8:103 will apply.

Materiality C5.  To benefit from Article 4:301, policyholders must be able to establish, if required, that the reduction in risk is material. “Material” is to be understood in the same sense as in other provisions of the Principles of European Insurance Contract Law; see Article 2:103(b) Comment 2.

Policyholder’s Initiative C6.  To benefit from Article 4:103, policyholders must also take the initiative by requesting a reduction of the premium; and any reduction, if agreed, takes effect only from the date of the request under Article 4:103. Thus, policyholders cannot require a retrospective reduction, although that does not rule out the possibility of party agreement to such a reduction. If, on the contrary, the parties do not reach any agreement on reduction within four weeks, policyholders are entitled to terminate the contract and seek cover elsewhere. Termination would take effect immediately and policyholders would be entitled to a return of premium for the remaining insurance period in accordance with Article 5:104.

Notes Reduction of the Premium N1. A right to request a proportionate reduction of the premium, as set forth in Article 4:301, can be found in the laws of Belgium (art. 80 IA 2014), France (art. 113-4 para. 4 ICA), Greece

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(art. 5 para. 1 ICA), Italy (art. 1897 CC), Luxembourg (art. 33 ICA), Portugal (art. 92 para. 1 ICA), and Spain (art. 13 ICA). Only the wordings chosen by the national legislators seem to indicate slight differences regarding the substance of the reduced risk. What is called “material reduction of risk” in Article 4:301 meets similar qualifications under the laws of Belgium and Luxembourg (“sensible et durable”), Portugal (“unambiguous and durable”) or Greece (“substantially diminished”). Other laws do not characterise the reduction of the risk any further, see for example the French law where “en cas de diminution de risque” the policyholder is simply entitled to pay a lower premium. N2. A narrower approach is taken in Germany, Austria and Switzerland. Under the laws of these countries a reduction of the premium may only be applied for in respect of risks which, when the contract was concluded, had been assessed as special, aggravating risks justifying an additional premium. See for Austria s. 41a ICA, for Germany s. 41 ICA and for Switzerland art. 23 ICA. N3. The effect of a reduction of the premium also depends on when it takes effect. Under art. 80 Belgian IA 2014 and s. 41 German ICA, the relevant point in time is the receipt of the policyholder’s application by the insurer, namely when the insurer became aware of the reduction of the risk; this is in line with Article 4:301 as can be inferred from the words stating that the request is justified “for the remaining contract period.” The solution is the same in art. 23 Swiss ICA. But according to s. 41 of the Austrian ICA, and under art. 13 of the Spanish ICA, the reduction of the premium does not become effective before the beginning of the subsequent insurance period. N4. In the countries not mentioned above the written laws do not contain provisions on the reduction of risk. This includes countries with rather recently introduced insurance codes, such as the Netherlands and Sweden. United Kingdom and Irish case law deals only with the aggravation and its consequences for the obligations of the insurer, but not with the reduction of risk. Accordingly, no reduction of the premium can be requested by the policyholder if not explicitly provided for in the contract. Given the short contract periods that prevail in these countries this is not considered as a matter of concern.

Termination of Contract N5. Several countries have provisions virtually identical to Article 4:301 para. 2, including the one-month period preceding the right to terminate the contract. These are the laws of Belgium (art. 80 IA 2014), Greece (art. 5 para. 1 ICA) and Luxembourg (art. 33 ICA). In Portugal, the law grants the policyholder a right to terminate in case the parties fail to reach an agreement on the new premium (see art. 92 para. 2 ICA). There is no express requirement, however, as to how much time needs to elapse before the right of termination arises. Under French law (art. L. 113-4 para. 4 ICA) and under Spanish law (art. 13 para. 2 ICA), the policyholder’s right to terminate the contract is triggered by the insurer’s refusal to lower the premium in the case of reduction of risk. The termination, then, becomes effective after 30 days under French law and with the closing of the insurance period under Spanish law. For the period of time between the termination of the contract and its effect, the insurer must reimburse the policyholder for the proportionate “over”-premium. N6. Contrary to these provisions, the Italian Code allows for the termination of the contract by the insurer only. It is entitled to terminate the contract within two months after it has received

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notice of the reduced risk which leads to a reduction of the premium (see above Note 1 and art. 1897 CC). Going a step further, the laws of Austria, Germany and Switzerland which grant the right to a proportionate reduction of the premium only in rare cases (see above Note 2) do not allow either party to terminate the contract by unilateral declaration.

Exceptions for Personal Insurance N7. It is a common occurrence that countries which have provisions on the reduction of risk at the same time limit the scope of those provisions. They usually exclude contracts dealing with either health or life insurance, see: Belgium (art. 80 IA 2014), France (art. L. 113-4 para. 6 ICA), Greece (the third sentence of art. 5 para. 1 ICA), Austria (s. 164a ICA for life assurance), and Luxembourg (art. 33 ICA). Under the new German law, the provision governing the reduction of risk shall only apply to life assurance contracts when the risk which is said to be reduced had been specified by the parties when the contract was concluded (s. 158 para. 3 ICA).

Chapter Five: Insurance Premium Article 5:101 First or Single Premium When the insurer makes payment of the first or single premium a condition of formation of the contract or of the beginning of cover, that condition shall be without effect unless (a) the condition is communicated to the applicant in writing using clear language and warning the applicant that he lacks cover until the premium is paid, and (b) a period of two weeks has expired after receipt of an invoice which complies with requirement (a) without payment having been made.

Comments Scope of Regulation C1.  The scope of regulation of Article 5:101 is limited in several ways. First of all, it only deals with certain aspects of non-payment of premium leaving questions of performance such as the place, time and mode of payment of the premium to the general rules as contained in the Principles of European Contract Law (see Articles 7:101, 7:102, 7:107 and 7:108). Secondly, Article 5:101 only deals with first premiums or single premiums (as to the meaning of these terms below Comments 5 to 7) whereas subsequent premiums are dealt with in Article 5:102. Thirdly, Article 5:101 only deals with the impact of non-payment of a first or single premium on the formation of the contract and the commencement of cover under the policy, whereas the right of the insurer to terminate the contract following non-payment of premium is dealt with in Article 5:103.

Regulatory Approach C2.  Article 5:101 restricts itself to limiting the effect of any condition imposed by the insurer by which the formation of the contract or the commencement of the cover under the

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policy depends on prior payment of the first or single premium. Article 5:101 itself neither requires pre-payment of the premium nor does it revoke cover in case of non-payment. Thus, in the absence of a condition imposed by the insurer, non-payment of the first or single premium will have no impact on the conclusion of the contract and the provision of cover by the insurer. In such cases the insurer will be restricted to enforcing its claim for premium in accordance with Article 9:101 para. 1 PECL and for interest in accordance with Article 9:508 PECL or terminating the contract in accordance with Article 5:103 PEICL. C3.  On the other hand, Article 5:101 does not prohibit a condition requiring payment of premium prior to the formation of the contract or the beginning of the cover. Such a condition is looked upon as a means to deter fraudulent contracting by policyholders. In particular, it makes it impossible for them to enjoy cover, at least for a certain amount of time, under a contract which was concluded knowing that they were not going to pay the premium – whether they were unable or simply unwilling to do so. Of course, policyholders could nevertheless obtain cover without advance payment of premium by means of preliminary cover if the insurer is willing to grant it (see, however, Article 2:403 and especially its para. 2 addressing the problem of preliminary cover obtained fraudulently). C4.  Article 5:101 applies no matter what kind of condition the insurer chooses to impose. In practice, mainly two patterns are followed by insurers. In some countries the offer of the insurer or the insurer’s acceptance of the application for insurance, as the case may be, is conditional on the advanced payment of premium. As a consequence, subject to Article 5:101, a contract of insurance will only be formed and cover will only start to run upon payment of the premium. In other countries insurers insert specific clauses into their general contract terms which become part of the contract by parties’ agreement and make the commencement of the cover but not the conclusion of the contract depend on payment of the first or single premium.

First and Single Premium C5.  In view of Article 5:102 the distinction between first premiums and subsequent premiums becomes vital. In principle, “first premium” is the premium which falls due immediately after the conclusion of the contract. Since contracts concluded under the Principles of European Insurance Contract Law normally last for one year (see Article 2:601) the premium due for the year after the initial conclusion of the contract is a first premium. In contrast, all premiums due after a prolongation of the contract according to Article 2:602 will be subsequent premiums and not governed by Article 5:101 but by Article 5:102. C6.  The issue described above in Comment 5 does not arise when a single premium is due. A single premium is the only premium which will ever be paid by the policyholder under the policy. Therefore, there will be no subsequent premiums within the meaning of Article 5:102 and Article 5:101 will apply to the single premium. In order to avoid any argument to the contrary the wording of Article 5:101 makes its application to single premiums explicit. C7.  Insurers frequently agree that policyholders may pay the premiums by instalments. A premium which is calculated, for example, on a yearly basis may be paid by the policyholder by monthly instalments. In such cases “the premium” will only be fully paid about

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one month before the regular one year period of the insurance contract comes to an end in accordance with Article 2:601. In such cases it would be contrary to the purpose of Articles 5:101 and 5:102, as well as the parties’ intention which is expressed in the agreement allowing payment of the first premium by instalments, to apply Article 5:101 to the full amount of the first premium. This is because the conclusion of the contract and/or the commencement of cover would be delayed by about 11 months. It follows that only the first instalment can be considered a first premium whereas all following instalments are subsequent premiums and subject to Article 5:102.

Prerequisites for Giving Effect to a Condition which is Subject to Article 5:101 C8.  A condition subject to Article 5:101 and imposed by the insurer will only take effect if specific criteria are met. First of all, the policyholder must be warned about the condition and its consequences (Article 5:101(a)). For that purpose the insurer must give written notice of the condition to the policyholder; for the meaning of written notice see Article 2:602 Comment 4. Like all documents issued by the insurer the notice must use plain and intelligible language and must be issued in the language in which the contract was negotiated, as required by Article 1:203 para. 1. The notice must set out the condition imposed by the insurer as well as the consequence of non-payment of the premium, namely the lack of cover. C9.  The warning to be given under Article 5:101(a) may partly overlap with the general duty of the insurer to warn the applicant about the commencement of cover in accordance with Article 2:203, where applicable. In such cases the insurer must comply with both duties in a manner which is mutually consistent. C10.  The second requirement for a condition subject to Article 5:101 is the receipt of an invoice (Article 5:101(b)). The invoice must not only state the amount of the (first or single) premium but must also comply with the duty to warn which is required of the insurer by Article 5:101(a). C11.  Finally, Article 5:101(b) allows the policyholder a period of two weeks after receipt of an invoice for payment of premium. As long as this period has not expired the policy condition is without effect (for more details, see below Comment 12).

Consequences of Payment or Non-Payment within the Two Week Period C12.  If the policyholder pays premium within the two week period, the condition imposed by the insurer “shall be without effect” and, therefore, the policyholder, insured or beneficiary, as the case may be, will enjoy cover irrespective of whether an insured event has occurred before or after payment of the first premium. If, in turn, the policyholder does not pay premium within the two week period, cover only commences with actual payment and only for the future. During the period until payment is made, including the period of two weeks referred to in Article 5:101(b), the risk will not be covered. However, if the policyholder is prevented from paying, Article 8:108 PECL may apply.

