Introduction

Spain’s insurance litigation landscape is undergoing a period of remarkable transformation. A confluence of landmark judicial decisions, unprecedented systemic events, and evolving European regulatory frameworks is reshaping the boundaries of insured risk, redefining the allocation of liability, and compelling the market to reassess long-standing underwriting assumptions. The year 2026 has already delivered a series of developments that will leave a lasting imprint on the sector – developments that reflect both the increasing sophistication of the Spanish courts and the growing complexity of the risks that insurers are called upon to absorb.

This edition of the guide examines four areas where the intersection of law, regulation and market practice is generating the most significant shifts.

The first section addresses a question of profound importance for product liability insurance: whether a product recall, in and of itself, is capable of establishing that a product was defective at the time it was placed on the market. The Spanish Supreme Court’s recent judgment in cassation appeal No 8763/2024, delivered on 6 May 2026, has substantially relaxed the evidentiary requirements for proving defectiveness in cases where the product can no longer be physically examined. By allowing defectiveness to be inferred from post-market surveillance data, safety notices, and voluntary withdrawal measures, the ruling edges the Spanish regime closer to a form of quasi-strict liability in the medical device sector – with far-reaching consequences for coverage, claims reserving, and the insurability of post-commercialisation regulatory conduct.

The second section turns to what is arguably the most extraordinary loss event to affect the Spanish insurance market in recent memory: the nationwide power blackout of 28 April 2025. The incident left millions of consumers and businesses without electricity for several hours, triggering an unprecedented volume and variety of claims – from spoiled perishable goods and damaged industrial machinery to business interruption losses across virtually every sector of the economy. With no definitive official determination of the blackout’s causes yet available, insurers and policyholders alike face acute uncertainty regarding coverage, exclusions, subrogation prospects and the potential role of the Spanish Insurance Compensation Consortium. The discussion explores how this uncertainty is channelling disputes towards the courts and what that may mean for future systemic-event litigation.

The third section examines a dual development – one ruling from the Court of Justice of the European Union, the other from the Spanish Supreme Court – that is redrawing the permissible boundaries of ancillary insurance financing within loan agreements. Both rulings converge on a single critical principle: when an insurance premium is financed as part of a loan’s principal, courts will scrutinise the genuine transparency of the arrangement and the availability of effective alternatives for the consumer. Read together, these decisions carry significant implications for bancassurance distribution models and for the litigation risk associated with single-premium insurance products embedded in consumer and mortgage credit.

The fourth and final section analyses two recent Supreme Court judgments that address core structural questions in directors’ and officers’ (D&O) liability insurance. The rulings confront the consequences of marketing D&O policies drafted under Anglo-Saxon legal traditions – particularly the exclusion of legal-entity directors from the definition of “insured” – and establish important criteria regarding the standing of a shareholder to claim, as an injured third party, under a D&O policy taken out by the company whose director caused the loss. Together, these decisions underscore the urgent need for policies marketed in Spain to be adapted to the specificities of Spanish corporate and insurance law.

Across these four areas, a common thread emerges: the Spanish courts are assuming an increasingly active role in defining the contours of insurable risk, and the pace of judicial and regulatory change is outstripping the adaptation capacity of many existing policy wordings. For insurers, reinsurers, brokers and corporate policyholders operating in the Spanish market, understanding these developments is no longer optional – it is essential.

Does a Product Recall Amount to a Defect? Recent Supreme Court Doctrine and Its Implications for Product Liability Insurance

The recent judgment of the Spanish Supreme Court (Civil Chamber), issued in cassation appeal No 8763/2024 on 6 May 2026, represents a turning point in the interpretation of liability for defective products, with significant implications for medical device manufacturers and insurers. The dispute arose from a metal-on-metal hip prosthesis implanted in 2007 and explanted in 2014. The device was destroyed in accordance with standard hospital protocols, making any subsequent expert examination impossible. One year later, the manufacturer issued a safety notice contraindicating the product for female patients and withdrew from the market femoral heads with certain characteristics – including the one implanted in the claimant – due to a revision rate higher than originally anticipated. On this basis, the Supreme Court overturned the judgment of the Provincial Court and held that the prosthesis was defective despite the impossibility of examining the specific implanted unit.

