Introduction

In 2025, insurance litigation in Spain has been shaped by two main drivers: the consolidation of Alternative Dispute Resolution Mechanisms (MASC) as a mandatory pre-litigation step, and the impact of the April 28th blackout.

Organic Law 1/2025, of 2 January, reinforced the “MASC first, court second” approach, requiring parties in civil and commercial disputes to explore consensual solutions before commencing litigation – a particularly relevant change for insurance disputes, where swift resolution and technical claims handling are crucial. Entering into force on 3 April 2025, the law introduced practical adjustments (time limits, proof of attempted resolution, minimum standards) that claims departments and law firms have already incorporated into their internal protocols.

The 28 April 2025 blackout – which affected Spain and Portugal – has been the other major change. Beyond the technical debate over its origin, the event triggered a surge in claims for business interruption, property damage and loss of profits, as well as disputes over exclusions (power failure, force majeure, cyber-risk) and sub-limits. Public and industry reports have anticipated a significant volume of potential losses for insurers, prompting more sophisticated litigation strategies (expert evidence and concurrent causation analysis, among others). Preliminary government findings ruled out a cyber-attack as the primary cause, pointing instead to a multifactorial origin, complicating liability allocation and claim aggregation.

A further development in 2025 has been the rise of ESG-related litigation, particularly in connection with Directors’ and Officers’ (D&O) liability policies. ESG compliance has become a decisive factor in underwriting and claims handling, with lawsuits increasingly targeting directors for alleged greenwashing, failure to adopt preventative environmental measures, cybersecurity breaches, lack of diversity in governance, and insufficient transparency in executive remuneration. Spanish courts are beginning to address these claims, often inspired by trends in other European jurisdictions, and their rulings are expected to shape the interpretation of policy exclusions and the scope of coverage for ESG-related risks. This evolution is turning D&O insurance into a key risk management tool not only for financial protection but also for driving good corporate governance and sustainable business practices.

Against this backdrop, insurance litigation is becoming more strategic, technical and outcome-oriented. From a business perspective, insurers are reviewing policy wordings and claims protocols to anticipate disputes and reduce exposure, while law firms are strengthening their pre-litigation capabilities and technical expert networks. From a jurisprudential standpoint, key rulings expected in the coming months are likely to clarify coverage issues and set standards for quantifying damages. All signs indicate that 2025 will be a trend-setting year, with lasting effects on the practice of insurance litigation in Spain.

This chapter of the guide will now address several issues that are relevant in Spain’s courts and tribunals or that deserve, due to their interest, to be analysed in this chapter.

ESG Litigation and the Transformation of D&O Insurance in Spain

In 2025, ESG has become a decisive factor in insurance litigation in Spain, with a particular impact on directors’ and officers’ liability (D&O) policies. Sustainability is now a central element of the global economy, and insurers must not only provide coverage against climate-related risks but also adapt their own operations to ESG standards.

D&O policies – originally designed to safeguard the personal assets of decision-makers against third-party claims – are now confronted with an expanded risk landscape driven by regulatory and societal pressure on sustainability. As highlighted by Berkley España, corporate activity is increasingly subject to regulation across diverse areas, and breaches of ESG obligations are already giving rise to a surge in claims and litigation against executives.

Common causes include proceedings related to climate change impacts, lawsuits for greenwashing, failures to implement preventative measures against environmental or cyber risks, claims regarding the lack of diversity on boards, and allegations of opacity in executive remuneration. Underestimating these risks can prove costly, leading to reputational and financial harm, higher premiums and greater difficulty in securing coverage.

WTW’s global survey on D&O risks confirms that ESG factors are now among the top concerns for directors and officers. Environmental litigation has grown exponentially: by the end of 2023, more than 2,280 climate-related lawsuits had been filed worldwide, many against senior executives accused of mismanaging the energy transition or persisting in carbon-intensive investments. In Spain, while the trend has developed more slowly than in other European jurisdictions, ESG-related litigation is also on the rise.