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Notes Postponement of Cover N1. In most European countries the beginning of insurance cover is linked to the payment of the first or single premium (“Einlöseprinzip”). This rule can be found as a non-mandatory provision in the laws of Austria (s. 38 para. 2 ICA), Denmark (s. 14 ICA); Germany (s. 37 para. 2 ICA), Greece (art. 6 para. 1 ICA), Italy (art. 1901 para. 1 CC), Poland (art. 814 para. 1 CC), and Portugal (art. 59 ICA: not applicable to life assurance and certain other types of insurance). N2. In other countries, even though no similar rule can be found in the insurance laws, a contractual clause having the same effect is permitted by the law (see for Belgium art. 69 para. 2 IA 2014, Basedow/Fock-Fock 267-268; for England and Wales Clarke 13-9, Basedow/Fock-Rühl 1464; for France Picard/Besson, Contrat para. 100, Basedow/Fock-Völker 520; for Ireland Doolan 361; for Luxembourg art. 37 para. 2 ICA, Basedow/Fock-Völker 796; for Scotland Forte, para. 834; for Sweden the second sentence of s. 1 of Ch. 5 ICA; for the Netherlands Basedow/Fock-Fock 869; and for Switzerland art. 19 para. 2 and art. 20 para. 3 ICA). Consequently, in many of these countries the same rule exists as a result of contractual practice (see for Belgium Cousy/Schoorens 119, Basedow/Fock-Fock 267-268; for the Netherlands Basedow/Fock-Fock 869; for England and Wales Clarke 13-9, Basedow/Fock-Rühl 1464; for Scotland Forte, para. 834; for Ireland Doolan 361). Only Finnish law (s. 11 para. 3 ICA) requires an additional justification by the nature of insurance or another particular reason for a contractual clause in the abovementioned manner to be effective.

Protection of the Applicant’s Expectations N3. Even though almost all European legal systems make it possible to require payment of the first or single premium for the insurance cover to begin, many laws establish some form of protection for the policyholder before the putative insurance cover is lost. One form of protection which can be found is a requirement of warning of the consequences of non-payment before they materialise. This requirement (similar to Article 5:101 para. 1(a)) can be found in the laws of Austria (s. 38 para. 3 ICA), Germany (the second sentence of s. 37 para. 2 ICA), Portugal (art. 60 para. 1 ICA) and Switzerland (art. 20 para. 1 ICA). In those countries where the Einlöseprinzip is established as a result of contractual practice, at least some form of warning is achieved by the fact that the consequences of non-payment are expressly spelled out in the insurance contract or shall be set forth in pre-contractual information (for Belgium Basedow/Fock-Fock 268; for Sweden the fourth sentence of s. 2 para. 1 of Ch. 2 ICA). N4. Another form of protection is the allowance of a “period of grace” (similar to Article 5:101 para. 1(b)) between receipt of an invoice (possibly containing a warning of the consequences of non-payment) and the actual payment by the policyholder. If the policyholder pays the first or single premium within this period of usually seven to fourteen days, insurance cover is granted even for the time before the payment was effected. Forms of such “periods of grace” can be found in the laws of Austria (s. 38 para. 2 ICA: two weeks), Denmark (s. 14 ICA: one week; usually longer in contractual practice, see Basedow/Fock-Scherpe 971), Portugal (art. 60 ICA), Sweden (s. 1 of Ch. 5 ICA: 14 days – applies to consumer insurance only), and Switzerland (art. 20 para. 1 ICA in accordance with art. 107 of the Code of Obligations (a reasonable period for execution

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has to be fixed by the creditor) foresees a “period of grace”). No “period of grace” exists in the laws of Germany (Basedow/Fock-Lemmel 390), Greece (Basedow/Fock-Papathoma-Baetge 620), and Italy (Basedow/Fock-Brunetta d’Usseaux 710). However, some of the countries which do not have a “period of grace” require fault of the policyholder regarding non-payment for the commencement of cover to be delayed (for example s. 37 para. 2 German ICA and s. 2 of Ch. 5 Swedish ICA).

Article 5:102 Subsequent Premium (1) A clause, providing for the insurer to be relieved of its obligation to cover the risk in the event of non-payment of a subsequent premium, shall be without effect unless (a) the policyholder receives an invoice stating the precise amount of premium due as well as the date of payment; (b) after the premium falls due, the insurer sends a reminder to the policyholder of the precise amount of premium due, granting an additional period of payment of at least two weeks, and warning the policyholder of the imminent suspension of cover if payment is not made; and (c) the additional period in requirement (b) has expired without payment having been made. (2) The insurer will be relieved of liability after the additional period in para. 1(b) has expired. Cover will be resumed for the future as soon as the policyholder pays the amount due unless the contract has been terminated in accordance with Article 5:103.

Comments Scope of Regulation C1.  The scope of regulation in Article 5:102 is subject to the same limitations as Article 5:101; see above Comment 1 on Article 5:101. However, in contrast with Article 5:101, Article 5:102 deals with non-payment of subsequent premiums; as to the meaning of this term see below Comment 3. As a consequence it only deals with contract clauses, providing for the insurer to be relieved of its obligation to provide cover, but not with conditions unilaterally imposed by the insurer in its initial offer or acceptance; see, in contrast, Article 5:101 Comment 4.

Regulatory Approach C2.  Article 5:102 applies the same regulatory approach as Article 5:101. Therefore, it is restricted to limiting the effect of any contract clause by which the provision of cover under the policy depends on prior payment of a subsequent premium. Article 5:102 itself neither requires pre-payment of the premium nor does it revoke cover in case of non-payment. Thus, subject to a clause in the contract providing otherwise, non-payment of a subsequent premium will have no impact on the provision of cover by the insurer. In such cases the insurer will be restricted to enforcing its claim for premium in accordance with Article 9:101 para. 1 PECL and for interest in accordance with Article 9:508 PECL or, alternatively, terminating the contract in accordance with Article 5:103 PEICL.

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Subsequent Premium C3.  In the context of Article 5:101 the terms “first premium” and “single premium” have been defined; see Comments 5 to 7. It follows from these definitions that the term “subsequent premium” must be understood as any premium or instalment of a premium due following payment of a first premium within the meaning of Article 5:101.

Prerequisites for Giving Effect to a Clause which is Subject to Article 5:102 C4.  The criteria to be met under Article 5:102 in order to relieve the insurer of its obligation to cover the risk go beyond what Article 5:101 requires in the case of non-payment of a first or single premium. This is justified because at that stage sanctions do not have to deter fraudulent contracting on the part of the policyholder. C5.  First of all, Article 5:102 para. 1(a) requires the insurer to send an invoice to the policyholder in order to make him aware of the premium due. The invoice must at least provide the policyholder with the two most important pieces of information concerning the subsequent premium, namely its precise amount and the date of payment. C6.  If payment is not made in accordance with the invoice, the insurer must send a reminder to the policyholder; see Article 5:102 para. 1(b). The reminder must state the precise amount of the premium due. In addition, it must grant the policyholder a period of grace of at least two weeks. Finally, the reminder must state the consequences of non-payment of the premium within the period of grace, namely the suspension of cover provided for by the contract.

Consequences of Payment or Non-Payment within the Period of Grace C7.  If the policyholder pays premium within the period of grace, any insured event will be covered irrespective of whether it occurred before or after payment of premium. C8.  If the policyholder does not pay premium within the period of grace, cover will be suspended with effect from the end of the period of grace; see the first sentence of Article 5:102 para. 2. As a consequence, insured events which occurred before the period of grace has ended will be covered. C9.  If the period of grace has ended and cover has been suspended, the policyholder still has the option to resume cover by paying the premium; see the second sentence of Article 5:102 para. 2. Cover will, however, be resumed only for the future. As a consequence, insured events occurring between the end of the period of grace and the payment of premium remain uncovered under the policy. C10.  The option to resume cover by paying premium as provided for in the second sentence of Article 5:102 para. 2 is lost as soon as the contract is terminated. Termination for non-payment of a subsequent premium is regulated in Article 5:103.

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Notes N1. Almost all European insurance laws provide for insurance cover to be suspended on default of payment of subsequent insurance premiums. This is true for the law of Austria (s. 39 para. 2 ICA), Belgium (standard contractual clause permitted by art. 69 para. 1 IA 2014, see Vandeputte 84 and Basedow/Fock-Fock 268), Denmark (s. 14 ICA), France (art. L. 113-3 ICA), Italy (art. 1901 para. 2 CC), Luxembourg (art. 21 ICA), the Netherlands (art. 7:934 CC), Poland (art. 814 para. 3 CC), Portugal (art. 61 para. 2 ICA), Spain (art. 15 para. 2 ICA), Switzerland (art. 20 para. 3 ICA), England and Wales (Clarke 13-9 and 18-3), Scotland and Ireland (Basedow/Fock-Rühl 1465). N2. Exceptions seem to be Greece and Sweden. In Greece, the insurer has the choice between termination and continuation of the insurance contract. If the contract is not terminated, the insurance cover is preserved even in default of premium payment (art. 6 para. 2 ICA and Basedow/ Fock-Papathoma-Baetge 621). In Sweden, likewise, insurance cover is not lost by operation of law where the policyholder defaults on the subsequent premium. Rather, the insurer has a right to terminate the contract pursuant to s. 2 of Ch. 5 ICA (see also the notes on Article 5:103). N3. At the same time most European legal systems stipulate additional requirements for the insurance cover to be lost in the case of non-payment of subsequent insurance premiums. Usually insurance cover is not lost unless an additional period of payment set by the insurer has run out and the policyholder has been warned of the forfeiture of cover. The requirement of an additional payment period exists in the laws of Austria (s. 39 para. 1 ICA: two weeks), Belgium (art. 70(2) IA 2014: 15 days, see Cousy/Schoorens 120), Denmark (s. 14 ICA: one week), France (art. L. 113-3 ICA: 30 days), Germany (s. 38 para. 1 ICA: two weeks as a minimum), Luxembourg (art. 21 ICA: 30 days), the Netherlands (art. 7:934 CC: 14 days), Poland (art. 814 para. 3 CC: 7 days from receipt of a notice posted by the insurer), Spain (art. 15 para. 2 ICA: one month; Basedow/Fock-Schlenker 1329-1330), Sweden (the first sentence of s. 2 para. 2 of Ch. 5 ICA: within two weeks from receipt of a notice posted by the insurer), Switzerland (art. 20 para. 1 ICA: 14 days), and in art. 6 para. 1 of the Amended Proposal for a Council Directive on Insurance Contract Law (two weeks). A rule to the effect that the additional payment period may not be set before the premium fell due exists in the Netherlands (art. 7:934 CC). N4. The requirement of a warning of the forfeiture of coverage can be found in the laws of Austria (s. 39 para. 1 ICA), Belgium (art. 70 para. 3 IA 2014), France (Basedow/Fock-Völker 521), Germany (s. 38 para. 1 ICA), Luxembourg (art. 22 ICA), the Netherlands (art. 7:934 CC), Poland (art. 814 para. 3 CC), Sweden the second sentence of s. 2 para. 2 of Ch. 5 ICA), Switzerland (art. 20 para. 1 ICA), and in art. 6 para. 1 of the Amended Proposal for a Council Directive on Insurance Contract Law. No requirement of warning exists in Italy where insurance cover is lost automatically 15 days after the subsequent premium fell due (art. 1901 para. 2 CC). It may be added that special rules exist for life assurance contracts in many countries, for example Austria (ss. 173 and 175 ICA), France (art. L. 132-20 para. 1 ICA), Germany (s. 166 para. 2 ICA), Luxembourg (art. 24 ICA) or the Netherlands (art. 7:980 CC). The same is true of the law in the United Kingdom, although there is a long established insurance practice of issuing life assurance policies with a “period of grace” for payment of subsequent premiums: Birds 5.7.3, Clarke 13-8A.

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Article 5:103 Termination of the Contract (1) On expiry of the period referred to in Article 5:101(b) or Article 5:102 para. 1(b), without payment of the premium being made, the insurer shall be entitled to terminate the contract by written notice, provided that the invoice required by Article 5:101(b) or the reminder required by Article 5:102 para. 1(b), as the case may be, states the right of the insurer to terminate the contract. (2) The contract shall be deemed to be terminated if, as the case may be, the insurer does not bring an action for payment (a) of the first premium within two months after expiry of the period mentioned in Article 5:101(b); or (b) of a subsequent premium within two months of expiry of the period mentioned in Article 5:102 para. 1(b).

Comments Scope of Regulation C1.  Article 5:103 regulates the insurer’s right to terminate the contract in case of non-payment of premium. It covers non-payment of both a first or single premium and a subsequent premium. However, termination only applies to cases in which a contract has actually been formed. This is not the case if the insurer makes payment of a first or single premium a condition of formation of the contract in accordance with the first of the alternatives stated in Article 5:101. Thus, non-payment of the first or single premium prevents the formation of the contract and, therefore, there is no question of termination. C2.  Article 5:103 states a special, mandatory and comprehensive rule. Thus, it overrides the provisions of the Principles of European Contract Law on delay in payment as well as non-payment of money otherwise applicable, namely Articles 8:106 para. 3 and 9:301 to 9:304 PECL.

