The Cour de Cassation (French Supreme Court) and the ACPR (French insurance regulator) have taken turns to examine the issue of insurance exclusions.
Let’s remember 2 principles: :
- There are 2 types of exclusions:
- The first type of exclusions are all the legal exclusions, i.e. those of public order. These cover all cases that should not be insured. These cases are then automatically excluded from the insurance without having to be mentioned in the contract. A typical example is intentional or malicious misconduct on the part of the insured, which cannot be insured.
- The second type is the set of contractual exclusions. This is a list of events and circumstances in which the insurance cannot be activated.
- Contractual exclusions are freely chosen by the insurer when creating his insurance product, or when determining the insurance conditions for a given risk. On the other hand, the insurer is bound by article L. 113-1 of the French Insurance Code: he may only exclude certain risks, a priori covered by the contract, by means of a “formal and limited” clause, the validity of which is also conditional on the clause being written in “very conspicuous” characters, as stipulated in article L. 112-4.
These last 2 requirements are there because, as the 2023 study by the Second and Third Civil Chambers of the Cour de Cassation on the subject indicates:
[Insurance:] A mechanism designed to protect individuals against the hazards of life, and economic operators against those affecting their activity, its implementation must be as predictable as possible, and must not leave contracting parties uncertain as to the coverage of the risk. Particularly when insuring professional liability, policyholders must be certain that all the risks they wish to be covered for are indeed covered. The insurer, who has set the premiums in consideration of the risks he intended to cover, must not be caught unawares by an unexpected application of the contract.
These exclusions are designed to ensure that the insured is never trapped, while preserving the mutualization (or insurability) of the risk. Over time, however, protection of the insured is becoming increasingly important, even if it means making insurance more expensive.
In the same vein, the ACPR has issued a press release (“Exclusion clauses: the ACPR calls on insurance organizations to review all their insurance contracts”) on the subject.
The ACPR has carried out an investigation into exclusion clauses, particularly in the two main types of insurance contracts covering major risks for the general public: motor and home insurance.
It reminds insurers of the need to comply more fully with the requirements of the Insurance Code and the case law of the Cour de Cassation.
In particular, it criticizes the insurers: “The clauses identified relate in particular to ‘lack of maintenance”, “failure to comply with the rules of the trade’ and “negligence on the part of the insured”.
Some of these expressions are very often used and are not in fact vague in themselves. They are flexible because they allow us to adapt to circumstances, which can be very varied. For example, a building constructed in the 1960s will not be built according to the same ‘rules of the art’ as a building in the 2020s. It would be impossible to list all the ‘règles de l’art’ that buildings must respect, and this list would quickly become obsolete.
This expression enables claims adjusters (for the insurer or the insured) to carry out their work and to differentiate between what is really insurance and what is not. The term is sufficiently vague to ensure that any doubts are resolved in favour of the policyholder.
Other expressions are more tendentious, such as ‘negligence on the part of the insured’. After all, the vast majority of accidents are due to ‘negligence’. And since the insured is not necessarily a professional (imagine a private driver), the expert will be of little help in assessing whether or not this exclusion should apply. This type of expression, which is too imprecise, is too much like a ‘joker’ that the insurance company might try to play on a claim that it does not want to pay.
So it’s not necessarily necessary to delete all these expressions, but we should certainly try to clarify them, avoiding the trap of ‘spreading legalese’, which would only make things even more confusing.
In conclusion, insurers need to take this subject seriously; indeed, the ACPR states, in bold and apparent type (in a tasty reference to Article L. 112-4 of the Insurance Code):
‘The ACPR will closely monitor the measures implemented by insurance undertakings to deploy robust governance arrangements and rapidly revise or remove from contracts any exclusion clauses that do not comply with the state of the law’.
So long !