Spanish directors additionally face heightened responsibilities under the CSRD and CSDD Directives, which require not only accurate disclosure of non-financial information but also the implementation of measures to prevent negative impacts on human rights and the environment. Non-compliance opens the door to litigation from shareholders, consumers and NGOs, with direct consequences for D&O coverage.

Insurers, for their part, are incorporating ESG criteria as critical underwriting variables – penalising companies with deficient sustainability policies or internal controls and rewarding those with robust ESG frameworks. This evolution is transforming the traditional function of D&O insurance: from a passive shield against conventional liability to an active tool for ESG risk management.

Greenwashing litigation exemplifies this shift. In Spain, environmental groups have filed complaints against major energy companies over allegedly misleading campaigns on biofuels. Moreover, in February 2025 the courts ruled in favour of Repsol against Iberdrola in a case concerning alleged “eco-posturing”, underlining the legal challenges in framing certain forms of corporate communication.

Cybersecurity is another emerging axis. As Berkley notes, insufficient safeguards against cyber-attacks may give rise to negligence claims against directors. The transposition of the NIS2 Directive into Spanish law further intensifies this framework, introducing fines of up to EUR10 million for breaches of cybersecurity obligations and significantly expanding the exposure covered under D&O policies.

In conclusion, ESG litigation has moved from being a diffuse threat to a concrete reality that is redefining the function of D&O insurance in Spain. Directors can no longer ignore their ESG responsibilities, while insurers adjust underwriting and pricing according to compliance levels. Today, D&O insurance serves not only as a shield for personal assets but also as a catalyst for sound corporate governance and sustainable business practices.

The Insurer’s Exoneration From Default Interest Under Article 20.8, LCS: Can ADR Mechanisms Suspend the Accrual of Interest?

Paragraph 8 of Article 20 of Law 50/1980, of 8 October, on the Insurance Contract (LCS), establishes a significant exception to the general regime of default interest: “The insurer shall not be liable for default interest where the failure to pay the compensation or the minimum amount is based on a justified cause or one not attributable to it.” The interpretation of this concept has been the subject of extensive case law, as the scope of “justified cause” determines the extent of protection afforded to the insured against delays in payment.

The Spanish Supreme Court has traditionally adopted a restrictive interpretation of “justified cause”. In judgments such as STS 317/2018 (30 May), STS 47/2020 (22 January) and STS 643/2020 (27 November), the Court has clarified that the mere existence of litigation or the filing of a claim in court does not constitute a justified cause exempting the insurer from paying default interest. The exception is only recognised when there is genuine uncertainty or a rational doubt as to the existence or scope of the obligation to indemnify, or when the insurer’s position is based on a reasonable interpretation of the policy or of the case law prevailing at the time.

The Court has also identified specific situations where “justified cause” may be found: when there is a reasonable dispute over coverage, the claimant’s inclusion in the policy, the date of the triggering event, or the basis for calculating compensation. Conversely, mere disagreement as to the quantum, lack of liquidity of the claimed amount, or the use of judicial proceedings as an excuse to delay payment do not constitute justified cause (STS 56/2019, 25 January; STS 556/2019, 22 October; STS 419/2020, 13 July).

The recent Supreme Court Judgment 1227/2025 synthesises and reinforces this doctrine. In its seventh legal ground, the Court held that

“there is no justified cause excusing the insurer’s passivity in settling the claim when: (i) the existence of the loss is not disputed; (ii) the insured’s liability is not contested; and (iii) coverage under the policy is acknowledged. Likewise, mere disagreement as to the amount of compensation claimed does not constitute justified cause for avoiding the accrual of interest.”

The Court added that justified cause only exists when it is necessary to resort to judicial proceedings to resolve an objective situation of uncertainty or rational doubt regarding the insurer’s obligation to indemnify – that is, when judicial determination is indispensable to dispel existing doubts regarding the reality of the loss or its coverage.