Regulatory Approach C3.  Article 5:103 grants the insurer a right to terminate the contract in case of non-payment of the premium by the policyholder. The rule serves, first of all, the interest of the insurer to be able to terminate its contractual relationship with a policyholder, who has proved to be unreliable in paying the premium. Indeed, relief from the obligation to provide cover in accordance with conditions of the kind referred to in Articles 5:101 and 5:102 does not fully satisfy the interest of the insurer in termination because it would remain in a relationship which involves some obligations to the policyholder. C4.  On the other hand, Article 5:103 was not needed solely for the purpose of giving a right of termination to the insurer, because Articles 8:106 para. 3, 9:301 and 9:304 PECL, which would apply as the lex generalis by virtue of Article 1:105 PEICL give a right to termination anyway. Article 5:103 also lays down mandatory limits on the insurer’s right of termination.

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Termination in Case of Non-Payment of a First or Single Premium C5.  The insurer will only be entitled to terminate the contract if, first of all, the period of two weeks for payment of premium under Article 5:101(b) has ended. Since this period will only start to run if the further conditions set out in Article 5:101 are fulfilled, these conditions must also be met. However, in the unlikely case that an insurer does not use the option granted by Article 5:101 it may nevertheless send an invoice to the policyholder and trigger the two week period for payment of premium. C6.  Furthermore, Article 5:103 para. 1 requires information about the right of termination to be given to the policyholder. This information must be included in the invoice mentioned in Article 5:101(b); see Article 5:103 para. 1.

Termination in Case of Non-Payment of a Subsequent Premium C7.  Termination in the case of non-payment of a subsequent premium is regulated in the same way as in the case of non-payment of a first or single premium, with one exception. The exception is that, in the case of non-payment of a subsequent premium, Article 5:103 para. 1 refers to the additional period of payment of at least two weeks and to the reminder mentioned in Article 5:102 para. 1(b) instead of the period of payment and the invoice mentioned in Article 5:101(b).

Notice of Termination C8.  If the insurer wishes to exercise its right to terminate, it must do so by giving the policyholder written notice of termination; for the meaning of written notice see Article 2:602 Comment 4.

Effects of Termination C9.  The contract will come to an end upon receipt of notice of termination by the policyholder. C10.  Termination under Article 5:103 has no retroactive effects. Therefore, the insurer is entitled to the premium due for the period in which the contract remains in force; concerning divisibility of the premium see Article 5:104. This period is, however, restricted by Article 5:103 para. 2; see below Comment 11.

Automatic Termination C11.  According to Article 5:103 para. 2 the insurer must either terminate the contract or bring an action for payment of premium within a period of two months following the payment periods mentioned in Article 5:103 para. 1. The contract is deemed to be terminated and end automatically, if the insurer fails to act in either way within such period. Thus, the insurer cannot let the contract go on indefinitely and collect the premium while cover is withheld in accordance with Article 5:101 or suspended in accordance with Article 5:102.

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C12.  Article 5:103 para. 2 must not be applied in the unlikely case that the insurer does not use the options granted by Articles 5:101 and 5:102. In such case, if the insurer has a right to terminate under Article 5:103 para. 1 but decides not to use it, no harm is done to the policyholder. Because cover must be provided by the insurer it is only reasonable that the policyholder owes any premium due as long as the insurer does not terminate.

Notes Article 5:103 para. 1: The Right to Terminate N1. The right of an aggrieved party to terminate a contract after giving the other party a reasonable time in which to perform is accepted by the Principles of European Contract Law (Article 8:106 para. 3), the United Nations Convention on Contracts for the International Sale of Goods (CISG) (arts. 47, 49 para. 1(b), 63, and 64 para. 1(b)) and the laws of many European countries (Lando/Beale 376-377). The first sentence of Article 5:103 para. 1 establishes this principle for insurance law and refers back to the time periods of Article 5:101(b) and Article 5:102 para. 1(b) as reasonable time periods for performance. N2. The right to terminate the insurance contract if the policyholder has delayed performance and a reasonable time to perform has lapsed can be found in the insurance laws of Austria (s. 39 paras. 1 and 3 ICA: two weeks), Belgium (art. 71 paras. 1 and 3, art. 70 para. 2 IA 2014: not less than 15 days), Denmark (s. 13 ICA: one week and three days after termination notice), Finland (s. 39 para. 1 ICA: 14 days from the dispatch date of the termination notice; this does not apply to automatically renewed non-life insurance policies), France (art. L 113-3 para. 3 ICA: 30 + 10 days), Germany (s. 38 paras. 1 and 3 ICA: two weeks), Greece (the second sentence of art. 6 para. 2 ICA: one month), Luxembourg (art. 22 para. 2 and art. 21 ICA: 30 + 10 days), the Netherlands (art. 7:934 CC: 14 days), Spain (Bataller/Latorre/Olavarria 193, Sánchez Calero, (art. 15) 255-256, Basedow/Fock-Schlenker 1329-1330), Sweden (s. 2 of Ch. 5 ICA), and Switzerland (arts. 20 para. 1 and 21 para. 1 ICA: 14 days; Basedow/Fock-Bälz 1240). In England and Wales, Scotland and Ireland, except in the case of life assurance, delayed payment leads to termination of the insurance contract even if the insurer does not set an additional payment period (Clarke 13-9; Basedow/ Fock-Rühl 1465). The contract remains valid, however, if the insurer accepts late payment of the premium (Basedow/Fock-Rühl 1465). In Poland: art. 814 paras. 2 and 3 CC. In Portugal the insurance contract ends automatically subject to the conditions laid down in art. 61 ICA.

Form of Termination N3. Explicit formal requirements (“by notice in writing”) for the termination of the insurance contract (at least for some forms of termination) can be found in Austria (see Basedow/Fock-Lemmel 1118), Belgium (art. 71 para. 4 and art. 70 para. 1 IA 2014, see Basedow/Fock-Fock 299), Finland (s. 39 ICA), France (arts. L. 113-14 and R. 113-6 ICA), Greece (the second sentence of art. 6 para. 2 ICA), Italy (Basedow/Fock-Brunetta d’Usseaux 746), Luxembourg (art. 39 para. 1 ICA) and Sweden (s. 2 of Ch. 5 ICA: notice of termination must contain information on the date from which the termination takes effect; where such information is omitted, the termination is without effect). The possibility to combine the notice of termination with the invoice or the

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reminder is explicitly permitted by the insurance laws of Austria (s. 39 para. 3 ICA), Belgium (art. 71 para. 3 IA 2014) and Germany (s. 38 para. 3 ICA). N4. The second half of Article 5:103 para. 1 makes it possible to combine the invoice or the reminder with the sanction of automatic termination of the insurance contract if payment is not effected in the period fixed. Similar rules can be found in the insurance laws of Austria (s. 39 para. 3 ICA), Belgium (art. 71 para. 3 IA 2014) and Germany (s. 38 para. 3 ICA).

Article 5:103 para. 2 N5. In order to avoid the insurer taking advantage of a forfeiture of cover while keeping the right to the premium, some European insurance codifications have developed a presumption of termination similar to Article 5:103 para. 2. Such a presumption exists in Spain (art. 15 para. 2 ICA: six months after the additional payment period has expired) and Switzerland (art. 21 para. 1 ICA: two months after the additional payment period has expired). As already mentioned, Portuguese law regards the insurance contract as terminated by operation of law if the policyholder defaults on the premium (art. 61 paras. 2 and 3 ICA).

Article 5:104 Divisibility of Premium If an insurance contract is terminated before the contract period has expired, the insurer shall only be entitled to premium in respect of the period prior to termination.

Comments The Principle C1.  Article 5:104 establishes the principle of divisibility of premium. Therefore, if a contract is terminated early, the insurer will only be entitled to claim an amount of premium which relates to the period of time before termination took effect. If premium is pre-paid, the insurer must pay back a pro rata share of the premium to the policyholder. For example, a contract concluded for one year but terminated after 10 months will give rise to a claim for repayment of one sixth of the yearly premium which was paid in advance.

Abolition of a Principle of Indivisibility of Premium C2.  Article 5:104 excludes the principle of indivisibility of premium found in some countries because it is not justifiable in this context. Indivisibility is, first of all, no longer required for reasons of practicability. Modern information technology allows virtually costless calculation of pro rata premium. Secondly, the argument, that the insurer needs the premium to fund the relevant risk pool as originally conceived, is unfounded. Following early termination of the contract, the overall exposure of the insurer to risk decreases and the unearned premium is no longer needed to maintain the solvency of the insurer. Thirdly, the risk covered is not indivisible itself. Insurance practice shows that premium for a risk can be calculated on a daily, monthly or yearly basis. Clearly, premiums for cover of a shorter

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period are lower in absolute terms than premiums for cover of a longer period. Therefore, at least from an economic point of view, risks are divisible in time. There is, of course, an argument, that the risk is not even throughout a given period, such as one year. For example in the case of flood insurance, the risk is higher at some seasons than others. However, insurers can tackle this problem, for example, by calculating and charging premiums on a monthly basis instead of a yearly basis. The principle of divisibility of premium neither prevents nor interferes with such calculation and charging of premium. Fourthly, the right of the insurer to keep unearned premium cannot be justified as a provision for liquidated damages. In fact, many cases of early termination are not based on a breach of contract on the side of the policyholder. Moreover, the amount of unearned premium depends on the time of termination and, therefore, the amount of liquidated damages will be high if termination comes early but low if it comes relatively late. Finally, indivisibility may be looked upon as a “penalty” against the policyholder. However, as has been mentioned, many cases of early termination do not involve any breach of contract on the side of the policyholder and, therefore, there is no ground for a penalty. Again, the amount of the penalty depends on the time of termination which is merely fortuitous. For all these reasons, any such penalisation of the policyholder must be restricted to extreme cases; see below Comment 3. C3.  Exceptionally, in case of fraudulent breach of pre-contractual information duties, the insurer may keep all premiums paid in spite of retroactive effect of avoidance under Article 2:104. This rule serves as a deterrent to fraud on part of the applicant when carrying out pre-contractual information duties.

Notes N1. Many insurance laws regard the insurance premium as divisible and limit the premiums which the insurer may collect to those owed pro rata temporis at the time of termination of the insurance contract. This is true for the laws of Austria (s. 40 ICA), Belgium (art. 73 IA 2014), Denmark (s. 16 ICA), Germany (s. 39 ICA), Finland (s. 45 ICA), Poland (art. 813 para. 1 CC), Portugal (art. 61 para. 3 ICA), Sweden (s. 3 of Ch. 5 ICA), and Switzerland (art. 24 ICA with an exception made, in case of partial damage, by art. 42 para. 2 ICA where the policyholder terminates the contract in the year following its conclusion). The Dutch Civil Code applies the principle of divisibility according to what is fair (see art. 7:939 CC). In Greece, the principle of divisibility is derived from the second sentence of art. 7 para. 6 ICA which provides that the parties can agree that the premium shall be indivisible in the event of termination of the contract after the occurrence of the insurance event. N2. On the other hand, the traditional contrast to the principle of divisibility, the principle of indivisibility of premium which has traditionally been the position in particular of German-influenced legal systems, seems to be in decline. Law reform in Austria and Germany shifted the respective laws towards the principle of divisibility (for Austria see Fenyves/Kronsteiner/Schauer-Fenyves, § 2 VersVG para. 1 and § 40 VersVG para. 1, Heiss/Lorenz-Heiss, § 40 VersVG para. 1, and Basedow/Fock-Lemmel 1113-1114; for Germany compare s. 39 ICA with s. 40 former ICA, see Wandt, para. 500), and even in those countries where the principle of indivisibility is still in force, it is either limited to insurance of business risks or at least the scope of application of the principle of indivisibility is limited and its extension by way of analogy rejected (for criticism in

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Switzerland, see Basedow/Fock-Bälz 1239, 1263-1264, Honsell/Vogt/Schnyder-Fuhrer, art. 25-27 paras. 60 ff., and Maurer 291). At present, the principle of indivisibility of premium is still in force in the United Kingdom (see Tyrie v Fletcher (1777) 2 Cowp 666, Birds 10.2, and Clarke 13-12).

