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I. Introduction. Clauses limiting the rights of insured parties.
In this article we will analyse the recent Supreme Court Decision No. 1321/2023, of 27 September 2023, in relation to the transparency requirements established by article 3 of the Insurance Contract Law (LCS).
In this sense, there is abundant literature on these requirements, and we have already addressed in previous publications questions such as the distinction between clauses limiting the rights of the insured and clauses delimiting the risk, as well as the interpretation made by the Jurisprudence of the requirements that limiting conditions must legally comply with.
The aforementioned Article 3 of the LCS establishes, firstly, that the general and particular conditions of an insurance contract must be drafted in a clear and precise manner. Secondly, that the clauses limiting the rights of the insured must be specially highlighted and accepted in writing.
Regarding the concept of clauses limiting the rights of the insured, the jurisprudence of the Supreme Court is consistent, and has explained in numerous decisions (for example, STS no. 961/2000, of 16th October), as those that diminish the normal rights of the insured or, in the words of the Court itself, come to "restrict, condition or modify the insured's right to compensation once the risk that is the object of the insurance has occurred".
II. Analysis of the case
The importance of the judgement we are analysing today lies in the fact that the Supreme Court analyses a very widespread practice in insurance contracts, which is the inclusion, for the purposes of accrediting compliance with the requirements of art. 3 LCS, of a final form by which the insured declares that he/she is aware of and accepts the clauses limiting his/her rights.
To briefly explain the factual situation, in the case analysed by the Judgment, the insured party had taken out a life and permanent disability insurance policy on 23 June 2011. Shortly afterwards, on 14 July 2011, he was diagnosed with a bladder tumour, from which he died years later, on 29 September 2014.
The widow, as his beneficiary, sued the insurance company, claiming compensation in the amount of €50,000. However, the insurer objected, essentially on two grounds:
1. That the insured had concealed the existence of previous symptoms suggesting the existence of cancer.
2. That the policy contained a clause in which, when the insured risk (death or permanent disability) was caused by cancer, the compensation would be conditional on the disease having its origin and being diagnosed one year after the effective date indicated in the individual insurance certificate (what in insurance law is usually called a "waiting period").
The Court of First Instance agreed with the insurance company. It did not uphold the first of the grounds of objection, stating that the insured lacked any history in his medical records, and that a normal consumer has no reason to know that a certain symptomatology points to bladder cancer as a possible diagnosis. However, it did uphold the second of the pleas, stating that the aforementioned condition was a clause delimiting the insured risk, but not a clause limiting his rights. Therefore, the acceptance of the policyholder was sufficient for the effectiveness of the clause.
The widow filed an appeal before the Provincial Court of Valencia, and this Court, in the second instance judgement, again agreed with the insurance company, although changing its criteria, which proved to be fundamental for the subsequent final judgement of the Supreme Court. In this second instance, the Provincial Court considered that the clause conditioning the payment of the cancer benefit to the illness arising and being diagnosed after one year had elapsed from the effective date was in fact a limitation of rights, but nevertheless, it passed the control of transparency of art. 3 LCS as a particular condition had been signed which contained the following text:
"By signing this document, the policy holder declares to have received together with these particular conditions the general and special conditions (if any), which constitute this contract, and accepts all its clauses and, especially, those that limit the rights of the policy holder and the insured person”.
Those familiar with the world of insurance will have been able to verify that the inclusion of a similar clause in the policy, to be signed by the insured person, is common practice in the contracting of insurance, for the purpose of accrediting the fulfilment of the requirements of Art. 3 LCS.
III. STS no. 1321/2023, of 27th September 2023
The widow filed an appeal in cassation before the Supreme Court against the judgement of the Provincial Court of Valencia, which was upheld. In its judgement, the Supreme Court, in the first place, coincides with the Provincial Court of Valencia in the sense of considering the disputed clause as truly limiting the rights of the insured, and not merely delimiting the risk.
Thus, it explains that a delimiting clause specifies the object of the contract, establishing which risks, in the event of their occurrence, give rise to the insured person's right to the benefit and the correlative obligation of the insurer to attend to it. The limiting conditions, as has already been explained, are those that worsen the contractual situation of the insured person.
Thus, in the case analysed, the insurance contract established an insured risk (death or permanent disability), a benefit (€50,000), an effective date (23 June 2011) and a duration (annual renewable). That is as far as the clause delimiting the risk would go.
It is a different matter to specify that the cover does not include death due to cancer, which is a prototypical illness for producing the insured risk, when the latter is diagnosed within one year of the effective date. The Supreme Court maintains that this clause imposes a real limitation to the coverage that in no case can be considered within the simple delimitation of the risk, but is a real limitation of the insured's rights.
Having established this issue, the Supreme Court states that the logical consequence of this is that the clause, as a limiting clause, must meet the special requirements of Art. 3 LCS (to be expressly highlighted and accepted in writing). In the case analysed, the general conditions in which the clause was found were not signed, but the particular conditions were, which included the text transcribed above, whereby the policyholder declared having received together with them the general conditions, accepting the existing conditions limiting rights.
The Supreme Court refers to its criterion, already upheld in the previous STS no. 402/2015, of 14 July, stating that, when the particular conditions refer to the limiting clauses that appear in the general conditions, it will be necessary for the policyholder to also sign the general conditions. In the case analysed, the insurance company was unable to provide any document signed by the policyholder in which the disputed clause was included.
IV. Conclusion
The Supreme Court establishes that in the case of life and permanent disability insurance, it is necessary to distinguish between a clause delimiting the risk and a clause limiting the rights of the insured. Only those that limit themselves to establishing the insured risk (death or disability), the benefit, the effective date and the duration of the contract can be considered as delimiting. On the contrary, those that establish waiting periods conditioned to a specific illness being diagnosed within a determined period of time, are undoubtedly limiting the rights of the insured.
As a consequence of the above, they must fulfil the requirements of Art. 3 LCS, that is to say, they must be expressly highlighted and accepted in writing. The insurance company, if it wishes to oppose them, must provide the document that accredits the fulfilment of these requirements. However, if this is not the case, it will not be sufficient to sign a declaration of acceptance with reference to the general conditions, nor vice versa, but express acceptance will be necessary in the same document in which the restrictive condition is included.
Adrián Macias Catalina
Belzuz Abogados SLP
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