Insurance Litigation 2021

Last Updated October 01, 2021

Spain

Law and Practice

Authors



Blanco y Asociados Abogados (B&A) is a law firm founded in 1987, specialised in insurance law and civil liability, which provides legal services throughout Spain. The firm has its main office in Madrid and the insurance team is composed of ten people. Given the great knowledge and extensive experience of the firm in the implementation of insurance programmes; the drafting and reviewing of general, particular and special conditions of all insurance lines; the adaptation of foreign law policies to the Spanish legal system; the direct management or legal supervision in the processing of claims; and, in particular, in the claim or judicial defence of controversial losses, B&A is considered as a clear professional reference for all kinds of insurance or risks affecting large companies and industrial sectors. Furthermore, B&A is a member of the Global Insurance Law Connect (GILC), a worldwide network of prestigious law firms specialised in insurance law and civil liability.

Spain is a country with a wide range of legislation. As far as insurance is concerned, there are several regulations that are relevant, the main source being Law 50/1980 of 8 October 1980 on Insurance Contracts, which regulates the content of the contract itself and the relationship that must exist between the insured and the insurer. It contains a set of general provisions that all insurance contracts must comply with and also deals with the main lines of insurance that operate in the market (both damage and personal insurance). 

In terms of the regulatory aspect (which affects insurance companies and insurance mediators), there are a multiple of rules, two of which are worth highlighting: Law 20/2015 of 14 July on the regulation, supervision and solvency of insurance and reinsurance companies, which regulates the activity of national and foreign insurance companies, and also the recent Royal Decree Law 3/2020 of 4 February, which transposes into Spanish law, Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution. 

Furthermore, as is the case in other jurisdictions, disputes related to the insurance contract are often settled through court or arbitration proceedings.  

Judicial proceedings can be substantiated in different jurisdictions: civil, criminal, social and contentious-administrative, depending, of course, on the nature of the dispute in question. Each of these jurisdictions have different procedural regimes, and Law 1/2000 of 7 January on Civil Procedure is considered for matters not stipulated in other specific procedural laws. 

In Spain there are different types of courts: first instance, instruction, courts of appeal (provincial courts, higher courts of justice) and, as a last resort, the Supreme Court, although this court only handles cases of great technical complexity. To access this last instance, the contentious matter must have either appeal interest (the case deviates from the applicable case law) or the amount of the appeal must exceed EUR600,000. 

The litigation process depends on the jurisdiction in which we find ourselves. In the civil jurisdiction, all litigation begins with a statement of claim in which the identification and circumstances of the plaintiff and the defendant, and the domicile or residence where they can be summoned must be stated, the facts and legal grounds must be numbered and set out separately, and what is being requested must be clearly and precisely stated. Once the above has been done, the court will admit the claim and will transfer it to the defendant so that he/she may respond to the claim within ten or 20 days (depending on the type of trial).  

Afterwards, the court sets a date for the preliminary hearing (at which the evidence to be presented at the trial is proposed, as well as other formalities such as the possibility of making complementary allegations, providing new documentation, etc). Lastly, a date is set for the trial at which the proposed evidence is presented. Once the evidentiary period is over, the judge pronounces the judgment. Normally in Spain, the duration of a civil proceeding in first instance is between ten and 24 months from the filing of the lawsuit to the judgment, depending on the location of the court. The judgment can be appealed before the court of appeal (audiencia provincial) and, after that, if the requirements are met, before the Supreme Court. 

Criminal proceedings are different from civil proceedings. They begin with a complaint or a lawsuit in which the accuser states the facts that he or she believes may constitute criminal offences. The investigating court is responsible for carrying out the investigation of the alleged facts. Normally, a statement is taken from the person under investigation and, subsequently, the corresponding investigative measures are carried out to clarify the facts. Here it is the state, through the public prosecutor's office, which is also involved in the proceedings. Once the investigation phase has been completed (generally a maximum of 12 months, although this can be extended), the investigating judge decides whether to prosecute the person under investigation or, on the contrary, to close the proceedings. At this stage, the opinion and arguments of the public prosecutor's office and, to a lesser extent, those of the private prosecutors are usually taken into account. If the proceedings continue, the judge issues what is known as an "accommodation order" and all the investigative proceedings are transferred either to the criminal court or to the provincial court (depending on the offence in question and the years of conviction it carries). Once the corresponding trial has been held, the corresponding judgment is handed down, which can be appealed. 