Article 5:105 Right to Pay Premium The insurer shall not be entitled to refuse payment by a third party if (a) the third party acts with the assent of the policyholder; or (b) the third party has a legitimate interest in maintaining the cover and the policyholder has failed to pay or it is clear that he will not pay at the time payment is due.

Comments Obligation of the Insurer to Accept Payment C1.  The policyholder is the person who owes the premium. He is obliged to pay and the insurer must accept his payment. In contrast, third parties – including the insured and beneficiary – do not owe the premium and, therefore, do not have to make payment. However, sometimes third parties want to pay so that the insurer is not relieved of its obligation to cover the risk. Usually this is the case when the third party benefits from cover, for example, either directly as an insured, or indirectly as a pledgee. In other cases payment by a third party is intended as a gift to the policyholder, for example, when a mother keeps paying health insurance premiums for her bankrupt son. Both cases raise the question, whether an insurer must accept payment from a third party as the payment of the policyholder, even though it seeks to be relieved of its obligation to provide cover in accordance with Article 5:101, 5:102 and to obtain early termination of the contract in accordance with Article 5:103. C2.  Article 5:105 establishes the right of certain third parties to pay the premium on behalf of the policyholder. The wording of the provision is flexible and modelled on the parallel rule contained in Article 7:106 PECL. The wording of Article 7:106 PECL has been adapted to the context of insurance premiums and its contents are made mandatory by virtue of Article 1:103 para. 2.

Consent of the Policyholder C3.  Payment by a third party must be accepted by the insurer if it is made with the consent of the policyholder (Article 5:105(a)). This will usually be the case when the third party wishes to benefit the policyholder.

Legitimate Interest of Third Party C4.  Payment by a third party, even if made without the consent of the policyholder, must be accepted by the insurer, if the third party has a legitimate interest in maintaining the cover (Article 5:105(b)). However, this option is restricted to cases where the policyholder has already failed to pay on time or where it is clear that he is not going to make payment.

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This restriction is appropriate because, without it, there appears to be no good reason for giving a third party, even one with a legitimate interest a right to pay premium. C5.  A third party has a legitimate interest in maintaining the cover whenever he benefits from it either directly or indirectly. The insured and the beneficiary under the policy both benefit directly from cover and are thus entitled to pay premium in accordance with Article 5:105(b). Third parties who have an interest in the subject matter of insurance or who would otherwise have to cover losses resulting from an insured event benefit indirectly from cover and are also entitled to effect payment. This is the case, for example, with a relative who would otherwise have to cover losses resulting from an insured event because he may be obliged to provide maintenance for the policyholder. It applies also to pledgees who would lose their security if the property pledged was destroyed after the insurer was released from its obligation to provide cover on account of non-payment of premium. Moreover, a tenant may also have a legitimate interest in effecting payment of premium for insurance taken on the tenanted property, if he has reason to fear that it could not be rebuilt for lack of funds if it were destroyed by fire. The cases mentioned are only examples and, thus, do not represent an exhaustive list.

Notes N1. The dispositive rule of Article 7:106 para. 1 PECL admits performance by a third person either if the debtor assents or if the third person has a legitimate interest in performance and the debtor has failed to perform or it is clear that the debtor will not perform at the date due. Similarly the law of obligations on the European continent generally allows third parties to perform the contract, albeit on varying conditions, while English law is much more restrictive and only in specific situations favourable to third parties’ performance (for the general law see Lando/Beale 340; for the law of insurance contracts, see Clarke 13-5)). N2. The mandatory provision of Article 5:105 slightly varies the rule of Article 7:106 para. 2 PECL for the field of insurance law (where a large number of contracts affect the interests of third parties) and allows payment by third parties without the further requirement of default of the policyholder being a precondition of payment. Similar rules can be found in Austria (s. 35a ICA), France (Picard/Besson, Contrat para. 270; Basedow/Fock-Völker 536), Germany (s. 34 ICA), Luxembourg (art. 70 para. 3 ICA), Portugal (art. 55 ICA which permits the payment by a third party with or without a legitimate interest in the fulfilment of the obligation) and Spain (art. 7 para. 3 ICA).

Chapter Six: Insured Event Article 6:101 Notice of Insured Event (1) The occurrence of an insured event shall be notified to the insurer by the policyholder, the insured or the beneficiary, as appropriate, provided that the person obliged to give notice was or should have been aware of the existence of the insurance cover and of the occurrence of the insured event. Notice by another person shall be effective.

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(2) Such notice shall be given without undue delay. It shall be effective on dispatch. If the contract requires notice to be given within a stated period of time, such time shall be reasonable and in any event no shorter than five days. (3) The insurance money payable shall be reduced to the extent that the insurer proves that it has been prejudiced by undue delay.

Comments Channels of Communication C1.  The obligation to give notice of an insured event to the insurer on risk without undue delay applies (as a default rule) in all cases. No single person subject to the obligation is identified in Article 6:101. In practice, the person with an obvious interest in giving notice of an event is one or more of those referred to in Article 6:101 para. 1, who may do so personally or through an agent. As the rule is framed as an obligation, breach of which may have adverse consequences to those concerned, the provision concerning awareness is included to safeguard their position. C2.  Notice by another person is effective, it being understood that insurers are not obliged to act on information that does not appear to be reliable. The rule envisages, for example, catastrophic events reliably reported in mass media or notified by friends and neighbours where the event is such that policyholders with potential claims may have been incapacitated from carrying out day to day functions. In such instances potential claimants are not compelled to claim but, if they do so, insurers cannot reduce the amount payable by reference to Article 6:101 para. 3.

Balancing Interests C3.  Due performance of the notice obligation is beneficial to insurers because it affords them an opportunity for investigation and the prevention of fraud, before the trail becomes cold and information about the occurrence becomes more difficult and unduly expensive to obtain. Moreover, it assists insurers to form an intelligent estimate of their liabilities, their financial exposure, in general. Still, some delay is inevitable. However, there is undue delay when the time taken to notify insurers is longer than is reasonable in the circumstances. Circumstances vary. On the one hand, in life assurance it may be some time before interested persons even discover the existence of the policy. In house insurance, on the other hand, unless the policyholder occupant has been away on holiday or on business, the time required to notify a burglary is likely to be short. Indeed, lengthy periods are unlikely to be reasonable in the case of indemnity insurance unless, for example, a person with fire insurance perishes in the fire together with the policy. In all cases, however, the five day period referred to in Article 6:101 para. 2 indicates the minimum period that people can expect to be allowed.

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Notice Periods C4.  Policies sometimes state a certain number of days for notice to be given of the loss. In some countries courts have applied such conditions to the letter whether, in the particular case, it was reasonable to expect notice in the stipulated time or not. The Principles of European Insurance Contract Law protect policyholders by providing that the policy period, if any, shall not be shorter than five days, as well as requiring that it must be reasonable in the particular case which, of course, may extend the number of days allowed in that case. Moreover, as with other notice rules in the Principles of European Insurance Contract Law, notice is effective on dispatch, and this must be stated in the policy. See Article 4:202 Comment 2.

Contents of the Notice C5.  The contents of a notice of loss must be sufficient to achieve the purpose of such notice; see Comment 2. They include the time, place, and circumstances of the insured event, and any other available information which might assist insurers to decide whether and, if so, how to undertake an investigation of the loss. Notice does not have to amount to a precisely formulated claim with full details, such as an estimate of the value of what has been damaged or lost. Distinguish notice of an insured loss from proof of its occurrence. Statements in the notice are no more than assertions of fact. Sooner or later claimants must be in a position to prove the facts on which their claim is based but that is not required of them for the purpose of notice. C6.  In practice, once insurers have received due notice, it is then for them to indicate, if the policy does not do so, what further particulars are reasonably required. See Article 6:102. Commonly insurers do this simply by sending claimants a form to complete. The wording of both policy notice terms and claim forms are likely to be construed in favour of claimants. Words such as “full particulars of loss” are not taken literally but mean “the best particulars the insured can reasonably give”. A requirement of “true” particulars is taken to mean true to the best of the claimant’s belief.

Breach of Duty C7.  The effect of breach of notice requirements varies in the law of European countries. In particular, there is no universal agreement about whether it is a condition of any sanction against claimants that insurers have been prejudiced by any undue delay. Article 6:101 para. 3 resolves this issue in favour of claimants. Moreover, first, as insurers usually raise breach of the notice duty as a ground for refusing to pay a claim, it is for insurers to prove prejudice which, in many if not most cases, insurers will find it either difficult or inexpedient to do. Second, it can be inferred that a reduction in the amount of insurance money payable, the remedy stated in Article 6:101 para. 3, is the only sanction. Thus, insurers will not be allowed to plead policy terms whereby performance of a notice duty is a “condition precedent” of payment of any insurance money at all. In that regard note also the rules on precautionary measures: Articles 4:101 ff.

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Notes Article 6:101 para. 1: Duty to Notify N1. Obligations of the policyholder to give notice to the insurer that an insured event has occurred are common to most European insurance statutes (see for Austria s. 33 para. 1 ICA, Basedow/Fock-Lemmel 1077; for Belgium art. 74 para. 1(1) IA 2014, Basedow/Fock-Fock 271; for Denmark s. 21 para. 1 ICA, Basedow/Fock-Scherpe 974; Basedow/Fock-Scherpe 974; for France art. 113-2 para. 4 ICA, Basedow/Fock-Völker 523; for Germany s. 30 para. 1 ICA; for Greece art. 7 para. 1 ICA, Basedow/Fock-Papathoma-Baetge 623 and Rokas, paras. 429 ff.; for Italy art. 1913 para. 1 CC, Basedow/Fock-Brunetta d’Usseaux 714; for Luxembourg art. 26 para. 1 ICA, Basedow/ Fock-Völker 798; for the Netherlands art. 7:941 para. 1 CC, Asser/Clausing/Wansink 230 ff.; for Poland art. 818 para. 1 CC (not mandatory); more detailed: Kowalewski 299; for Portugal art. 100 para. 1 ICA; for Spain art. 16 ICA, Basedow/Fock-Schlenker 1330 ff.; for Sweden s. 2 of Ch. 7 ICA; the same rules apply to business insurance with one exception, see s. 19 para. 2 of Ch. 8 ICA; and for Switzerland the first sentence of art. 38 para. 1 ICA and Basedow/Fock-Bälz 1241). N2. Even the insurance contract laws of the United Kingdom and the Republic of Ireland provide for a duty by law to give notice, although the basis of the rule in law is not clear: Birds 14.5; Clarke 26-2A. Although this duty is normally regulated in the insurance contract, the duty of utmost good faith comprises, according to the prevailing opinion, an obligation of the policyholder to give notice that the insured event has occurred (cf. Haydenfare v British National Ins Soc Ltd [1984] 2 Lloyd’s Rep 393 (402); Clarke 26-2A; Rühl 285 ff.).

Who Owes The Duty to Notify N3. In some European jurisdictions the duty to give notice of the insured event is not limited to the policyholder; under certain circumstances, it may be incumbent upon third parties (see for Austria ss. 158d and 158e ICA, Basedow/Fock-Lemmel 1078; for Germany the second sentence of s. 30 para. 1 ICA; for Poland art. 818 para. 4 CC) or upon the insured or even the beneficiary (for the Netherlands art. 7:941 para. 1 CC; for Switzerland the first sentence of art. 38 para. 1 ICA and Basedow/Fock-Bälz 1241). N4. Apparently European insurance laws do not contain explicit provisions comparable to the second sentence of Article 6:101 para. 1. Although the notice is not a declaration of intent but rather a declaration of knowledge (Wissenserklärung) (cf. for example for Germany Münchener Kommentar-Wandt, § 30 VVG para. 2), it appears that the general rules on representation and agency apply at least by analogy (see, for example, for Germany Palandt-Ellenberger, Einf. v. § 164 BGB para. 3). This is also true in the United Kingdom, provided that the source of the information is reliable: Clarke 26-2C.

