Once Again an Insurance Company Was Condemned to Pay in Excess of the Policy Limit

In re “M., C. D. and other vs M., M. M. and others re damages (transport accident with injury or death)” (File No. 51,968/2010), the plaintiff claimed the sum of AR$ 502,500 as compensation for damages suffered as a result of a traffic accident occurred on July 16, 2009, where he was involved with the respondent’s vehicle. In addition, the plaintiff brought the latter’s insurance company as co-defendant.

The lower court judge dismissed the claim. The plaintiff lodged an appeal against the first instance ruling.

Regardless of the analysis of the respondent’s liability and the revocation of the decision by the first instance judge, Tribunal A of the Argentine Court of Appeals in Civil Matters left without effect the coverage limit set forth in the insurance contract, and had the company pay in excess of the AR$ 125,000 policy limit (ruling dated September 22, 2016).

Among its arguments, the Court criticized the professional performance of the insurer’s lawyer who by simultaneously acting for the company and the insured had conflicting interests. The Court held that the potential validity of the coverage limit would benefit the insurance company at the expense of the insured. It was clear to the Court that the professional could not simultaneously act on behalf of both parties. The Court stated that the lawyer in question violated the principles of loyalty, integrity and good faith imposed by the Procedural Code, which led the Court to consider that enforcing the policy limit was “inadmissible due to the way in which it was proposed”.

The Court reinforced its decision on the basis of consumer rights. It stated that the insurance contract is a contract protected by article 37 of the Consumer Protection Law. The Court also adhered to what was established by the Argentine Supreme Court: “in case of doubt the obligation of the insurer should be considered as subsisting; the insurer not only drafted the terms of the contract but being that who foresees the probability of accidents through actuarial calculations, was in technical conditions to set clearly, precisely and beyond doubt the extent of its obligations” (according to CSJN, 6/12/1994, “Berlari, Norma E. vs Omega Coop. de Seguros Ltda. and others”, file 317:1684).

The Court also held that limits provided for in policies are sometimes insufficient to deal with potential claims for damages. It considered that if the clauses that set such policy limits were admitted, the nature of the obligations of insurance companies would be distorted thus thwarting the expectations that consumers have in view at the time of entering into a contract.

The ruling also made reference to article 68 of Law No. 24,449 which imposes on users of automobiles the duty to take out liability insurance. In this regard, the Court held that the purpose of that legal provision would be undermined by the application of administrative decisions (e.g., decisions by the Superintendence of Insurance) that allow the possibility of limiting the amount of coverage, thus affecting the hierarchy of laws and regulations on which the Argentine legal system is based.