Life Insurers – Rendering of Accounts

On 6 November 2007, in re “Balaz Hernán Pablo c/ Eagle Star (International Life) Ltd. Sucursal Argentina s/ Ordinario”, Tribunal “A” of the Commercial Court of Appeals confirmed that life insurers are not obliged to render accounts of their investments. This ruling is in line with that of Tribunal “E” of the Commercial Court of Appeals in re “Salva Marcelo Adalberto y otro c/Metropolitan Life S.A.”.

In the case of “Balaz Hernán Pablo c/ Eagle Star (International Life) Ltd. Sucursal Argentina s/Ordinario”, the plaintiff had sought that life insurer “Eagle Star” render accounts of the yield of the funds under a unit-linked life insurance policy.

The Tribunal held that any person that manages someone else’s assets is obliged to render accounts. However, the Court found that this is not the case in the relationship between a life insurer and its insureds.

One of the bases of the Court’s ruling was that premiums paid by the insured are the price for an insurance protection, i.e., the consideration borne by the insured under section 1 of Argentine Insurance Contract Law No 17,418. They therefore become part of an insurer’s estate for the insurer to invest.

An insurer forms its technical reserves with the premiums collected from its insureds and invest them in order to comply with its obligations. However this obligation is in respect to all its insureds as a whole, but not to anyone in particular.

The duty to form the technical reserves and to invest them is supervised by the Government through the Superintendent of Insurance. An insured cannot impose on the insurer the duty to render accounts of its investments.

The Court held that an insurer’s investment portfolio changes by the day as a consequence of incoming and outgoing insureds; it may therefore be concluded that “… there is no direct and daily relationship between a new policy underwritten and the purchase of a given security; it would therefore be difficult –if not impossible- to render account to each insured of the daily changes in the portfolio …”.

The Court unanimously resolved that insurers have no obligation to render account to their insureds of the yield of funds under life insurance policies.