The ruling is particularly noteworthy because it significantly relaxes the evidentiary requirements traditionally associated with the defective product liability regime. Article 139 of the Consolidated Text of the General Consumer and User Protection Act (TRLGDCU) requires the injured party to prove the defect, the damage and the causal link. The Provincial Court had held that, since the explanted prosthesis no longer existed, it was impossible to demonstrate a specific defect in the implanted unit. The Supreme Court, however, accepted that defectiveness could be inferred from indirect evidence, such as information obtained through post-market surveillance, observed revision rates, or safety measures adopted in relation to the product.

From the perspective of manufacturers and their insurers, the judgment raises important concerns. In particular, it ultimately concludes that the product was defective even though the specific unit could not be examined and without conclusively identifying the precise nature of the defect alleged to have caused the claimed damage.

The key issue raised by the decision is not so much a formal alteration of the rules governing the burden of proof, but rather the weight attributed to information generated years after the product was placed on the market. The Court states that a product recall does not necessarily mean that the product was defective when it was first put into circulation. Nevertheless, in practice, the safety notice, the contraindication for certain patients, and the withdrawal of specific product references played a decisive role in the Court’s assessment of defectiveness.

It is precisely at this point that the judgment warrants critical reflection. Post-market surveillance is a fundamental element of the regulatory framework governing medical devices and is intended to identify risks that may not have been detectable during the pre-market stages. There is therefore a risk that actions driven by regulatory prudence may subsequently be used as retrospective evidence of an original defect. Paradoxically, the more robust the surveillance systems and the more diligent the manufacturer’s response, the greater its potential exposure to future claims.

This issue is far from insignificant. Although the Supreme Court insists that a product recall does not automatically establish defectiveness, the combination of the inability to examine the specific unit and the importance attributed to post-commercialisation safety measures appears to substantially raise the evidentiary threshold that manufacturers must meet to rebut an inference of defectiveness. The practical effect is an approach that comes close to a quasi-strict liability regime in cases involving product recalls or field safety corrective actions. This is particularly relevant in the medical device sector, where such measures are a normal feature of post-market surveillance systems and do not, in themselves, constitute an admission of an original defect.

The implications for product liability insurance are especially significant. The growing importance that the judgment attaches to recalls and safety corrective actions as evidentiary elements increases uncertainty regarding insured exposure and complicates the ex-ante assessment of risk. It is entirely conceivable that this may lead to stricter underwriting conditions and greater scrutiny of the temporal scope of coverage.

For medical device manufacturers, the judgment also serves as a warning regarding litigation and evidentiary strategy. The preservation of technical evidence, proper documentation of risk assessments, and the traceability of decisions taken throughout the product life cycle may prove decisive in future proceedings. Likewise, it would be prudent to review product liability insurance programmes on a regular basis to ensure that coverage adequately addresses scenarios in which subsequent regulatory actions acquire decisive importance in litigation.

In conclusion, Supreme Court Judgment (STS) 678/2026 introduces an additional layer of uncertainty into product risk management. The significance attributed to product recalls and safety corrective actions as indicators of defectiveness may reduce the predictability of insured exposure and, in practice, move defective product liability closer to a quasi-strict liability regime in certain circumstances.

The Blackout as a Source of Litigation

On 28 April 2025, a major power blackout occurred, affecting virtually the entire Spanish mainland – as well as Portugal – leaving millions of consumers and businesses without electricity for several hours and triggering an unprecedented wave of claims against insurance companies. The losses resulting from the interruption of the power supply are highly diverse, including:

• damage to electronic equipment and industrial machinery;
• spoilage of perishable goods due to the disruption of refrigeration chains;
• business interruption losses and the resulting loss of profit;
• failures of IT and communications systems; and
• damage in particularly sensitive sectors such as healthcare and transport.