The legal proceedings before the labour courts begin with the respective complaint to the businessman (natural person or legal entity), followed by a hearing in which the aim is to carry out an act of conciliation between the two parties. If there is no agreement between the parties, the procedure is similar to the civil one, although with some nuances, for example in relation to evidence (you can propose and present it on the day of the trial). As in all other jurisdictions, the judgment of the labour court can be appealed before the High Court of Justice and, subsequently, before the Supreme Court. 

As far as the contentious-administrative jurisdiction is concerned, the judicial procedure is also very similar to the civil procedure, although in this case the administrative file is of particular importance. It should be remembered that all proceedings before the contentious-administrative jurisdiction result from a previous process that has been followed by the injured parties against the corresponding administrative authorities (local councils, tax authorities, etc). The procedure begins with a notice of the contentious-administrative appeal (this is the name given in this jurisdiction to the first document), at which point a file number is assigned and the corresponding authority is notified so that within 20 days it can deliver the entire administrative file. Subsequently, with all the documentation, the corresponding lawsuit is filed. The rest is similar to the civil procedure. 

As far as limitation periods are concerned, the time limit depends to a large extent on the action being brought. The general time limit for an insured to bring an action against his/her insured is two years from the date of the loss for non-life insurance and five years for personal insurance (Article 23 of the Insurance Contract Act). 

For matters not expressly regulated, for example, when the insurer compensates his/her insured and is subrogated in his/her position to exercise recovery actions against the third party that effectively caused the damage, the action will be time-barred depending on the action in question (five years for contractual actions and one year for non-contractual actions). 

Another frequent case is that of traffic accidents, for which the limitation period is one year after the stabilisation of the damages suffered by the injured party (when temporary injuries have become permanent injuries). 

Spain is a country where litigation is constant in all fields of law. In the insurance field, in the civil sphere only, the courts issued more than 5,000 judicial decisions affecting insurance policies in 2020 (in 2019, the number went up to more than 6,000). 

By legal imperative, there are mechanisms for the resolution of conflicts between insurers and insured parties, always complementary to court proceedings. These mechanisms consist of submitting the parties to arbitration procedures or civil or commercial mediation procedures.  

In addition, the insurance entities are obliged to attend and resolve the complaints and claims that the policyholders, insured persons, beneficiaries, injured third parties or rightful claimants may file in relation to their legally recognised interests and rights within the policy contracted. For these purposes, the entities must have a customer service department or service in charge of attending to and resolving complaints and claims. Of course, this service has to be independent and external from the insurance company. 

The Insurance Contract Law governs any controversy between insurers and policyholders or insured parties, being the basic regulation of the contract. Failing this, the Civil Code governs the private relations between the parties. 

In matters of jurisdiction, Article 22 of Organic Law 6/1985 of 1 July 1985 on the Judiciary Power states that in matters of insurance, the Spanish courts shall have jurisdiction when the insured, policyholder or beneficiary of the insurance has his or her permanent address in Spain. The insurer may also be sued before the Spanish courts if the harmful event occurred in the Spanish territory. 

Moreover, for non-contractual obligations in the field of insurance, Spanish courts are also competent if the event was caused in Spain or the defendant is domiciled in Spanish territory.  

However, Article 24 of the Insurance Law states that the actions derived from the insurance contract will be heard by the court corresponding to that of the insured person's residence, rendering any agreement to the contrary null and void. 

For other types of actions in which insurance policies may be affected, we must be aware of the type of action that is intended to be brought. The Civil Procedural Law generally establishes that the competent judge to hear a case will be the judge of the defendant's domicile. Failing this, those who have neither domicile nor residence in Spain may be sued in the place where they are located within the national territory or in the place of their last residence and, if jurisdiction cannot be determined in this way either, in the place of the plaintiff's domicile. Legal persons, for their part, will be sued as a general rule where they have their headquarters.  

According to Article 36 et seq of Regulation (EU) No 1215/2012 of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, judgments given in a member state which are enforceable in that member state shall also be enforceable in the other member states without the need for a declaration of enforceability. Therefore, judgments of the member states are directly enforceable in Spain. This is directly applicable to all judgments affecting insurance companies.  

In the same sense, judgments of Denmark, Iceland, Norway and Switzerland are also enforceable in Spain through the Lugano Convention of 2007. 

