LIMITATION PERIOD INSURANCE AND REINSURANCE

Report no. 8 – Reinsurance Working Party

Peggy Sharon, Adv.Levitan, Sharon & Co.

Israel

Presentation at AIDA Budapest26th November 2008

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Limitation Period – Why?

Balance between conflicting interests:

• Claimant: to enforce right through legal proceedings

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• Defendant: to be discharged of being subject to a potential court claim

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Limitation Period – General(Contractual Claims)

3 years

5 years

7 years

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10 years

10 years

20 years

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Limitation – Procedural or Substantive?

Most jurisdictions - substantive.

Expiration of the limitation period – extinguishes the right

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Limitation – Procedural or Substantive?

Israel, UK and USA -procedural.

Expiration of the period – bars the remedy

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Commencement

The limitation period commences on the day on which the cause of action accrued;

• the date of the violation of the right, or

• When the obligation becomes due.

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Circumstances affecting the Period

Fraud

• Fraud - the limitation period does not commence until the fraud is discovered

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Admission of Liability – Stay of the Running

• The limitation period is suspended and begins to run anew by the debtor’s express admission of the debt

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Special (Personal) Circumstances

• Minors, mentally disturbed persons, or matrimonial relationships – stay of limitation period or delayed commencement.

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Stipulation regarding the limitation period - Possible?

• No: The length of the limitation period is regulated by the law and the parties are not at liberty to change it.

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• Yes: In the majority of legal systems, the parties are free to stipulate regarding the limitation period by agreement.

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Reinsurance Claims

Are there specific laws regarding these claims?

In most countries - no specific rules apply to reinsurance claims.

NOYES

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Specific rules concerning limitation period for reinsurance claims –

two years.

Specific Rules in Marine and Aviation – five years.

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Commencement of Limitation Period in Reinsurance

Reinsurance Contract - Contract of Indemnity.

On what date the cause of action of the reinsured accrues? Different answers.

??

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Commencement - Reinsurance

Possible Dates:

•The day on which the cedent paid the original insured

In the USA: reinsurer's obligations under the reinsurance contract are not triggered until at least when the ceding company paid a claim.

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• The date of judgement/settlement against the cedent – establishment of liability:

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• The date of the occurrence – the insured event

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Cut-Through Clause

Undeveloped Areas

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• Does it change the relationship of the Original Insured vs Reinsurer to be identical to direct insurance, including for purposes of the Limitation Period?

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Cut-Through Clause

• Assignment of right – including the period to enforce it – as in contracts?

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Cut-Through Clause

• Direct privity towards Reinsurer – direct insurance claim – shorter period

Thank You

תודה

Köszönöm

LIMITATION PERIOD INSURANCE AND REINSURANCE

Report no. 8 – Reinsurance Working Party

Peggy Sharon, Adv.Levitan, Sharon & Co.

Israel

Presentation at AIDA Budapest26th November 2008