Argentina: Insurance Company Condemned To Pay In Excess Of The Coverage Limit

Tribunal C of the Court of Appeals in Civil and Commercial Matters condemned an insurance company to pay in excess of the civil liability coverage limit for vehicle insurance which was set at AR$ 3,000,000.

In re: "Aimar, María Cristina y otro c/ Molina, José Alfredo y otros s/ daños y perjuicios (acc. tran. c/ les. o muerte)" and "Aldasoro y Compañía S.A. y otro c/ Molina José Alfredo y otros s/ daños y perjuicios (acc. tran. c/ les. o muerte)" the plaintiffs (the victim's heirs in one case and the owners of the vehicle in the other) sued Mr. José Alfredo Molina and cited the insurance company as a co-guarantor in order to obtain compensation for the damages suffered in a car accident that claimed two lives. The plaintiff claimed that the clause which established the coverage limit of AR$ 3,000,000 should be declared void.

The first instance judge ruled against the defendant ordering him to pay AR$ 6.333.670, plus interests and the costs of the proceedings. However, the plaintiff's request to declare the limitation clause void was dismissed. According to the judge's opinion, the plaintiff did not have the right to file a complaint challenging the coverage limit; therefore, the insurance company was only obliged to respond for up to said limit of AR$ 3,000,000 provided for in the insurance policy.

This decision was appealed by both the defendant and the plaintiff. The latter disagreed not only on the liability distribution and percentages assigned by the judge, but also on the ruling regarding title to object the coverage limit.

Tribunal C of the Court of Appeals partially accepted the plaintiff's arguments. In the first place, they overruled the decision by the first instance judge that denied the plaintiff the right to challenge the coverage limit. In addition, they also voided the limiting clause. Regarding compensation, despite reducing the amount from AR$ 6,333,670 to AR$ 4,972,045, the court ordered the insurance company to pay for said amount in full.

The Appellate Court argued that the main goal of the obligation to hire a vehicle civil liability policy (in section 68 of Argentine Traffic law No. 24,449) is to protect and maintain intact the patrimony of the damaged party, not that of the insured. 

Although the AR$ 3,000,000 limit was mandated to the insurance market through Circular No. 2819 issued on May 3, 1993 by the Argentine Superintendence of Insurance (the "SSN" after its acronym in Spanish), and further confirmed by SSN Resolution No. 35,863/2011, the Court understood that said limitation runs against the principles of Argentine Traffic Law.

According to the Tribunal's decision, when there is an insurance contract, the insurer "could not and should not have ignored the high litigiousness of the automobile insurance market. Norr should they have ignored the average amount of the awards granted by court rulings in cases of grave lesions, which will often exceed the AR$ 3,000,000 limit."

Therefore, an insurance policy containing this limit (even when it is established by the SSN) cannot be deemed a valid contract as it fails to protect the damaged party.

Another important argument made by the Court of Appeals is that the victim should be treated as an "insurance consumer". They considered the victim to be the main part of the insurance contract, which should be protected. Therefore, the victim is covered by section 37 of the Consumer Protection Law, by which any abusive clause in a consumer contract is considered not to be  valid.

This ruling constitutes an important precedent as it understands that the limit included in the policy is an obstacle to achieve the protection aimed by Argentine Traffic Law.

The second instance decision has been appealed by the insurance company to the Argentine Supreme Court of Justice; therefore, for the time being, we  cannot know for sure if the limit will be declared valid by the highest judicial authority.

It is important to note that on July 14,, 2016, the SSN published Resolution No. 39.927/2016, by which the maximum limit was modified to the amount of AR$ 6,000,000. Another important aspect of this resolution is that it allows insurance companies to set higher values (above the limit of coverage), with prior approval by the SSN (see "Liability Insurance for Motor Vehicles: Modifications Made by the Superintendence of Insurance" in Marval News #163).

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