In relation to third countries (non-EU members), the Hague Convention or, alternatively, the "exequatur" procedure regulated in Law 29/2015 of 30 July on international legal co-operation in civil matters, may be applicable. 

One of the biggest problems we find when litigating in Spain on behalf of foreign entities has to do with procedural representation. In order to be able to litigate in Spain in matters of EUR2,000 or more, insurers must be represented by a court procedural representative and defended by a lawyer (this requirement must be met by both individuals and legal entities).  

The court procedural representative – the person who represents the litigants in court – must have a power of attorney issued by the person or persons (possibly a board of directors) within the organisation who are empowered to grant and guarantee such powers of attorney. This is often a complex task as insurers have internal structures with a different distribution of power and competences and finding the right person can often be an arduous and time-consuming task. 

Spanish courts and tribunals may enforce all awards rendered by arbitrators at the request of one of the interested parties. In this regard, commercial insurance and reinsurance contracts usually include dispute resolution clauses of various kinds, the most frequently used being submission to the competent courts and tribunals. Similarly, the contracts also include the right of the parties to submit to arbitration proceedings for the resolution of disputes, although this option is usually less common and applicable, in any case, to non-life insurance. 

In this sense, the jurisdiction to enforce arbitral awards belongs to the courts of first instance of the place where the award was rendered, the procedure being initiated by one of the parties through a claim for enforcement, attaching the enforceable title, the arbitration agreement and the documents proving that the award was duly notified to the parties. This procedure is concluded with the corresponding judicial enforcement decision, as if it were an ordinary judgment. 

In 1977, Spain signed the Instrument of Adherence to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on 10 June 1958. 

The purpose of the Convention is to promote the extraterritorial enforcement of arbitral awards, which it effectively achieves due to the large number of states that are party to it (currently more than 159). Article III establishes that “for the recognition or enforcement of arbitral awards to which this Convention applies, no more stringent conditions or higher fees or costs shall be imposed than those applicable to the recognition or enforcement of domestic arbitral awards”. Therefore, according to the transcribed provision, no more rigorous conditions can be imposed for the enforcement of foreign awards than for domestic ones, following the Spanish substantive rules for enforcement. 

Over the years, the Supreme Court has chosen to favour the recognition and enforcement of arbitral awards for the benefit of international commercial traffic, so we could say that, in effect, it is possible to enforce a foreign award in Spain directly on the basis of the New York Convention. 

As noted at 1.3 Alternative Dispute Resolution (ADR), Spain is a country where litigation is common. Undoubtedly, one of the most common ways of solving disputes is through courts. Secondly, disputes can be resolved through arbitration procedures; although these procedures tend to be more expensive (depending, logically, on the amount claimed), they may lead to a quicker resolution. 

There are some insurance companies that frequently submit to arbitration procedures for the resolution of disputes, one of the most significant areas being credit insurance, when the contracting parties are exporters, distributors or companies related to a specific sector, such as transport. 

However, we must bear in mind that Spanish Arbitration Law regulates the arbitration procedure based on the idea that natural or legal persons may submit, subject to prior agreement, to the decision of one or more arbitrators. There are currently several arbitration organisations: the Spanish Court of Arbitration, the Civil and Commercial Court of Arbitration (CIMA), the Court of Arbitration of the Madrid Chamber of Commerce, the Barcelona Court of Arbitration and, lastly, the possibility of submitting to arbitration by appointing ad hoc lawyers as arbitrators through the Madrid and Barcelona Bar Associations. 

That said, arbitration is a single instance form of dispute resolution (some arbitration courts established double instance proceedings in which appeals could be lodged). The possibility of appealing an arbitral award in Spain is very limited, the only possible means being those indicated in Article 43 of the Arbitration Act: action for annulment and action for review. With regard to the first of these options, this type of action can only be brought if the arbitration procedure has breached procedural rules for resolving the disputed issue. As for the second mechanism, that of review, this is subject to the options established by Article 510 of the Civil Procedural Law: ie, after the award has been delivered, decisive documents are recovered or obtained which could not have been made available due to force majeure.   

Ultimately, the review of arbitral awards in court is restricted and is often difficult to accept by the competent courts, especially after the recent doctrine established by the Constitutional Court. 

The meaning of the legal rules of interpretation of contracts, in accordance with the purpose of interpretation, as understood by case law, must seek the real or effective will of the parties. To this end, the literal meaning, as a hermeneutic criterion, is the initial presupposition, in so far as it constitutes the starting point from which meaning is attributed to the declarations made, the specific intention of the contracting parties is investigated and the business purpose projected in the contract is adjusted or delimited.  