The scale of the event and the large number of affected parties have placed insurers in an exceptional situation, putting significant pressure on the ordinary mechanisms for claims handling and loss adjustment.

Although litigation arising from electricity supply disruptions is not new within the Spanish legal system, its scale changes dramatically when the interruption results from a widespread systemic failure. In such cases, the simultaneous concentration of thousands of claims, the variety of losses being asserted and the complexity of the potentially applicable insurance coverages create a situation particularly prone to disputes. Disagreements regarding the scope of policy coverage, the quantification of losses, or the applicability of certain exclusions make these events fertile ground for increased litigation.

The main source of uncertainty, however, lies not only in the magnitude of the loss event itself but also in the absence, to date, of a definitive technical determination by the competent authorities and regulatory bodies regarding the causes of the blackout. Despite the economic and social significance of the incident, and the various analyses and reports published since then, the sector still lacks a sufficiently clear official conclusion capable of accurately establishing the chain of causation and, where appropriate, the corresponding liabilities.

This circumstance has a direct impact on the insurance sector. Determining liability within the electricity industry requires a rigorous technical reconstruction of events, particularly in an environment involving multiple participants engaged in generation, transmission, distribution and system operation activities. However, the lack of a conclusive official explanation has left room for differing interpretations regarding the origin of the incident, making it more difficult to identify potentially liable parties and complicating insurers’ decision-making processes.

The practical consequences of this uncertainty are evident. Insurers are compelled to make decisions regarding coverage, exclusions and potential subrogation or recovery actions in a context of considerable legal uncertainty. At the same time, policyholders face difficulties in identifying the parties against whom claims should be directed and the legal grounds upon which compensation claims should be based. In such a scenario, disagreements between the parties are almost inevitable, and disputes are likely to be resolved through litigation.

Moreover, in the absence of a definitive official conclusion, expert reports commissioned by insurers, insured parties and electricity system operators will likely play a central role in resolving these disputes. Discussions concerning the causes of the blackout and the allocation of liability will therefore be transferred to the courts, where judges will be required to assess competing technical opinions and determine which is supported by the evidence. This points towards complex proceedings involving substantial evidentiary burdens and potentially lengthy litigation.

In this context, and given the extraordinary scale of the event, some commentators have suggested a possible intervention by the Spanish Insurance Compensation Consortium (Consorcio de Compensación de Seguros, or CCS) as a mechanism for compensating losses. The closest precedent is the DANA (isolated high-level depression) that affected the Valencia region in October 2024, where the Consortium fully exercised its indemnification role because the event constituted an extraordinary risk expressly covered under the regulatory framework governing extraordinary-risk insurance compensation.

However, the comparison is legally debatable. Unlike the DANA – a natural phenomenon expressly included among the extraordinary risks covered by the Consortium – the blackout of 28 April 2025 does not appear, based on the information currently available, to fall within any of the categories of extraordinary risks covered by the relevant legislation. Rather, it appears to involve an incident related to the operation of the electricity system and the possible conduct of specific operators, meaning that compensation issues would more appropriately be addressed within the framework of ordinary civil liability rather than through the CCS extraordinary-risk compensation scheme.

In conclusion, the April 2025 blackout illustrates how systemic events affecting critical infrastructure can become significant sources of litigation for the insurance sector. The absence of a clear official conclusion regarding the causes of the incident and the potential allocation of responsibility has increased uncertainty for both insurers and insureds, shifting a substantial part of the dispute into the courts. It is likely that judicial decisions will ultimately play a decisive role in defining liabilities and establishing important principles for the management of future disputes arising from similar large-scale events.

Limits on Financing Ancillary Insurance Within Loans

2026 is proving to be a turning point in the judicial treatment of ancillary insurance financed within the loan itself, with two developments converging from different angles – consumer credit and mortgage lending – yet sharing the same analytical starting point: delimiting which amounts form part of the capital on which remuneratory interest may be charged, and which instead constitute costs associated with the transaction.

