On occasion, the Superintendencia is asked to comment on the interpretation and /or application of Peruvian law, and while its opinions are not law and thus, not binding, they are highly persuasive given that they represent the views of the regulator in Peru.
The Superintendencia was recently asked to respond to a number of questions on claims made clauses. The most pertinent of these questions was whether the inclusion of claims made clauses in an insurance contract subject to Peruvian law would be valid?
In response to this question, the Superintendencia stated the following:
(1) Peruvian Law No. 29946 does not expressly refer to the validity of claims made clauses;
(2) For property damage insurance and civil liability insurance, Article 87 of Law No. 29946 promotes the idea that the insurance company is liable for covered losses and damages caused, provided the loss occurs during the validity of the insurance policy;
(3) The view in (2) above is consistent with Article 105 of Law No. 29946, which obliges the insurer to hold an insured party harmless for its liability to third parties;
(4) The inclusion of claims made clauses are contrary to the rules because the legislator has expressly opted for the traditional liability system based on the occurrence of the loss and so, claims made clauses are null and void and should be replaced; and
(5) In line with Article 78 of Law no. 29946, there is a term of 10 years from the occurrence of the loss to present actions to the insurance company.
The Superintendencia has taken a strict view of the law and the possible implications of these views are potentially significant and, at this stage, give rise to a number of questions:
- In the context of the above, when would the loss occur under an insurance policy under Peruvian law?
- If claims made clauses are null and void as the Superintendencia states, then is the effect of that to make the entire contract void?
- Alternatively, if claims made clauses are to be replaced (as stated by the Superintendencia), are they replaced by the "traditional liability system based on the occurrence of the loss"?
In our view, preliminary indications are that claims made clauses now potentially operate on a losses occurring basis.
This potentially opens current and previous years of account to a liability spanning 10 years. This may well equate to a significant increase in the period of potential exposure and impact the reserving position. Insurances likely to be impacted are construction third party and public liability and professional indemnity policies.
If you have queries please contact Iftikhar Ali