When the terms are clear and leave no doubt as to the intention of the contracting parties, literal interpretation prevents the modification, under the pretext of interpretative work, of a statement that is really clear and precise. The rule contained in the first paragraph of Article 1281 of the Civil Code (“if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its clauses shall apply”) responds to this.  

Conversely, literal interpretation also helps to show that contracts, due to their lack of clarity, the existence of contradictions or gaps, or due to the conduct of the contracting parties themselves, contain interpretable provisions, so that the work of interpretation must follow its course, with the hermeneutic criteria within its reach (Articles 1282-89 of the Civil Code), in order to provide those provisions with a meaning in accordance with the intention of the parties and with the imperative provisions of the contractual order. 

Firstly, before the conclusion of the insurance contract, the policyholder must submit himself to a rigorous insurance questionnaire in which he/she must declare all the circumstances known to him/her that may influence the evaluation of the risk. The policyholder is exonerated from this duty if the insurer does not submit him/her to the questionnaire. 

The insurer can cancel the contract by means of a declaration addressed to the policyholder within one month of becoming aware of the policyholder's reservation or inaccuracy in the questionnaire. In this sense, all premiums relative to the current period will correspond to the insurer, except in the event of wilful intent or gross negligence on his or her part. 

Furthermore, the insurance application is not binding on the applicant but on the insurer for a period of 15 days. By agreement of the parties, the effects of the insurance may go back to the moment when the application was made or the proposal was formulated. 

Since the COVID-19 crisis started in 2020, some lines of business such as healthcare, travel and event cancellation or credit insurance, among others, have been seriously impacted with a corresponding increase in claims. 

One significant line of business affected is business interruption (BI) coverage insurance. This is not yet fully apparent, but we believe that in the next few months we are likely to see an increase in claims, as soon as companies have quantified their full loss of earnings. In this regard, some courts have emitted several judgments in the last few months that, in line with what is being stated in Europe, have ordered insurance companies to compensate their insured for BI. 

Lastly, it is reasonable to expect that there will also be a noticeable increase in claims against D&O insurance, due to the bankruptcy of companies. The more the profit and loss accounts are constricted, the more risk managers have to take with the consequent exposure to future losses. D&O is the class of insurance where the impacts of poorly considered corporate risk-taking will be felt most deeply.

As indicated in 2.1 Rules Governing Insurance Disputes, disputes related to insurance contract coverage are usually settled by the courts of the insured's residence. In the case of disputes concerning the interpretation of certain policy clauses, disputes are usually settled, in the first instance, by the civil courts. Disputes arising from reinsurance contracts are also settled in the same way.

In Spain, policyholders who are natural persons are usually considered as consumers and as the vulnerable party of the contract. For this reason, if at any time there is any controversy as to the interpretation to be given to any clause of the policy, this must always favour the insured, given the circumstances of the case. 

Likewise, the Insurance Contract Law is drafted precisely to protect the contracting consumers, and there are several provisions that are more favourable to them than to the insurance companies. Article 3 of the aforementioned Law is a clear example of this: “The general conditions of cover which in no case should be prejudicial to the insured, must be included by the insurer in the proposal form if there is one and in any event in the policy documents or in a supplement, which shall be signed by the insured to whom a copy shall be given. The general and particular conditions shall be drafted in clear and precise terms. Those clauses limiting the rights of the insured shall be plainly marked and specifically accepted in writing.

The general conditions of the contract are subject to supervision by the public administration in the terms set forth in this Act.

If the Supreme Court declares that a particular clause in the general conditions of a contract is null and void, the competent public administration shall take steps to oblige all insurers to modify identical clauses contained in their own policies.” 

In this section it is important to highlight the importance of Article 76 of the Insurance Contract Law, which states: “The prejudiced party, or their heirs, shall have direct action against the insurer in order to demand compliance with the obligation to indemnify, without prejudice to the right of the insurer to re-claim against the insured in the event of the damages to the third party being due to the fraudulent conduct of the insured. The direct action is immune to the exceptions which the insurer may have against the insured. The insurer shall have the right, however, to oppose the action by alleging the exclusive blame of the prejudice party and the personal exceptions that the insurer has against the latter. In order to exercise the direct action, the insured shall be obliged to inform the prejudiced third party or their beneficiaries of the existence of the insurance contract and its contents." 

