On 1 August 2015 a new Civil and Commercial Code ("CCC") will come into effect introducing key modifications in the Argentine legal system. Although the Insurance Contract Law ("ICL") remains in force, the new CCC will certainly influence insurance activities in Argentina and will be relevant to all insurers including FI and D&O insurers.
In terms of scope, it is notable that the CCC is stated to apply to existing contractual relationships, and not just those entered into after the CCC is in force. Accordingly, ongoing insurance contracts will therefore be regulated by the CCC, although only in relation to mandatory provisions. Non-mandatory provisions will still be regulated by the previous code.
However, despite this express provision, it remains to be seen how the application of the CCC will be interpreted by the courts. In principle Argentine laws should not have a retroactive effect.
The new CCC introduces some significant changes as follows.
- The CCC recognises both adhesion and consumer contracts. In adhesion contracts, only one party is in control of the drafting (in the case of insurance contracts this is the insurer). As insurance contracts are regulated by the Argentine Superintendence of Insurance, they can only be drafted as adhesion contracts. However, they will also be considered consumer contracts under the CCC if the insured procures the cover for his own benefit or his family or social group.
- Insurers must be aware that adhesion contracts will now be subject to more rigorous regulation preventing abusive terms, even when not in a consumer context. In effect, clauses that refer to documents or information not provided to the insured; distort obligations of the insured; extend the rights of the insurer, or are simply not "predictable", will be deemed unwritten and struck out.
- In relation to consumer insurance contracts, when in doubt, the interpretation that is more favourable for the consumer will prevail. Accordingly, the Argentine Consumer Protection Act must be carefully analysed when writing insurance contracts.
- The CCC provides that contractual and non-contractual civil liability claims will be subject to a three-year limitation period, leaving behind the traditional distinction which applied different rules. Whilst a one-year special limitation period for insurance contracts under the ICL remains in force, the new three-year period will be relevant to inwards liability claims and potential subrogation. The previous legislation established a ten-year limitation period for contractual claims. The CCC contains a transitional period, so that ongoing claims will be now time-barred after three years from the CCC's effective date, unless the prior applicable term ends before hand. Thus the limitation period for existing claims may be significantly shortened.
- The new CCC introduces the application of compound interest, which was previously prohibited. Therefore insurers may be best-served in seeking to resolve claims much more quickly, to reduce exposure to higher payments. This is especially given that the timescale for litigation in Argentina is often very long. Nevertheless, it is worth noting the CCC gives judges the power to reduce interest if the average cost of similar transactions is disproportionally exceeded.
- Another noticeable incorporation for professional liability insurers is that the concept of loss of chance is now expressly mentioned among the recoverable damages. Whilst this concept has been recognised by the Courts for many years; it is now on a codified basis.
- Foreign currency obligations will be considered to be obligations to deliver amounts of goods instead of sums of money, as is currently the case. As a result, an obligation due in foreign currency may be payable in its equivalent in Argentine pesos.
In conclusion, given the magnitude of the changes the CCC introduces and the continuing discussions regarding its application, it will be crucial to pay attention to its further interpretation by the Argentine Courts. It is certain that this new legislation represents a considerable change of perspective and a new era in the Argentine market.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.