Against this background, the entry into force of Organic Law 1/2025, of 2 January, on measures to improve the efficiency of the Public Justice Service, introduces a novel element: the mandatory requirement to attempt an Alternative Dispute Resolution (ADR) mechanism as a precondition for the admissibility of civil and commercial claims. This raises the question of whether initiating a legally required ADR procedure, carried out in good faith, could constitute a “justified cause” for the purposes of Article 20.8, LCS.

It is reasonable to argue that, if the insurer actively participates in the ADR process and makes a reasoned and fair offer, it would be acting consistently with the spirit of Article 20.8, since the delay in payment would not be attributable to it but rather the result of a mandatory extrajudicial process. However, ADR mechanisms are still in the early stages of judicial interpretation. A prevailing view seems to be emerging that a merely formal attempt at settlement – without a genuine effort to negotiate – does not qualify as a valid ADR and therefore cannot easily be deemed a justified cause. The key will lie in the good faith and substantive reality of the extrajudicial attempt: only where the ADR process reveals an objective and reasonable dispute as to the obligation to indemnify should justified cause be recognised.

In conclusion, the recent procedural reform opens the door to a new scenario in which ADR may play a significant role in the management of default interest, but its effectiveness will depend on how the courts interpret the sufficiency and good faith of its use. The debate is now open, and it will likely be case law that ultimately defines the limits of “justified cause” in the context of these new procedural efficiency mechanisms.

The Retroactive Application of the Compensation Scale Under Law 35/2015: Jurisprudential Shift, Admissible Scenarios and Impact on the Insurance Sector

Supreme Court Judgment No 951/2025, delivered by the Civil Chamber on 17 June 2025, marks a turning point in the doctrine governing the application of the compensation scale (baremo) set out in Law 35/2015. In this landmark decision, the Supreme Court revises its traditional approach and, for the first time, admits the possibility of applying the baremo retroactively in extra-contractual cases unrelated to motor vehicle traffic. This doctrinal shift has significant implications both for judicial practice and for insurers’ calculation of compensation.

Until this ruling, the Supreme Court’s consolidated case law held that the baremo applicable for quantifying damages was the one in force at the time of the harmful event or the diagnosis of the injury. This position was supported by judgments such as STS 429/2007, STS 460/2019 and STS 453/2021.

Judgment 951/2025 departs from this line of reasoning. In its Second Legal Ground, the Court acknowledges that, although the transitional provision of Law 35/2015 limits its mandatory application to accidents occurring after its entry into force, this restriction applies only to road traffic accidents. In disputes outside this scope, the baremo has merely guiding value, which allows the judge to use the most up-to-date system as a reference for assessing the damage.

The Court held that applying the previous baremo could result in insufficient compensation and run counter to the principle of full reparation (principio de indemnidad plena) that governs the law of damages, thereby overcoming the limitations of the former system. As the judgment expressly states:

“The use of the compensation scale set out in Law 35/2015 as a guiding criterion for assessing personal injury in cases unrelated to motor vehicle traffic does not infringe the principle of non-retroactivity, provided that its application is grounded in reasons of equity and proportionality and is not imposed automatically. In other words, it is not applied as a mandatory rule but as an interpretative tool that enables a fairer valuation.”

The Supreme Court therefore justifies the change in approach on the grounds that the 2015 baremo may be used for guidance without infringing the principle of non-retroactivity, thus respecting the transitional provision of Law 35/2015.

However, retroactive application of the baremo is not admitted in a generalised manner but is limited to specific circumstances:

• matters unrelated to motor vehicle traffic;
• where there has been an express request by the parties; and
• in cases involving progressive harm or damage whose temporal determination is particularly complex.