Therefore, any injured party could claim directly against the insurer of the party or parties that cause(s) the damage without the need to sue the main party.  

That said, the situation in which a third party sue an insurer is a frequent scenario in our jurisdiction. In relation to actions arising from any breach of contract that may affect a third party, that third party may, by virtue of the damage caused, bring a claim against the tortfeasor and his insurer, or simply against the latter, provided that in the framework of the proceedings or prior to them, the liability of the former has been declared. 

Article 7.1 of the Spanish Civil Code states that rights must be exercised in accordance with the requirements of good faith. Extrapolating this precept to the Insurance Contract Law, the legislator established in Article 19 that: “The insurer shall be obliged to pay the indemnity, except when the loss has been caused in bad faith by the insured”. 

There are no penalties for insurers for paying claims late in our insurance legislation, although for unjustified delay in the payment of compensations, Article 20 of the Insurance Contract Law imposes on insurers the payment of interest per day of delay.  

In this respect, it is understood that the insurer incurs a delay if it has failed to pay the compensation within the period of three months from the date of the loss, or if it has failed to pay the minimum sum known by it to be due within 40 days following receipt of notification of the loss. 

The indemnity for delay shall be imposed at the instance of the judicial court and shall consist in the payment of an interest equal to the legal money interest in force at the time of accrual increased by 50%; such interest is considered to accrue daily, without the need to be claimed judicially. However, if two years have elapsed since the date of the loss without payment, the annual interest shall not be less than 20% from that second year. 

As mentioned at 1.2 Litigation Process and Rules on Limitation, legal proceedings tend to be lengthy and, in many cases, from the time the claim arises until the first instance judgement is handed down, it could take from 15 to 24 months or more, so that in view of the amounts claimed, the interest set out in Article 20 could increase the amount of compensation by a large sum. 

The declarations made in the insurance questionnaire to the broker or to the insurance company about the risk that is the object of the insurance binds the policyholder. In this regard, Article 10 of the Insurance Law states that the insurer may rescind the contract by means of a declaration addressed to the policy holder within one month from the date on which the insurer becomes aware of the non-disclosure or inaccurate declaration by the policyholder. 

Insurance companies usually manage claims internally for medium and large or complex risks. In mass risks, there are usually delegated authorities for the management of files, as is the case with the management of policy underwriting where insurance agents are involved. This is usual in vehicle liability policies, healthcare, home, multi-risk, etc. 

In recent years, we have seen an increase in this type of organisation offering multidisciplinary services to insurance companies in claims management until they are brought to court, at which point they are usually handled by law firms with expertise in certain areas. 

Liability insurance policies include coverage for legal costs. Most of the claims in which this type of coverage is activated are in criminal proceedings. These proceedings are usually lengthy and involve long periods of criminal investigation, for which the legal costs incurred (appearance at depositions, pleadings, etc) have to be paid. After this phase, if criminal evidence is finally found, the trial takes place, with the legal costs increasing until the sentence is issued.  

In addition to the above, within the framework of legal proceedings, the courts and tribunals can impose the costs of the proceedings on the losing party, so that in this case, the insurer should also pay the legal costs incurred by the winning party in the proceedings. 

The problem with civil liability insurance policies is that the assumption of legal costs is required by law, so it is difficult to see how this will change in the coming years. Likewise, due to the high level of competition in the market (especially in relation to some insurance lines such as D&O or professional liability), entities have been increasing coverage and limits with lower premiums, creating an intrinsic risk for this type of policy. 

Legal costs in Spain depend on the litigation in question. There is no definite criterion, although a few years ago the Bar associations issued guiding fee criteria that lawyers take into account when invoicing their services at court. These criteria are indicative and may be modified by the competent judges hearing the case. 

Regarding the complexity of litigation in the insurance field, more and more coverages are being offered to an ever-changing market. By way of example, a few years ago there was no cyber-risk insurance, and nowadays it is one of the branches that is experiencing the greatest growth. For this reason, we understand that in the coming years, the complexity of cases will increase, and judges and magistrates will have to be increasingly more specialised in specific matters. 

The Spanish market offers legal defence insurance by which the insurer is obliged, within the limits established in the Law and in the contract, to cover the expenses that the insured may incur as a consequence of his/her intervention in an administrative, judicial or arbitration procedure, and to provide him/her with the judicial and extrajudicial legal assistance services derived from the insurance cover (Articles 76 a)-g) of the Insurance Contract Law). 

