Draft bill presented

Last month a draft bill for new statutory provisions governing insurance contracts was presented for debate to professional circles such as insurance companies, intermediaries, the chamber of commerce, consumer organizations, the bar association, and the central bank. The author of the draft is Prof. Jan de Boer, member of the Netherlands Antilles and Aruba court of appeals. A large part of the new legislation is comprised of codification of existing case law. Several stipulations follow from standard case law of the Dutch Supreme Court which, pursuant to the Supreme Court Appeals Act for the Netherlands Antilles, also acts as the highest court for the Netherlands Antilles.

The newly proposed insurance legislation will become part of the Netherlands Antilles Civil Code, replacing the current insurance provisions in the Netherlands Antilles Code of Commerce. It will bring about an important change in viewpoint. In the Commercial Code, which dates back to 1935, the focus is, briefly put, on protecting the insurer against fraudulent actions of the insured or policyholder. The proposed legislation, which also recognizes other important aspects such as the social function of insurance, aims to balance more appropriately the interests of the parties.

For instance, the obligation to disclose remains, in essence, unaltered. However, the legal consequences of non-disclosure will be different when the new legislation is implemented. Whereas the Code of Commerce gives the insurer the possibility to nullify the insurance contract in case of non-disclosure, under the proposed legislation, the insurer only has a limited right to terminate the contract: when the insured intended to mislead the insurer or where the insurer would not have agreed to this insurance had it known all the relevant facts.

If the non-disclosure only relates to a minor issue and is therefore of no relevance for the evaluation of the risk then, the insured’s rights remain untouched. If, in the case of undisclosed facts, the insurer would have stipulated a higher premium (or a lower insured sum) or other terms had it been aware of the true state of affairs, the payment shall be reduced in proportion to the amount the premium would have been more (or the insured sum less) or payment will only be due as if such terms were included in the contract.

Where several insurance contracts cover the same risk (concurrence), under the proposed legislation the insured may make a claim against each insurer. However, the principle of indemnity is respected. The insurers shall have mutual recourse so that each will bear its part in proportion to the amounts for which a claim can be made against each individually. The liability of insurers involved in one and the same insurance contract shall not extend beyond their proportionate part of the amount which, in the aggregate, falls under such insurance. These are regulatory provisions. This means that parties may deviate from them, and therefore clauses such as the frequently used ‘after you’ and ‘unless elsewhere covered’ remain valid.

Other proposed changes include, for instance, the possibility of direct action. This option already exists for the compulsory insurance of motorized vehicles, but it is a new remedy for voluntary insurances. Henceforth, the injured party may in certain circumstances claim the damages directly from the liability insurer. This option is, as yet, limited to personal injuries.

The right of action against the insurer for payment is prescribed by a three year period from the day following that on which the person entitled to payment becomes aware of it becoming due. This three-year period is mandatory, meaning that different (shorter) periods of limitation are null and void. There is an important exception, however. In the case of rejection, the right of action is time-barred after six months. Nevertheless, in the case of liability insurance, the right of action does not expire until six months after institution of the claim covered by the insurance, within the applicable prescription or expiry period. It is possible to interrupt the prescription period by way of a written notice whereby demand for payment is claimed. A new prescription period will commence from the beginning of the day following the day on which the insurer either admits the claim or, in unambiguous terms, has rejected it by written notice stating, also in unambiguous terms, the consequences of such rejection, i.e. commencement of said prescription period.

In short, the position of the insured will improve under the newly proposed insurance legislation. However, the position of the insurer remains strong.

Karel Frielink / Ursus van Bemmelen
Dutch Antilles Attorneys / Lawyers

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