Article 6:101 para. 2: Time Allowed for Notification N5. However, European insurance laws differ as to the time period allowed for notice. In some countries the policyholder has to notify the insurer as soon as possible (see for Belgium art. 74 para. 1(1) IA 2014, Basedow/Fock-Fock 271; for Denmark s. 21 para. 1 ICA, Basedow/Fock-Scherpe 974; for France the general rule in art. 113-2 para. 4 ICA, Basedow/Fock-Völker 523; for

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Luxembourg art. 26 para. 1 ICA, Basedow/Fock-Völker 798; for the Netherlands art. 7:941 para. 1 CC). According to other European insurance laws, notice shall be given without undue delay (see for Austria the general rule in s. 33 para. 1 ICA, Basedow/Fock-Lemmel 1077; for Germany the general rule in s. 30 para. 1 ICA; for Greece the special rule in art. 278 of the Code on Private Maritime Law; Basedow/Fock-Papathoma-Baetge 625; for Switzerland the first sentence of art. 38 para. 1 ICA; Basedow/Fock-Bälz 1241; however it is also possible to agree on or within an appropriate and reasonable time period (for the Netherlands the second sentence of art. 7:941 para. 1 CC, Basedow/Fock-Fock 873; or as soon as reasonably possible (for the United Kingdom Birds 14.6, Clarke 26-2E). N6. Some jurisdictions clearly establish that the event shall be notified within a fixed period of time which may vary between 24 hours and 8 days after the occurrence (see for Austria the special rules in the first sentence of s. 92 para. 1, s. 110 para. 1, the first sentence of s. 153 para. 1, and s. 153 para. 2 ICA; Basedow/Fock-Lemmel 1077; for France the special rule in art. 123-1 ICA; Basedow/Fock-Völker 523; for Greece art. 7 para. 1 ICA and art. 9 para. 1 of the Code on Motor Liability Insurance providing for notice as soon as possible but not later than eight days; for Italy art. 1913 para. 1 CC, Basedow/Fock-Brunetta d’Usseaux 714; for Portugal art. 100 para. 1 ICA; for Spain art. 16 ICA, Basedow/Fock-Schlenker 1330 f.). In Poland, the period of time can be settled by parties in the insurance contract.

Contractual Derogations N7. Commonly the duty to give notice of the insured event is and can be regulated by special contractual stipulations and contracts of insurance determine the requirements for a valid notice in detail. In order to keep those requirements reasonable and fair, most European insurance laws put some limit on the contractual freedom of the parties (Basedow/Fock-Basedow/Fock 92 f.). N8. Similarly to what is laid down in Article 6:101 para. 2, a time period fixed in the insurance contract is declared ineffective if the policyholder gives notice within a reasonable time period (see for Belgium art. 19 para. 1(2) IA 2014, Basedow/Fock-Fock 271; for Luxembourg art. 26 para. 1 ICA, Basedow/Fock-Völker 798) or within a fixed statutory time period (for France art. 113-2 para. 4 ICA: 5 working days; Basedow/Fock-Völker 523), or if the stipulated time period is so short that the rights of the policyholder may be impaired (for Italy art. 2965 CC, Basedow/Fock-Brunetta d’Usseaux 714). Other insurance laws do not allow insurance contracts to derogate from statutory notice periods to the detriment of the policyholder (see, for example, for Portugal art. 13 ICA and the Netherlands art. 7:943 para. 2 CC). N9. Like Article 6:101 para. 2, many European insurance laws regard the dispatch of the notice by the policyholder within the time period as sufficient (see for France Cass. civ. 21.2.1989, RGAT 1989, 421 (422), Basedow/Fock-Völker 523; for Germany as a general rule of law OLG Hamm 18.5.1988, Recht und Schaden 1988, 302 and OLG Köln 16.8.1994, Versicherungsrecht 1995, 567).

Article 6:101 para. 3: Sanction – Reduction of Insurance Money N10.  According to most European insurance laws, the insurer is entitled to damages if the policyholder breaks the duty to give notice and the insurer can prove that, as a consequence, it has suffered loss (see for Belgium art. 76 para. 1 IA 2014, Basedow/Fock-Fock 271 ff.; for France

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art. 113-11 para. 4 ICA; for Greece art. 7 para. 2 ICA and art. 9 para. 3 of the Code on Motor Liability Insurance, see Chatzinikolaou-Aggelidou 182 ff.; for Italy art. 1915 CC, Basedow/Fock-Brunetta d’Usseaux 715; for Luxembourg art. 28 para. 1 ICA, Basedow/Fock-Völker 798; for the Netherlands art. 7:941 para. 3 CC, Asser/Clausing/Wansink 233 ff.; for Switzerland art. 38 para. 2 ICA and Basedow/Fock-Bälz 1241). Some jurisdictions grant the insurer the right to withhold the insurance money only in the case of fraud or dolus directus (see for Belgium art. 76 para. 2 IA 2014, Basedow/Fock-Fock 272; Italy art. 1915 CC, Basedow/Fock-Brunetta d’Usseaux 715; for Luxembourg art. 28 para. 2 ICA, Basedow/Fock-Völker 798; for the Netherlands art. 7:941 para. 5 CC, Asser/Clausing/Wansink 238 ff.; for Switzerland art. 38 para. 3 ICA and Basedow/ Fock-Bälz 1241 f.).

Contractual Arrangements N11. However, insurance contracts often stipulate that the insurer is discharged from its duty to perform if the policyholder does not comply with its duty to give notice of the insured event (Basedow/Fock-Basedow/Fock 94; see also art. 101 para. 1 Portuguese ICA which expressly allows such clauses). In response to such stipulations, many European insurance laws limit contractual arrangements which allow the insurer to cut insurance money in general (for France art. 11311 ICA; for Greece Areopag 1805/1986, NoB 1987, 1609 and Rokas, para. 432; for Luxembourg art. 26 para. 1 ICA, Basedow/Fock-Völker 798; for Poland art. 818 para. 3 CC; for Portugal art. 101 para. 3 ICA). Others release the insurer only of its duties in case of fraudulent, intentional or grossly negligent breaches of the duty to notify the insurer of the occurrence of the insured event (see for Austria the first sentence of s. 6 para. 3 ICA, Basedow/Fock-Lemmel 1077; for Belgium art. 76 para. 2 IA 2014, Basedow/Fock-Fock 271; for Germany s. 28 para. 2 ICA, Basedow/Fock-Lemmel 396; Italy art. 1915 CC, Basedow/Fock-Brunetta d’Usseaux 715; for Switzerland art. 45 ICA, BG 9.1.1989, BGE 115 II 88 (90), Basedow/Fock-Bälz 1241). N12. Additionally, some European jurisdictions allow contractual stipulations which provide for a release of the insurer’s duty to perform only if the breach of the duty to give notice was objectively suited to seriously harm the interests of the insurer (see for Austria the second sentence of s. 6 para. 3 ICA, Basedow/Fock-Lemmel 1077 ff. and for the Netherlands art. 7:941 para. 4 CC, Asser/Clausing/Wansink 235 ff.). In Germany and Portugal, a clause limiting or excluding the insurer’s liability in case the policyholder fails to report the loss in time may not be invoked if the insurer obtained notice of the occurrence of the event through some other source (see s. 30 para. 2 German ICA; art. 100 para. 3 Portuguese ICA). Similar in Poland – see art. 818 para. 3 CC. In the United Kingdom and the Republic of Ireland there are no restrictions on contractual stipulations regarding the discharge of the insurer’s duty to perform (cf. Basedow/Fock-Basedow/Fock 95 and Basedow/Fock-Rühl 1470); if performance is expressly stated to be a condition precedent to the insurer’s liability, breach will entitle the insurer to repudiate liability, but if not, breach will only entitle the insurer to claim damages (Friends Provident Life & Pensions Ltd v Sirius International Insurance [2006] Lloyd’s Rep IR 45), in accordance with (disputed) rules of general contract law (see, for example, Alfred McAlpine v BAI [1998] 2 Lloyd’s Rep 694; [2001] 1 Lloyd’s Rep 437 (CA); The Mercandian Continent [2000] 2 Lloyd’s Rep 357; and The Beursgracht, Glencore Int v Ryan [2001] EWCA Civ 2051, [2002] Lloyd’s Rep IR 335; Birds 14.6 ff.; Clarke 26-2G).

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Article 6:102 Claims Cooperation (1) The policyholder, insured or beneficiary, as appropriate, shall cooperate with the insurer in the investigation of the insured event by responding to reasonable requests, in particular for – information about the causes and effects of the insured event; – documentary or other evidence of the insured event; – access to premises related thereto. (2) In the event of any breach of para. 1 and subject to para. 3, the insurance money payable shall be reduced to the extent that the insurer proves that it has been prejudiced by the breach. (3) In the event of any breach of para. 1 committed with intent to cause prejudice or recklessly and with knowledge that such prejudice would probably result, the insurer shall not be obliged to pay the insurance money.

Comments Information about the Occurrence of the Insured Event C1.  As noted in Article 6:101 Comment 5, once insurers have received notice of the occurrence of an insured event and thus of a pending claim, they commonly respond by sending claimants a form to complete or by seeking further particulars of the occurrence or its consequences in some other way. Such information may be necessary if insurers are to investigate the claim or seek to mitigate the extent of the insured loss. Accordingly, a duty to cooperate in this and other respects is sometimes implied in the law of European countries as an aspect of the mutual duty of good faith. Such a duty is confirmed by Article 6:102. The duty must be performed by the policyholder, insured or beneficiary, as the case may be: the person or persons to whom the request for information is made. In practice this will be the one most likely to possess the information and, usually, the one that makes a claim under the policy.

Reasonable Requests C2.  In contrast with the law of certain countries, in Article 6:102 the duty of cooperation is limited to a duty to respond to reasonable requests from the insurer for information about the causes and effects of the insured event. The duty does not extend to more intrusive matters, such as giving insurers access to financial information, or to more stressful matters such as submission to examination under oath. Nor does it extend to a duty, sometimes found in liability policies, to attend the proceedings of a court or tribunal. The duty does extend, however, to reasonable requests for information that might assist a defence to actions brought against liability policyholders. It is implicit that the response must be made within a reasonable time and that it is limited to information that is reasonably available then.

Breach of Duty C3.  As in the case of breach of the duty in Article 6:101 para. 1, according to Article 6:102 para. 2 it is for insurers to prove that a breach of the duty to respond to reasonable requests for information has occurred, and that they have suffered prejudice as a result; see Article 6:101 Comment 6. Moreover, it can be inferred from Article 6:102 para. 2 that, subject

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to para. 3, a reduction in the amount of insurance money payable is the only sanction for breach of the duty of cooperation. As to the circumstances that justify non payment under para. 3, namely intent to cause loss or damage or recklessly and with knowledge that loss or damage would probably result, see Article 9:101 Comments 2 and 3.