This type of insurance has some requirements that differentiate it from other insurances, such as:  

  • it must be the object of an independent contract or it may be included in a separate chapter within a single policy, in which case the content of the guaranteed legal defence and the corresponding premium must be specified; 
  • the insured party will have the right to freely choose the procedural representative and lawyer who will represent and defend him/her in any kind of proceedings; and 
  • this insurance excludes coverage for the payment of fines or sanctions. 

Article 43 of the Insurance Contract Law states that the insurer, upon payment of the compensation, shall have the right to exercise the rights and actions which by virtue of the loss belonged to the insured, against those persons liable for the loss, up to the limit of the amount's compensation. The insurer shall not be able to exercise in prejudice of the insured those rights that have been surrogated. The insured shall be responsible for those prejudices that, by his/her acts or omissions, have been caused to the insurer in his/her subrogation rights. 

Besides, the insurer shall not have the right of subrogation against any person whose acts or omissions give rise to liability on the part of the insured, in accordance with the Law, nor against any person who caused the loss and is, with regard to the insured, a direct relative, or a collateral relative within the third civil degree of consanguinity or adopted parent or adopted child that lives with the insured. This rule shall have no effect if the liability arises from bad faith or if such liability is covered by means of an insurance contract. In this latter case, the subrogation shall be limited in its scope in accordance with the terms of such contract. 

In the event of the insurer and the insured concurring against the third party liable for the loss, the amounts recovered shall be shared between them in proportion to their respective interests. 

As we have pointed out at 6.1 Right of Action to Recover Sums from Third Parties, the regulation of the right of subrogation to claim the damage caused from a third party is regulated in Article 43 of Insurance Contract Law. In this case, the insurer has to base its claim on having paid the compensation to his/her insured person, thus corresponding to him/her all the rights that corresponded to the first. 

The jurisprudence has established a series of requirements for the insurer to be able to exercise the recovery action, these being:

  •  the existence of an insurance contract;
  • the reality of a loss covered by said contract;
  • the effective payment, sufficiently accredited, of the compensation that corresponds to the insured, in accordance with the contract; and
  • the direct liability of a third party, against whom the subrogatory or repetition action is exercised, which in turn requires the causal relationship between the action of the third party and the loss (that is to say, based on the existence of a claim of the insured against the third party liable, as a consequence of the same damage that gave rise to said indemnity). 

The state of emergency for the COVID-19 health crisis was declared on 14 March 2020 and remained in effect until 21 June of the same year.  

On 14 March 2020, judicial activity was paralysed throughout the Spanish territory, with the court administration agreeing to ensure the provision of only the minimum services, such as actions with cases with convicts, matters of gender violence or prison supervision actions in order to avoid irreparable harm to citizens.  

Since June 2020, court system has operated normally, although some of the trials (around 30%) are being held via videoconference. Prior to 2020, no trials or statements were held via videoconference even though this practice has been provided for in our procedural laws since 2003. Therefore, we could say that COVID-19 has accelerated the modernisation of the judicial system.  

Nevertheless, over 15%-20% of personnel at the administrative office of the courts are on leave due to COVID-19 and, consequently, judicial activity has slowed down. 

We believe that due to the backlog of proceedings in courts and tribunals, the situation will worsen in the coming months, returning to normal by the end of 2022. 

The insurance lines that will be most affected are BI, D&O, healthcare, travel and event cancellation, property liability insurance for public administrations and credit insurance. However, because 

Spanish Law allows for a period of two years in which to file a claim against an insurance company, we are not currently seeing many claims due to COVID-19. In the second half of 20021, we are expecting a barrage of claims against companies for BI coverage insurance once insureds have quantified their loss of profits (normally, these types of insurance have a coverage of 12 months for BI).   

Moreover, we are experiencing a notable increase in bankruptcy due to the COVID-19 crisis, which will lead to an increase in claims against directors and officers due to their management in response to the pandemic. 

With regard to health and death policies, there has not been too much movement as insurance companies are generally compensating without much opposition. Some insurers have tried to introduce modifications in insurance contracts due to COVID-19 and in the middle of the insurance period, but they have retreated promptly. One example of this was found in sick leave insurance. Due to the pandemic, many workers have been taken to ERTE's (Temporary Employment Regulation File) and, therefore, the insurers claimed lack of insurable interest (because they were not really working). Various associations have condemned this type of practice and insurance companies have had to rectify this immediately.  

