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4 August 2021

From 1 January 2022: Direct right of claim for all liability insurances

1. Introduction

The new (partially revised) Insurance Contract Act (in German referred to as "Versicherungsvertragsgesetz" and “VVG”) will come into force on 1 January 2022. In addition to much that is familiar, it contains novelties that are intended to improve the protection of policyholders and damaged parties. The likely most fundamental reform is the introduction of a general direct right of claim of the damaged party against the insurer. However, a closer look shows that the effect of this novelty should be put into perspective for both insurers and potential damaged parties.

2. What will change?

The direct right of claim is already known from the Road Traffic Act (in German referred to as "Strassenverkehrsgesetz" and “SVG”). According to Art. 65 thereof, the damaged party has a right of claim directly against the insurer within the framework of the contractual insurance coverage. Neither defenses derived from the insurance contract nor from the VVG may be raised against them.

Such a direct right of claim has some advantages for the damaged party. The insurer bears the risk of an insolvency of the liable policyholder. Further, the damaged party may assert the claim against an insurer. Without the involvement of the courts claim settlements should, at least in tendency, be settled more quickly and more cost-effectively.

From 1 January 2022, anyone who has a liability claim will have the right to assert their claims directly against the liability insurer of the liable policyholder, who does not necessarily have to be the same person as the direct wrongdoer (art. 60 para. 1bis of the new VVG). To be in a position to enforce this direct right of claim, the new VVG also grants the damaged party a right of information about the insurance company as well as the type and the scope of the insurance coverage in question (art. 60 para. 3 of the new VVG). The information  request is to be addressed to the liable policyholder or to the designated supervisory authority, in Switzerland referred to as FINMA (supervising authority for banks and insurers).

3. Significance for practice

The new provision of the new legislation may be put into perspective as follows:

  • In contrast to the SVG, the damaged party must in principle accept statutory and contractual defenses to coverage. Such defenses are partially excluded in the area of compulsory liability insurance. In these cases, the insurer cannot oppose the claim on the basis of gross negligence or intentional causation of the insured event, breach of obligations, failure to pay the premium, and a contractually agreed deductible (Art. 59 para. 3 of the new VVG).
  • It must also be taken into account that the new provision does not exempt the damaged party from the procedural obligation to advance costs in the event of litigation in court. This may remain an impediment to the enforcement of claims (the advance on cost is determined in relation to the amount in dispute). If the claims are high, the enforcement may even prevent the damaged party from asserting the claims.
  • The scope of application of the absolutely mandatory provisions and the relatively mandatory provisions is limited. The direct right of claim according to Art. 60 of the new VVG (absolutely mandatory) as well as the limited exclusion of defense according to Art. 59 para. 3 of the new VVG (relatively mandatory) do not apply to credit or bail insurance insofar as it covers professional and commercial risks, transport insurance and so-called professional policyholders (Art. 98a of the new VVG). As a consequence, insurers may contractually impose deviating provisions in these areas, i.e., provisions to the detriment of the policyholder, and, therefore, to potential damaged parties.

    The law exhaustively defines who is considered a professional policyholder (Art. 98a para. 2 of the new VVG). These policyholders include, among others, companies with professional risk management in place or companies that exceed two of the following three thresholds: 1. balance sheet total: CHF 20 million; 2. net sales: CHF 40 million; 3. equity: CHF 2 million.

4. Conclusion

In certain cases, the new legislation will lead to an improved position of damaged parties. Because of the insurer's opportunities to raise defenses against an asserted claim and the limited scope of application of the direct right of claim, it remains to be seen and is questionable whether the new law will lead to a significant increase of legal actions against and in damage payments by insurers compared to today’s situation.

Authors: Daniele Favalli, Dorothée Krapf

Category: Litigation and Arbitration

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