Notes Article 6:102 para. 1: Duty to Cooperate N1. Many European insurance laws require the policyholder and/or the insured to cooperate and especially to provide the insurer with all relevant information and documents (see for Austria s. 34 ICA, Basedow/Fock-Lemmel 1079; for Belgium art. 74 para. 2 IA 2014, Basedow/Fock-Fock 271; for Denmark s. 22 ICA, Basedow/Fock-Scherpe 975; for Finland s. 69 ICA, Basedow/Fock-Scherpe 975; for Germany s. 31 para. 1 ICA, for Greece the second sentence of art. 7 para. 1 ICA, Rokas, Eisigiseis para. 152, for Luxembourg art. 28 paras. 1 and 2 ICA, Basedow/Fock-Völker 798; for the Netherlands art. 7:941 para. 2 CC, Asser/Clausing/Wansink 232 ff.; for Portugal art. 100 para. 2 ICA; for Spain art. 16 para. 3, art. 38 ICA, Basedow/Fock-Schlenker 1331; for Sweden s. 2 of Ch. 7 ICA; the same rules apply to business insurance with one exception, see s. 19 para. 2 of Ch. 8 ICA; for Switzerland art. 39 para. 1 and Basedow/Fock-Bälz 1243, 1245; in the United Kingdom and the Republic of Ireland, this will be the consequence of standard terms: Birds 14.5; Colinvaux 9-09; Basedow/Fock-Rühl 1470 f.), although it could also be seen as an aspect of a general and continuing duty of utmost good faith: Clarke 27-1A and for consumers as being based on the FCA Rules: Lowry/Rawlings 251. N2. In addition, in some countries the notice of the insured event given by the policyholder (the point dealt with by Article 6:101) must contain enough information to enable the insurer to investigate the damage (see for example for Germany BGH 23.11. 1967, Versicherungsrecht 1968, 58, 59 and OLG Köln 21.4.1998, Recht und Schaden 1998, 458). Under certain circumstances, some European insurance laws even require the policyholder to deliver evidence by expert opinion (see for France art. 122-2 ICA, Basedow/Fock-Völker 525 ff.). The duty to cooperate may be incumbent, not only on the policyholder, but in some jurisdictions also on a victim (see for Austria ss. 158d and 158e ICA, Basedow/Fock-Lemmel 1077; for Germany s. 31 para. 2 and s. 100 para. 3 ICA)

Article 6:102 paras. 2 and 3: Sanctions N3. The sanctions for a violation of the duty to cooperate are in some countries a matter of contract (see for Germany Wandt, paras. 568 ff. and 939; in Portugal, the same remedies apply as in the event of the policyholder’s breach of the duty to cooperate, see art. 101 ICA); however, if a release of the insurer’s duty to perform is stipulated, freedom of contract is restricted in a similar way as it is in relation to the breach of the policyholder’s duty to give notice of the insured event (see Notes 10 ff. under Article 6:101 (see for the Netherlands art. 7:941 paras. 3 and 4 CC, Asser/ Clausing/Wansink 233 ff.; for Portugal art. 101 para. 3 ICA). N4. If the contract does not provide for any sanctions, the consequences of a breach of the duty to cooperate are like those provided for a breach of the duty to give notice of the insured event (see

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the notes on Article 6:101 para. 3); see for Denmark ss. 21 and 23 ICA, Basedow/Fock-Scherpe 975; for Greece art. 7 para. 2 ICA, for Luxembourg art. 28 paras. 1 and 2 ICA, Basedow/Fock-Völker 798; for the Netherlands art. 7:941 paras. 4 and 5 CC. According to Swiss law in cases of non-cooperation by the policyholder the court has to appoint an expert to give evidence of the damage (art. 67 para. 2 ICA; Basedow/Fock-Bälz 1243).

Article 6:103 Acceptance of Claims (1) The insurer shall take all reasonable steps to settle a claim promptly. (2) Unless the insurer rejects a claim or defers acceptance of a claim by written notice giving reasons for its decision within one month after receipt of the relevant documents and other information, the claim shall be deemed to have been accepted.

Comments Settlement C1.  In the language of insurance practice, there is an important difference between settling a claim and settling a dispute. The settlement of a claim is the normal process, whereby insurers assess the claim presented in the light of the evidence and of the terms of the policy concerned and, all being well, “clear the file” by payment of insurance money to the claimant. In Article 6:103 para. 1, however, acceptance of a claim has the more limited meaning of assessing the validity of a claim as being one covered by the policy in question. Only after a positive assessment of the claim does an insurer proceed to settlement of the claim in the broader sense that includes payment. Duties relating to payment are regulated by Article 6:104. C2.  Distinguish also from settlement of claims, even in the broader sense that includes payment, the settlement of disputes over the validity or scope of insurance claims. That kind of settlement is a contract of compromise, a contract distinct from the contract of insurance to which the compromise relates, whereby, claimant and insurer, having disagreed on some aspect of the claim such as the amount of insurance money due, settle their disagreement with the compromise.

Prompt Settlement of Claims C3.  Article 6:103 para. 1 obliges insurers to take reasonable steps to settle undisputed claims promptly. The insurers’ obligation should be read in conjunction with the obligation to assist in the matter by responding to reasonable requests from insurers for information: Article 6:102 para. 1. Requests for information usually come to persons who have every interest in responding to such requests in order to expedite payment of the claim. Indeed that is also in the interest of society at large. Those who have suffered insured losses should be indemnified as soon as reasonably possible. In these circumstances Article 6:103 para. 2 establishes a presumption that claims have been accepted in the relatively short period of one month. When that is too short, as might be true of large or complex claims, Article 6:103

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para. 2 allows insurers to give reasoned notice of deferral. Mere suspicion of fraud would not normally be a valid reason.

Notes N1. The duty of the insurer to settle a claim promptly is, in effect, inherent to most European insurance laws although apart from Sweden (see s. 1 para. 1 of Ch. 7 ICA) apparently none of them enunciates the principle contained in Article 6:103 para. 1 expressly. However, several European countries provide mechanisms to facilitate swift claims settlement by requiring the insurer to accept or reject a claim in due time. N2. For example, similar in its effects to Article 6:103 para. 2, the insurance money becomes due under Austrian law if the insurer does not react within one month to an inquiry by the policyholder about the reasons of non-payment, if that inquiry was submitted within two months of the claim by the policyholder (see the second sentence of s. 11 para. 1 ICA; Basedow/Fock-Lemmel 1082). German and Swiss insurance law contain a special rule on the time of performance which is applicable if the insurer does not investigate properly and delays the acceptance of the claim. In that case, the insurance money is deemed to fall due at the time the claim would have been settled in the case of a proper investigation (see for Germany OLG München 13.11.1964, Versicherungsrecht 1965, 173, OLG Hamburg 19.8.1966, Versicherungsrecht 1967, 392 (393), OLG Hamburg 6.8.1981, Versicherungsrecht 1982, 543, OLG Köln 21.1.1982, Versicherungsrecht 1983, 922 (923), OLG Saarbrücken, 20.9.1995, Versicherungsrecht 1996, 1494 (1495), Basedow/ Fock-Lemmel 404 f., Wandt, para. 943; for Switzerland Roelli/Keller 567, Basedow/Fock-Bälz 1245). According to French law, fraudulent delay on the part of the insurer in settling the claim can interrupt the prescription of the duty of performance (see art. 114-1 ICA, Cass. civ. 10.5.2000, RGDA 2000, 514 (515), Basedow/Fock-Völker 529 f.). For further examples, see the notes on Article 6:104 para. 2 and Article 6:105.

Article 6:104 Time of Performance (1) When a claim has been accepted the insurer shall pay or provide the services promised, as the case may be, without undue delay. (2) Even if the total value of a claim cannot yet be quantified but the claimant is entitled to at least a part of it, this part shall be paid or provided without undue delay. (3) Payment of insurance money, whether under para. 1 or para. 2, shall be made no later than one week after the acceptance and quantification of the claim or part of it, as the case may be.

Comments The Importance of Performance C1.  Prompt payment of claims, which have been accepted as valid in accordance with Article 6:103, is self-evidently important to claimants who have suffered financial loss of such significance to them that they have bought indemnity insurance to cover it. The insurance money due to them may be urgently needed to repair a roof or to enable them to carry on

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business. The same is likely to be true of services promised by insurers, such as the services of a driver to a policyholder unable to drive a motor vehicle.

Undue Delay C2.  Under Article 6:104 para. 1 insurers are obliged to pay without “undue delay”. To avoid possible unjustifiable delay by reference to what that means in a particular case, para. 3 also requires payment of insurance money not later than one week after acceptance of the claim in accordance with Article 6:103. Moreover, it is no excuse for non-payment that total value of a claim cannot yet be quantified: Article 6:104 para. 2: insurers must pay part of the claim.

The Amount Payable C3.  What is required by Article 6:104 is not necessarily payment of all of the insurance money that may finally be payable in respect of the claim but such insurance money as has been determined to be due under the policy by that time, as provided by Article 6:104 para. 2. In some instances, for example, ongoing damage to property caused by storms or by subsidence, more time will be needed to adjust loss and determine the full amount due. Note that what is required to be paid is not an arbitrary amount but the part to which claimants are “entitled”, which means the full amount of insured loss which has been already determined to be due. C4.  The legal consequences of any breach by insurers of the payment duty under Article 6:104 are regulated by Article 6:105.

Notes Article 6:104 paras. 1 and 3: Rules on the Time of Payment N1. Most European insurance laws contain provisions on the time of performance. Time periods vary. In some jurisdictions performance is due immediately after the acceptance of the claim (see for Austria the first sentence of s. 11 para. 1 and the first sentence of s. 154 para. 1 ICA, which contains a time limit within which payment must be made of two weeks, Basedow/Fock-Lemmel 1082 f.; in Belgium, as to some types of insurances, 30 days after acceptance of the claim (see the special rule in art. 121 para. 2 IA 2014, Basedow/Fock-Fock 274); in Denmark 14 days after the insurer has obtained all facts to assess the claim (see the first sentence of s. 24 para. 1 ICA, Basedow/Fock-Scherpe 976 ff.); and in Finland one month after the insurer has obtained all facts to assess the claim (see s. 70 para. 1 ICA, Basedow/Fock-Scherpe 977)). In France payment is due, in general, immediately after the occurrence of the insured event, but, as to some types of insurances, 60 or 90 days after the notice of the insured event (see arts. 113-5, 242-1, 211-9 ICA, Basedow/Fock-Völker 528); in Germany immediately after the acceptance of the claim (see ss. 14 para. 1 and 106 ICA, Basedow/Fock-Lemmel 404); in Italy, provisions for the time of payment exist only in respect of motor insurance (see the special rules in the Code of Private Insurance) and the terms vary according to the types of damage (Cerini 279 ff.); in Luxembourg immediately after the insurer has obtained all information necessary to assess the claim but, at the latest, 30 days after the acceptance of the claim (see art. 29 paras. 1 and 2 ICA, Basedow/Fock-Völker 801);

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and in Switzerland four weeks after the insurer has obtained all information necessary to assess the claim (art. 41 ICA). In the Netherlands performance is due in accordance with the general rules of debtor’s default (arts. 6:81 ff. CC), in Poland, as a rule: in 30 days after the notice of the insured event (art. 817 para. 1 CC, Kowalewski 307 ff.); in Portugal in 30 days after the insurer has obtained all information necessary to assess the loss (art. 104 ICA), and in Spain immediately after the investigations have been concluded – insurer has maximum 40 days in order to investigate – (see art. 18 ICA, Bataller/Latorre/Olavarria 205, Basedow/Fock-Schlenker 1334). Spanish law contains a special rule, if an expert is involved in the assessment of the damage; in that case, the insurance money has to be paid within 5 days after the time period in which the insurer can challenge the expert opinion has elapsed (see art. 38 ICA, Bataller/Latorre/Olavarria 228, Basedow/Fock-Schlenker 1334, 1340 ff.). In Sweden performance is due one month after the notice of the insured event (see s. 1 para. 2 of Ch. 7 ICA). Greek general insurance contract law does not set any exact time periods, but merely requires the insurer to pay without undue delay (art. 7 para. 7 ICA and Basedow/Fock-Papathoma-Baetge 631; for non-life insurance the law obliges the insurer to pay without undue delay the insurance money upon acceptance on behalf of the insurer of the results of the adjusters’ report, see art. 29 para. 1 of the Legislative Decree on Insurance Undertakings and Rokas, paras. 364 ff.). Some countries have not enacted specific rules on the time of performance for insurance contracts (see for Belgium Basedow/Fock-Fock 274, for Italy Basedow/Fock-Brunetta d’Usseaux 717). The general rules on obligations apply. For the uncertain state of the law in the United Kingdom, see Birds 14.13 ff.; Clarke 30-2, and Sempra Metals v IRC [2007] UKHL 34; note Clarke, Compensation 291.