Lastly, the government, having declared a state of emergency, must assume administrative liability. The massive, forced closure of companies has caused multimillion-euro losses to the hospitality, travel, etc sectors, with which, logically, these companies will be directed against all acts emitted by the authority (both at local level and state level). We are now seeing this type of claim being filed, but no ruling has been issued as yet. 

Regarding the core business of the insurance industry, we are seeing an increase in the online contracting of policies and through internet insurance comparators. In addition, there are insurance lines that are experiencing high growth, such as cyber-insurance and personal lines (life, health and death). This is leading to an aggressive practice in terms of premiums offers, with high competition among insurers in these sectors. 

Conversely, certain lines of insurance are experiencing an increase in their premiums with coverage equal to or even lower than those previously offered. Some examples can be found in D&O, professional civil liability or all-risk material damage insurance (in addition to BI coverage). Other insurance lines such as credit or healthcare have also been affected.  

Moreover, the UNESPA Association (Spanish Union of Insurance and Reinsurance Entities) and the large companies in the sector have asked the government on several occasions to grant public support to maintain credit policies to companies. Despite this, and contrary to what many European governments have agreed to in relation to this type of policy in their respective countries (Germany has provided EUR30,000M in non-refundable funds, France in the amount of EUR10,000 million, etc), the government has only proposed assistance in the form of a loan in the amount of EUR300 million to insurers, which they would have to return in a couple of years. 

Furthermore, not only has the government not granted any help to the sector, but it has also decided to raise taxes on insurance premiums from 6% to 8% for 2021.

Floods, devastating storms, apocalyptic snowfall, etc are becoming more and more frequent. Climate change arrived a few years ago and is affecting all the continents across the globe to a great extent. 

Insurance policies are closely related to the above, although Spanish jurisdiction has a differentiating element with respect to other countries, namely the Insurance Compensation Consortium. The Insurance Compensation Consortium is a state company whose objective is to compensate for losses caused by extraordinary events, including natural events and, among them, climatic risks.  

There has been a clear increase in the payment of extraordinary claims in the last decade, with flood indemnities having an upward trend with upturns that are significantly larger every few years. This evolution is attributed to the increase in the insurance penetration rate, the increase in insured exposures and the greater volume of insured capital, which is a clear reflection of the socio-economic development of each period, without ruling out some impact, which is difficult to determine, of the effects of climate change. 

In this respect, insurers can expect to see an increase in claims of life, health and accident lines due to events related to higher temperatures, droughts, diseases and other natural phenomena.  

Lastly, it should be noted that the insurance sector must gradually contribute to the adaptation of it in a context of climate change, by incentivising policyholders to mitigate risks through risk-based pricing and contract conditions, thus enabling the most polluting industries to progressively reduce their emissions. 

Spain has not had any profound procedural or substantive law reforms linked to the insurance sector for several years. It is expected, however, that in the coming years there will be a reform of our procedural laws, starting with the Criminal Procedural Act. This will have a direct impact on the insurance sector, which will be directly affected in terms of all ongoing litigation. 

Many of the reforms proposed by politicians are aimed at restructuring the judiciary in order to speed up the processing of cases within a framework of transformation and dynamism, while maintaining legal quality intact. Undoubtedly, new technologies will have to play an important role, as it is through them that the transformation of the judiciary will be channelled. 

Blanco y Asociados Abogados

Lagasca, 105, 3º
28006 Madrid
Spain

+34 915 638 407

+34 915 638 347

secretaria@bya.abogado www.bya.abogado
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Law and Practice

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Blanco y Asociados Abogados (B&A) is a law firm founded in 1987, specialised in insurance law and civil liability, which provides legal services throughout Spain. The firm has its main office in Madrid and the insurance team is composed of ten people. Given the great knowledge and extensive experience of the firm in the implementation of insurance programmes; the drafting and reviewing of general, particular and special conditions of all insurance lines; the adaptation of foreign law policies to the Spanish legal system; the direct management or legal supervision in the processing of claims; and, in particular, in the claim or judicial defence of controversial losses, B&A is considered as a clear professional reference for all kinds of insurance or risks affecting large companies and industrial sectors. Furthermore, B&A is a member of the Global Insurance Law Connect (GILC), a worldwide network of prestigious law firms specialised in insurance law and civil liability.

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