Judgment 951/2025 is a watershed moment for the insurance sector, as it allows the 2015baremo to be applied to losses pre-dating its entry into force. This jurisprudential shift compels insurers to review their technical reserves in anticipation of potentially higher compensation awards, to prepare for a likely increase in litigation – particularly in industrial, healthcare and environmental contexts – and to rethink their litigation strategies, as courts may accept the baremo as a guiding criterion even in the absence of a mandatory rule. Furthermore, insurers will need to revisit indemnity limits and coverage clauses in new policies, with particular focus on professional, industrial and environmental liability insurance.

Irrevocable Beneficiary Clauses in Life Insurance and the Effect of Divorce: A Doctrinal and Jurisprudential Overview Under Spanish Law

The designation of beneficiaries in life insurance contracts is one of the most significant mechanisms for transferring wealth outside the succession process. Spanish law, following the model of continental systems, allows the policyholder wide discretion to name, revoke or modify beneficiaries, provided that the formal requirements of the Insurance Contract Act (Ley de Contrato de Seguro – LCS) are met. A decisive inflection point arises when the policyholder waives the right of revocation under Article 87, LCS. This waiver converts the beneficiary’s position from a mere expectancy into a legally fortified right conditioned only upon the occurrence of the insured event, while at the same time restricting the policyholder’s economic powers over the policy, such as surrender, advance payment or pledge. The irrevocable beneficiary thus acquires a stronger legal status, often described in doctrine as a vested credit right that may even be assignable under the general rules of credit assignment.

However, irrevocability does not insulate the designation from all challenges. Spanish contract law places central importance on the concept of cause (causa), understood as the underlying reason or purpose of a legal act. Beneficiary designations are typically made causa donandi, out of liberality, though they may also be solvendi causa, as consideration for an obligation. The distinction is crucial: a designation linked to a debt or contractual duty will generally persist even if the personal circumstances of the parties change, while a designation motivated by marital status may lose its foundation when that status ceases.

The question of what happens upon divorce has been addressed indirectly by Spanish courts through analogy with succession law. In its judgments 539/2018 and 531/2018, the Supreme Court held that testamentary dispositions in favour of the spouse or cohabiting partner lose effect if the marriage or partnership is dissolved before death, since the reason for the appointment ceases to exist. Several appellate courts have followed this approach in the insurance context, interpreting the designation of the “spouse” as presuming the normal continuity of the marital bond and not a situation of crisis or rupture. Accordingly, separation or divorce may render the designation ineffective unless there is clear evidence that the policyholder wished the benefit to survive beyond the marital relationship.

This reasoning can extend even to irrevocable designations. Article 87, LCS merely removes the policyholder’s power of revocation; it does not prevent a court from examining whether the designation continues to have effect when the underlying cause has disappeared. In this sense, irrevocability restricts the policyholder, not the judge’s duty to ascertain the real will of the disposer. Where the beneficiary clause explicitly refers to the status of spouse and that status no longer exists at the time of the insured event, courts may consider that the clause has lost its purpose, even if it was initially made irrevocable. Academic commentary supports this interpretation, viewing it as consistent with the principle of fairness and the need to honour the policyholder’s true intention.

The practical consequences of this line of reasoning are significant. For insurers, post-divorce claims can generate conflicting demands from ex-spouses and heirs, with the risk of double payment if the proceeds are delivered to the wrong party. Many insurers now encourage policyholders to keep beneficiary designations updated and review them at major life events. For policyholders, the key takeaway is the importance of reviewing designations upon separation or divorce to ensure that the policy reflects current intentions.

In sum, the figure of the irrevocable beneficiary under Spanish law is a powerful estate-planning tool but not an immutable one. Divorce may extinguish a designation whose cause was the marital bond, even if irrevocable, unless there is evidence of a contrary will or a designation made as consideration for a debt. The prevailing interpretative trend suggests that Spanish courts will prioritise the policyholder’s real intention and the principle of equity, balancing the security of irrevocable designations with the need to adapt them to supervening circumstances. For both insurers and insureds, clarity in drafting and proactive review of beneficiary clauses remain the best safeguards against future litigation.