The first development comes from the Court of Justice of the European Union (CJEU) in its judgment of 23 April 2026 (Case C-744/24, Bank Polska Kasa Opieki), issued in response to a Polish request for a preliminary ruling on Directive 2008/48/EC on consumer credit agreements. In that case, a consumer had allocated part of the nominal amount of his loan to the payment of a credit insurance premium classified as voluntary, and the bank applied the contractual interest rate to that amount as well. The Court held that the “borrowing rate” may only apply to the “amount of credit drawn down” – that is, the sums actually made available to the consumer – thereby excluding amounts allocated to costs of the credit itself, such as the financed premium, which form part of the “total cost of the credit” rather than the amount of credit granted.

The CJEU clarified that the judgment does not invalidate the insurance policy or prevent its cost from being passed on through other means; what it precludes is treating that cost as capital that generates interest. The ruling redefines the economic structure of consumer credit, with direct implications for business models, litigation risk and regulatory strategy in Spain, and takes on particular interpretative significance ahead of the transition to Directive (EU) 2023/2225, which will replace Directive 2008/48/EC on 20 November 2026.

The second development comes from the Spanish Supreme Court, First Chamber, in Judgment No 913/2026, handed down on 11 June 2026, this time in the mortgage context. The dispute arose from a mortgage loan executed in 2017, the deed of which included a single premium of EUR24,467.62 – over 16% of the principal – for a decreasing-term life insurance policy taken out with an insurer. The Supreme Court reversed the criterion applied by the Court of Appeal and held that, on the specific facts of the case, the insurance formed an inseparable commercial unit with the loan, since the borrower had not been offered any alternative as to the insurer or as to instalment payment of the premium.

The Chamber reasoned that the cost of the insurance was not disclosed in the loan deed itself, appearing only in the binding offer and in ancillary documentation, and that this lack of disclosure – combined with the consumer’s inability to ascertain the full APR and the effective cost of the financing – rendered the clause non-transparent and, given the resulting imbalance, unfair. The Court further noted that the borrower could have avoided financing the single premium through a system of periodic premiums, an option that was not offered to him. The Supreme Court also endorsed the position taken by the Directorate-General for Insurance since 2006, which has classified this practice as inappropriate and, in some cases, clearly unfair. As an effect of the nullity, the insurance policy retains its coverage until the judgment becomes final, but the bank must refund the single premium together with the agreed interest, deducting only the proportional part corresponding to the period during which the policy was actually in force.

It is important to underline that neither ruling declares the automatic nullity of every insurance policy linked to a loan: both confine their reasoning to a specific set of circumstances (eg, the absence of an alternative insurer, the lack of clear disclosure of the cost in the loan deed, and corporate ties between the lender and the insurer), the concurrence of which will need to be assessed on a case-by-case basis.

That said, read together, both rulings point in the same direction: both the Supreme Court and the CJEU, in the consumer credit sphere, focus their scrutiny on the genuine transparency of the transaction and on the availability of effective alternatives for the consumer – not on the mere fact that the premium is financed within the loan’s principal.

Directors’ and Officers’ Liability Insurance (D&O): Key Issues in Light of the Recent Case Law of the Supreme Court

Directors’ and officers’ liability insurance – known as D&O insurance – has become consolidated as an essential instrument in corporate risk management. In a context of increasing judicialisation of the liability of corporate directors, the D&O policy offers dual protection. On the one hand, it covers the civil liability of the director in the performance of his duties and, on the other, it guarantees legal defence costs against the claims brought against him.

The Civil Chamber of the Supreme Court has recently issued two judgments of extraordinary relevance – Judgments No 433/2026, of March 19th, and No 479/2026, of March 25th – that address core issues relating to the subjective delimitation of the insured risk and the standing to claim coverage. Both decisions provide far-reaching interpretative criteria for the configuration of these insurance products in the Spanish market. The following discussion will address the main legal issues arising from both rulings.

