Planned new Spanish insurance contract law good news for buyers

The bill, which will update the current legislation dating back to 1980, has been sent by the Spanish central government to parliament and is expected to be passed in the next few months. The process has been a long one, as the Economy and Justice ministries began to discuss the new bill back in 2005. Insurers and consumer associations were called to contribute to the debate, and the final version of the bill was approved by Spain's Council of Ministers on April 8. According to a statement released by the government, the main goal of the changes has been ‘the defence of the weak part of the insurance contract, which is to say, the buyer of insurance or the insured’. To that end, the new bill brings the insurance contract law into line with new consumer laws that have been implemented in recent years in Spain. hideIt will increase the number of cases in which insurers have to present a ‘reasoned offer’ for the payment of a loss. The offer must be presented to the insured up to two months after the loss was notified and, even if it is accepted, does not necessitate the claimant to renounce taking further actions. The system, already enforced in motor insurance contracts, following European directives on the matter, is to be extended to other lines. “We still do not know how the market will translate these changes into reality, but they will require a much more powerful capability to answer to losses,” said Daniel San Millán, the president of IGREA. A new way to calculate interests on delayed payments is also part of the bill. Both measures aim to accelerate the processing of claims and to create fewer incentives for insurers to delay payments. The government also claims the new rules will foster the adoption of more clarity in the wordings of insurance contracts, although experts are not so sure that this particular goal will be achieved by the new law alone. The experts said that the bill brings a welcome update to the 1980 law, but opportunities have been missed to improve certain parts of Spain’s insurance legislation. One example, according to Luis Alfonso Fernández Manzano, a partner at the Madrid office of Hogan Lovells, is the concept of limitation clauses, still included in the project of the new law. Limitation clauses are particular to the Spanish insurance market and do not exist in other countries. They are a ‘cloudy concept’ that are sometimes employed to insert items that, in other sectors, would be seen as abusive clauses, he stressed. Participants at the meeting suggested that the law does not make clear what kinds of risks should be considered large risks, and that definitions currently employed by the European insurance industry are outdated. Speakers also said that the contract law creates a possible problem when purchasing civil liability coverage for directors, as it forbids the payment of compensation for penal and administrative fines imposed on the company by the authorities. Mr Fernández stressed that the veto should not apply in cases of incompetence and negligence, but only for those where the irregularity was committed willingly and in bad faith.

Planned new Spanish insurance contract law good news for buyers

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