Article 6:104 para. 2: Partial Payment N2. Some European insurance laws provide for partial payment as a step in the direction of prompt payment of full indemnity. Time periods vary. In Austria partial payment is due one month after the notice of the insured event (see s. 11 para. 2 ICA, Basedow/Fock-Lemmel 1083); in Belgium, as to some types of insurances, 30 days after agreement on the expert decision concerning the amount of the loss (see the special rule in art. 121 para. 2 IA 2014, Basedow/ Fock-Fock 273); in Denmark 14 days after the insurer has obtained all facts to assess the claim (see s. 24 para. 2 ICA, Basedow/Fock-Scherpe 977); in Finland one month after the insurer has obtained all the facts to assess the undisputed part of the compensation (see s. 70 para. 4 ICA, Basedow/Fock-Scherpe 977); in Germany one month after the notice of the insured event (see s. 14 para. 2 ICA, Basedow/Fock-Lemmel 405); in Greece without undue delay to pay the undisputed amount of insurance money if a longer period is required for the assessment of the loss (see the second sentence of art. 7 para. 7 ICA, Basedow/Fock-Papathoma-Baetge 630); in Poland payment of the unquestionable part of the insurance money is due in 30 days after the notice of the insured event (art. 818 para. 2 CC); in Spain 40 days after the notice of the insured event (see art. 18 ICA, Basedow/Fock-Schlenker 1334); in Sweden immediately upon notice of the insured event (see s. 1 para. 3 of Ch. 7 ICA).

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Article 6:105 Late Performance25 (1) If insurance money is not paid in accordance with Article 6:104, the claimant shall be entitled to interest on that sum from the time when payment was due to the time of payment and at the rate applied by the European Central Bank to its most recent main refinancing operation carried out before the first calendar day of the half-year in question, plus eight percentage points. (2) The claimant shall be entitled to recover damages for any additional loss caused by late payment of the insurance money.

Comments Compensation C1.  Payment is late or delayed when it has not been made by the time that it is due in accordance with Article 6:104. As to the consequences, Article 6:105 para. 1 provides for interest and is inspired by the Motor Insurance Directive (2009/103/EC). In cases in which liability is not contested and the damages have been quantified, art. 22 of the Directive obliges Member States to require insurers “to make a reasoned offer of compensation in cases where liability has not been contested and the damages have been quantified” within three months of the date when the injured party presented his claim for compensation. If such an offer is not made within three months, insurers must pay the claimant interest. Interest is the least amount of which, in practice, unsatisfied claimants are likely to have been deprived by not having received the money due. The “rate applied by the European Central Bank” is modelled on the “reference rate” defined by art. 2 para. 7(a) of the Late Payment Directive (2011/7/EU). Reference is made to this rate in Article 6:105 solely as a mode of calculation in case of late payment of insurance money, and for no other purpose.

Damages C2.  In practice “statutory” interest alone may not be sufficient to indemnify claimants against the consequences of late payment of insurance money due. When motor insurers or fire insurers delay payment, and a claimant urgently needs the money to buy another van for the business to replace the one stolen or to repair the fire damage to the factory, subject to the normal legal limits, the insurer in question should be liable for the consequences. The same is true when an insurer has exercised a policy option not to pay insurance money as such but to have property, which the subject of the insurance, reinstated or otherwise to provide services. If insurers fail to do what they have promised to do without undue delay, commercially and legally their liability is the same as that of any other contract breakers: dealers that have failed to supply a van or contractors who have failed to repair a factory roof. For that reason the liability envisaged in Article 6:105 para. 2 is not a liability particular to insurance contract law but is liability in accordance with the general rule established by Article 9:508 PECL.

25

This Article is modelled on art. 3 para. 1(d) of the Late Payment Directive (2000/35/EC).

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The Conceptual Basis of Liability C3.  Under Article 9:508 para. 2 PECL damages are recoverable for any “further loss”, namely loss not indemnified by an award of interest, so far as it is “recoverable under this Section”. The Section, headed “Damages and Interest”, includes Article 9:502 PECL whereby “the general measure of damages” is the sum that puts claimants into the position that they would have been “if the contract had been duly performed”, namely if the insurance money had been paid on time. Thus, both the Principles of European Contract Law and the Principles of European Insurance Contract Law adopt the widely accepted expectation interest as the conceptual basis for damages. However, under Article 9:503 PECL the limit of liability of parties in breach in respect of loss that they “foresaw or could reasonably have foreseen at the time of the conclusion of the contract as a likely result of its performance”, namely the expectation interest, is qualified when “the non-performance was intentional or grossly negligent”. The qualification contemplates what in some countries is referred to as breach of contract in bad faith. Although such cases may not occur at all often in the context of insurance, when they do insurers are liable in full for all loss consequential on their failure to pay on time.

Assessment of Loss C4.  Generally, according to the rule in the Article 9:503 PECL, contract breakers, including insurers, are liable only for loss which they “foresaw or could reasonably have foreseen at the time of the contract” as a likely result of non-performance (emphasis added). This limit on liability applies to heads or categories of loss in a particular case rather than to the precise amount. So, although the precise amount of insurance indemnity is normally calculated on values later at the time of loss, their liability for late payment in principle is nonetheless limited to what they could or should have foreseen at the time that the insurance contact was concluded.

Instances of Loss C5.  It is the business of insurers to provide protection for their policyholders. They are deemed to know, for example, why people, consumers or businesses, buy fire insurance, and hence the likelihood that an undue delay in payment is likely to result in at least some of the very kinds of loss for which the policyholders sought protection in the first place. C6.  For policyholders in business those kinds of loss might include profits lost when business premises are destroyed by fire or when a commercial vehicle is stolen, or the cost of borrowing from a bank to keep a business going until the insurer pays, or even loss of credit or injury to credit reputation, when that was a foreseeable consequence of late payment. C7.  For consumers, in particular, a more problematic consequence of non-payment is distress. Peace of mind and at least a degree of freedom from distress are not infrequently used as selling points for insurance cover. A court once observed that a “contract of insurance differs from most commercial contracts, in that the insured is offered and buys peace of mind against the designated risks”. This being so, in appropriate cases, disappointed claimants will be entitled to damages for distress.

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Notes General Rules on Interest N1. Some European insurance laws have no special rules on interest or damage claims for delayed payment of the insurance money as such (for France Groutel 124, Favre Rochex/Courtieu, paras. 1-285 f., Basedow/Fock-Völker 529; for Germany Basedow/Fock-Lemmel 404 f., Wandt, para. 942, but see s. 91 which provides for a special interest rate in property insurance; for Greece Basedow/Fock-Papathoma-Baetge 630 f.; for the Netherlands Scheltema/Mijnssen 256; for Poland Kowalewski 226; for Portugal Basedow/Fock-Schlenker 1180; for Switzerland BG 22.11.1990, SVA XVIII No. 7, 35 f., Basedow/Fock-Bälz 1246; for the United Kingdom, see Article 6:104 Note 1, above). In those countries the general laws on delayed performance of obligations apply.

Specific Interest Rules for Insurance Law N2. However, in some countries the general rules are mandatory at least as far the duties of the insurer are concerned (see for Austria s. 11 para. 4 ICA, Basedow/Fock-Lemmel 1082; for Germany s. 14 para. 3 ICA). In most jurisdictions interest according to the general statutory interest rates has to be paid (see for Denmark s. 24 para. 3 ICA, Basedow/Fock-Scherpe 977; for Finland s. 70 para. 3 ICA, Basedow/Fock-Scherpe 977; for Luxembourg the second sentence of art. 29 para. 2 ICA, Basedow/Fock-Völker 801; for the United Kingdom, see s. 35A para. 1 of the Supreme Court Act 1981). These laws may be mandatory or provide for minimum standards that cannot be derogated from.

Punitive Interest Rates N3. If payment of the insurance money is delayed, some jurisdictions provide for higher interest rates (see for France art. 211-13 ICA: twice the legal interest rate in motor liability insurance, art. 242-1 para. 5 ICA; twice the legal interest rate in compulsory construction insurance; see also Basedow/Fock-Völker 528). According to Spanish law the insurer has to pay penalty interest (statutory interest rate plus 50 percent; 20 percent from the second year) if insurance money is not paid within 3 months after the occurrence of the insured event (see art. 20 para. 3 ICA; for details on this contentious rule, see Bataller/Latorre/Olavarria 207, Sánchez Calero, Mora del asegurador 336 f. and 344 f., Basedow/Fock-Schlenker 1335-1140). In the United Kingdom unpaid premium due is a “simple” contractual debt and may be claimed as such by the insurer, until the limitation period of “six years from the date on which the cause of action accrued” expires: s. 5 of the Limitation Act 1980, applicable in England and Wales.

Chapter Seven: Prescription Article 7:101 Action for Payment of Premium Action for payment of premium shall be prescribed after a period of one year from the time when payment is due.

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Comments C1.  The rules on prescription relate to contractual claims in general and not to specific types of contracts. That is why the Principles of European Contract Law contain a full set of rules on prescription. However, there are certain specific problems which attach to insurance contracts in particular. They are dealt with in Articles 7:101 and 7:102. For the remaining issues Article 7:103 refers to the Principles of European Contract Law. C2.  According to Article 7:101, the general period of prescription for claims to insurance premiums is one year. In that respect Article 7:101 deviates from Article 14:201 PECL which provides for a prescription period of three years. The shorter period is justified by the fact that premiums are usually paid periodically, quite frequently even in monthly instalments. Moreover, insurers usually set up claim enforcement processes which will ensure that they do not need a longer period of prescription than one year. C3.  The prescription period starts running from the moment the payment is due. The Principles of European Insurance Contract Law do not define this moment but reference may be made to Article 7:102 PECL. In the case of the insurance premium, the insurance contract will usually provide for a fixed time for payment, for instance at the beginning of the insurance period (see Article 1:202 para. 8) or at the beginning of every month.

Notes Community Law N1. The pertinent body of Community law does not contain any provision governing the law of prescription in insurance matters.

General Rules for All Claims Arising from Insurance Contracts N2. Most jurisdictions do not provide for a specific rule governing the prescription of actions for payment of the premium. Instead, general rules apply to all or most claims that flow from insurance contracts irrespective of the cause of action. If exceptions from the general rule exist, they mostly do not pertain to the insurer’s claim for the premium. According to these general rules, actions for payment of the premium are prescribed after two years in France (art. 114-1 para. 1 ICA: «toutes actions dérivant d’un contrat d’assurance»; cf. also Lamy Assurances, para. 974), and in Switzerland (art. 46 para. 1 ICA), after three years in Austria (s. 12 para. 1 ICA), in Belgium (art. 88 para. 1 IA 2014), in Luxembourg (art. 44 para. 1 ICA), and in Poland (art. 818 para. 1 CC), after four years for non-life and five for life insurance in Greece (art. 10 ICA). Various exceptions apply in cases of personal or life insurance contracts and thereby affect the action for payment of the premium.

Specific Rules on Prescription of Premiums N3. Some codes, however, contain an explicit rule governing the action for payment of the premium. In Italy, for example, actions for payment of the premium are prescribed after a period of

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one year after the payment has fallen due (art. 2952 para. I CC; cf. also Cerini 253). In Portugal, the period of prescription is two years (see art. 121 para. 2 ICA. In accordance with art. 121 para. 2 ICA, the period of prescription for all other claims arising from the insurance contract is 5 years from the time when the claimant had knowledge of his right, notwithstanding the general prescription period stated in the Civil Code). Under Spanish law, an action for payment of the premium has to be brought within 6 months after the premium, which is not the first premium, has fallen due (art. 15 ICA, see Bataller/Latorre/Olavarria 193 and Basedow/Fock-Schlenker 1372). The same short prescription period of 6 months applies in Danish law (s. 40 ICA, see Basedow/Fock-Scherpe 997). Swedish law determines in s. 7 of Ch. 5 ICA (as well as in s. 7 of Ch. 13 ICA for individual personal insurance cases) that the insurer forfeits “the right to an unpaid premium when 6 months have elapsed since the premium should have been paid”, provided that the insurance policy has not been terminated or ceased to apply before then.

General Rules of the Law of Prescription N4. Neither the United Kingdom nor Ireland provide for specific rules on prescription of insurance claims. The statutory limitations of the Limitation Act 1980, applicable in England and Wales, and of the Irish Statute of Limitations 1957 – albeit subject to contractual stipulations (see Article 7:101 Note 2 and Article 7:103 Note 2) – as well as equitable limitations apply. Thus, if the parties do not shorten the period of prescription by contract, actions derived from simple contracts are barred after six years, and those arising from contracts under seal after 12 years (Clarke 26-5, Colinvaux 9-32). The Prescription and Limitation (Scotland) Act 1973 provides for a prescription period of 5 years applying to all contractual claims in Scottish law (see Basedow/ Fock-Rühl 1516).