Nature of D&O insurance and the problem of imported policies

D&O insurance is configured as liability insurance (Article 73, Insurance Contract Act (ICA)) taken out by the company (policyholder) for the account and benefit of its directors (insureds). It is a contract for the account of another (Article 7, ICA), whose covered risk includes both the indemnity to the injured third party and the legal defence costs of the insured (Article 74, ICA).

One of the most relevant contributions of Supreme Court Judgment No 433/2026, of March 19th, is the explicit denunciation of the “uncritical reception” of D&O policies drafted by US insurers which, when marketed in Spain through mere translations, do not take into account the particularities of Spain’s legal system. The “Business Guard D&O” policy signed with AIG defined “director” exclusively as a natural person, following the tradition of legislations such as that of Delaware. However, Article 212 bis of the Capital Companies Act expressly allows a legal entity to be a director.

In the case under review, Comercial Aliper 1996, S.L. (“Aliper”), a legal entity director of a company in insolvency proceedings, claimed from the insurer coverage of its legal defence costs in the misconduct classification section. The Supreme Court dismissed the claim, as the policy only covered natural persons, and Aliper did not hold the status as an insured. The judgment also emphasises that in liability insurance the positions of insured and injured third party are structurally incompatible, which prevents the policyholder from claiming simultaneously under both conditions.

The standing of the shareholder as an injured third party

Supreme Court Judgment No 479/2026, of March 25th, addresses a matter of extraordinary significance, namely the standing of the shareholder of a company to claim, as an injured third party, coverage under the D&O insurance taken out by the company whose director has caused them direct damage. The case pitted Comsa, S.A.U. (“Comsa”) – a 100% subsidiary of Comsa Emte, policyholder of the policy with QBE Insurance – against the insurer. The general manager of a Chilean subsidiary of the group had poorly managed certain projects, reporting overstated profits by more than EUR23 million, causing Comsa direct damage materialised in the enforcement of guarantees for more than EUR30 million.

The Court establishes a decisive criterion: when the policy does not contain a definition of “injured third party” nor an exclusion clause in this regard, the standing of the shareholder to exercise the direct action of Article 76 of the Insurance Contract Act cannot be denied. (Article 76 provides: “The injured party or their heirs shall have a direct action against the insurer to require fulfilment of the obligation to pay the indemnity.”)

The insurer itself acknowledged that “the policy in question does not contemplate, as it should, the definition of injured third party”. However, it is required as an essential requirement that the shareholder has suffered a direct damage to his assets, not merely indirect or reflective.

The judgment identifies two ways to contractually delimit the injured third party. On the one hand, its direct definition with exclusions, and, on the other, the indirect definition through the concept of “claim”, excluding those filed by certain persons. The absence of both mechanisms broadens the coverage beyond what was contemplated when rating the risk. Nevertheless, both judgments agree that defence costs correspond only to whoever holds the status of insured, since the injured third party may claim the damages indemnity, but cannot access the intuitu personae coverages of the policy.

Conclusions and future prospects

The judgments analysed enjoy special relevance in Spanish case law on D&O insurance and highlight the need for a review of underwriting practices in this line of business. First, the adaptation of the policies to the singularities of Spanish law is imperative, so that the figure of the legal-entity director, fully recognised by Spanish legislation, is reflected in the definition of insured. The uncritical importation of Anglo-Saxon models generates coverage gaps that can prove extraordinarily costly.

Secondly, the contractual delimitation of the injured third party is revealed as an essential element of the D&O policy. The insurers must define precisely who can hold that status, through express, clear and understandable clauses. The absence of such delimitation can significantly broaden the scope of coverage. Thirdly, the distinction between direct damage and derivative shareholder damage will gain increasing importance in future litigation, particularly in corporate groups with cross guarantees.

Ultimately, these decisions underline that D&O insurance requires careful contractual design that takes into account the legal system in which it is to produce its effects, the corporate structure of the insured group, and a correct delimitation of all the participating parties.