Comparison of Prescription Periods N5. This comparative survey provides evidence of a very wide range of prescription periods relating to claims and actions for premium. Such actions are prescribed after 6 months in Denmark (s. 40 ICA, see Basedow/Fock-Scherpe 997), Spain (art. 15 ICA, see Basedow/Fock-Schlenker 1372), and Sweden (s. 7 of Ch. 5 ICA, as well as in s. 7 of Ch. 13 ICA for individual personal insurance cases), after two years in France (art. 114-1 para. 1 ICA), in Italy (art. 2952 CC as modified by art. 3 of the Decree of 28 August 2008), in Portugal (art. 121 para. 1 ICA), and in Switzerland (art. 46 para. 1 ICA), after three years in Austria (s. 12 para. 1 ICA), in Belgium (art. 88 para. 1 IA 2014), in Luxembourg (art. 44 para. 1 ICA), in the Netherlands (art. 7:942 para. 1 CC) and in Poland (art. 818 para. 1 CC), after four or five years in Greece (art. 10 ICA), after five years in Scotland (s. 6 para. 1 of the Prescription and Limitation (Scotland) Act 1973), and after 6 years (12 years if under seal) in Ireland and the United Kingdom. In the United Kingdom, however, contractual stipulations commonly and significantly shorten the prescription periods to one year in commercial cases (Clarke 26-5C).

Article 7:102 Action for Payment of Insurance Benefits (1) In general, action for insurance benefits shall be prescribed after a period of three years from the time when the insurer makes or is deemed to have made a final decision on the claim in accordance with Article 6:103. In any event, however, action shall be prescribed at the latest

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after a period of ten years from the occurrence of the insured event, except in the case of life insurance for which the relevant period shall be 30 years. (2) Action for payment of the surrender value of life insurance shall be prescribed after a period of three years from the time when the policyholder receives the final account from the insurer. In any event, however, action shall be prescribed at the latest after a period of 30 years from the termination of the life insurance contract.

Comments General Period of Prescription and its Commencement C1.  According to Article 7:102, the general period of prescription for claims to insurance benefits is three years. In that respect Article 7:102 is in line with Article 14:201 PECL. C2.  According to the Principles of European Contract Law, the period of prescription begins to run from the time “when the debtor has to effect performance” (Article 14:203 para. 1 PECL). This rule requires some clarification if applied to insurance cases because the general rule on time of performance under Article 7:102 PECL does not fit such cases. This is why Article 7:102 PEICL (sic) takes a different approach by referring to the time when the insurer has or is deemed to have made a final decision on the claim in accordance with Article 6:103. On the other hand the Principles of European Insurance Contract Law do not contain a comprehensive rule on the time of performance by the insurer either. Three cases have to be distinguished: acceptance (Article 6:103), rejection (Article 6:103 para. 2) and constructive acceptance in the case of an insurer’s inertia (Article 6:103 para. 2). The time of performance is regulated only for the first and third case but not for the case where the insurer wrongfully rejects the claim (see Article 6:104). However, since rejection is a final decision of the insurer, insurance money will fall due at the time of this final (though negative) decision and prescription will start to run. This is why Article 7:102 connects the commencement of the prescription period to the final decision of the insurer and thereby covers all cases. C3.  The decision of the insurer depends on the statement of claim by the policyholder. Nevertheless, the policyholder is not in a position to postpone the commencement of the prescription period arbitrarily because he is under a duty to notify the insurer about an insured event in accordance with Article 6:101. After notification the insurer can ask the policyholder to state his claim, if necessary. A policyholder, who does not respond to the insurer’s request, may violate the duty of good faith (Article 1:201 PECL) if he delays his claim unduly.

Absolute Period of Prescription and its Commencement C4.  If in exceptional circumstances the policyholder does not know about the occurrence of the insured event, he will not be able to notify the insurer and the insurer will not be able to deliver a final decision in accordance with Article 6:103. In such a case the absolute prescription period stated in Article 7:102 will apply, namely ten years, except in life assurance where the period is thirty years. In contrast to the general prescription period the absolute

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prescription period commences with the occurrence of the insured event. Therefore, the time of its commencement is objectively determined and will not depend on the knowledge and/or acts of either one of the parties.

Notes Introduction N1. Whereas Article 7:101 deals with the prescription of actions for payment of the premium, Article 7:102 governs the prescription of actions brought against insurers for the benefit of the insurance. As its characteristic feature the provision combines a subjective and an objective element. According to the subjective element, which is laid down as the primary factor in the first sentence of Article 7:102 para. 1, the prescription period only starts to run after the insurer has made or was deemed to have made a final decision on the claim. The second sentence of Article 7:102 para. 1, which is referred to as the secondary, objective element, determines prescription after 10 years (30 years in life assurance cases) from the occurrence of the insured event in any case, irrespective of what the insurer may or may not have decided. N2. The subsequent notes will illustrate the diversity of the national laws with respect to the prescription of claims for the insurance money or benefit. As will be shown in Note 5, the laws of some countries regard the objective element (the occurrence of the insured event) as the sole trigger for the running of the prescription period. Except for cases of fraud the claimant’s ignorance of his claim, in other words, is not taken into account. In Note 6, other laws are reported where such an objective rule (event) is supplemented by an additional requirement of knowledge. Reliance on the insurer’s decision as another key factor to determine prescription, however, is not without antecedents as will be illustrated in Note 11. An account of all the different statutory periods of limitation is finally provided in Notes 8 to 10. The final Note refers to exceptions for life assurance contracts. N3. In accordance with this distinction two groups of national laws can be identified. The first group, namely those adopting the objective element of the occurrence of the insured event as the sole factor triggering the running of the prescription period, consists of Greece, Ireland, Italy and the United Kingdom (cf. the subsequent Note 5). The jurisdictions of Belgium, Germany, France, the Netherlands, Portugal, Sweden, Denmark and Luxembourg form the second group (cf. Note 6). The prescription period in these countries does not run unless the claimant is aware of his case. N4. Where the prescription period does not start to run without the insured’s knowledge of his case, the insurer’s position may become excessively insecure over time. In order to protect the insurer’s legitimate claim to know where he stands, some national laws establish additional maximum periods of prescription that start to run on the occurrence of the insured event (see Notes 6 and 9). A second time barrier is available for the insurer who knows about the insured event and has already been confronted with a claim for insurance money: in the laws of Austria and the Netherlands, it can speed up prescription by rejecting the claim (see Notes 7 and 9).

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Article 7:102 Action for Payment of Insurance Benefits

A Single Rule without Any Requirement of Knowledge N5. Several countries take the occurrence of the insured event as the sole factor for the running of the prescription period. The claimant’s ignorance of his case, therefore, is not taken into account, but the prescription period is rather long in these countries. Most prominently, English law provides such an example where the statutory period runs even though the claimant may be unaware of his cause of action. According to s. 32(1)(b) of the Limitation Act 1980, applicable in England and Wales, exceptions to this rule only apply in cases of fraud or concealment (Clarke 26-5A, Colinvaux 9-32, and for Greece Rokas, Eisigiseis paras. 112-116 ff.).

A Double Standard: Knowledge plus Time N6. The laws of the second group share the view that the running of the prescription period is principally hindered by the claimant’s ignorance of his case. They also have in common that this requirement is not strict, meaning that the provision has to be complemented by a rule that finally precludes claims at some point in time irrespective of the claimant’s ignorance. An additional rule therefore sets an absolute time limit after which any claim is prescribed, and thus secures the insurer’s interests. This time limit starts to run on the occurrence of the insured event. This model can be found in Belgium (art. 88 para. 1(2) IA 2014), Denmark (s. 29 ICA, Basedow/Fock-Scherpe 996), Luxembourg (art. 44 para. 1 ICA), France (art. 114-1 ICA), Portugal (art. 121 para. 2 ICA), and in Sweden (s. 4 of Ch. 7 ICA). German law takes the same approach: in the absence of a special regime under the ICA, prescription is subject to the general rules of the Civil Code (s. 195 CC) which also provide for a double-standard analogous to the aforementioned legal systems (see Wandt, para. 945).

The Insurer’s Decision on the Claim as Starting Point of Prescription N7. Making the insurer’s decision an important element for determining prescription, as Article 7:102 para. 1 does, is not without antecedents in particular under Austrian (s. 12 para. 3 ICA), Dutch (art. 7:942 para. 3 CC) and Finnish law (s. 74 ICA). In the first two countries mentioned, the rule requiring the claimant to bring the action within a certain time period from the insurer’s refusal to settle the claim is to be viewed as a lex specialis supplementing the general rules on prescription of claims against the insurer. In other words: in the absence of the insurer’s rejection of the claim, the ordinary rules apply. Once the insurer has rejected a claim, however, the claims are subject to prescription in accordance with the aforementioned special rules.

The Duration of the Prescription Periods N8. Under Dutch law, an action is time-barred if it is not brought within three years after the claimant has become aware of his claim (art. 7:942 para. 1 CC). In Austria, the claimant has to bring the action within one year from the insurer’s refusal to settle the claim. The general limitation period, however, is also three years (see s. 12 paras. 1 and 3 ICA). In Finland, the claimant is still granted three years from the date of receipt of the insurer’s decision to bring suit before the claim is prescribed (s. 74 ICA).

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N9. In France, the prescription period of two years begins to run with the occurrence of the insured event; the claimant, however, can prove ignorance with the effect that prescription only starts to run afterwards (art. 114-1 ICA). In Belgium, the period of prescription is three years beginning with the occurrence of the insured event and, in case of the claimant’s ignorance, with the day of knowledge. An action is always prescribed if it is brought later than 5 years after the occurrence of the insured event (art. 88 para. 1(2) IA 2014). In Luxembourg, the prescription period is three years starting with the occurrence of the insured event only if the claimant cannot prove ignorance. Again, an action is prescribed five years after the occurrence of the insured event in any case (art. 44 para. 1 ICA). Under Danish law, an action is prescribed two years after the claimant receives knowledge of his claim. No action, however, can be brought later than 5 years after the claim fell due (Basedow/Fock-Scherpe 996). The prescription period in Sweden is three years after the claimant knows that the claim could be made, with a maximum of 10 years from the earliest time at which the claim could have been made (s. 4 of Ch. 7 ICA). The German law is similar: the Civil Code provides for a limitation period of three years from the moment the claimant has notice of the occurrence of the insured event (s. 195 CC). Irrespective of the claimant’s ignorance, however, the claim shall be prescribed not later than after ten years from the insured event (see s. 199 CC). In Italy, the prescription period for insurance contracts other than life insurance is two years, following the amendment introduced by Law of 17 December 2012, no. 294 (see Cerini 245). N10.  In England and Wales, as stated in the notes on Article 7:101, actions derived from simple contracts are barred after six years, and those arising from contracts under seal after 12 years. In commercial cases, however, they may be subject to contractual stipulations shortening the prescription period to one year (Clarke 26-5A, Colinvaux 9-32 and 9-35).

Exception for Life Assurance Contracts N11.  Various national laws provide for exemptions from the general prescription period in case of life assurance contracts. These exemptions extend the prescription period to 5 years in Greece (art. 10 ICA) and the Netherlands – allowing a further extension of the prescription period by contract – (art. 7:985 CC), to 10 years in France (art. 114-1 para. 4 ICA) and Italy (art. 2952 para. II, as amended by Law of 17 December 2012, no. 294) and even to 30 years in Belgium (art. 88 para. 1(2) IA 2014).

Article 7:103 Other Issues Relating to Prescription Subject to Article 7:101 and Article 7:102 of the PEICL, Articles 14:101–14:503 of the Principles of European Contract Law (PECL)26 shall apply to claims arising out of a contract of insurance. The insurance contract may derogate from these provisions in accordance with Article 1:103 para. 2 of the PEICL.

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Cf. Lando/Beale (eds.), Principles of European Contract Law, Parts I and II (Kluwer Law International, The Hague 2000); Lando/Clive/Prüm/Zimmermann (eds.), Principles of European Contract Law, Part III (Kluwer Law International, The Hague 2003).

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