NEW INSURANCE LAW - COMMERCIAL CODE

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NEW INSURANCE LAW - COMMERCIAL CODE

BOOK II TITLE VIII CONCERNING INSURANCE CONTRACTS

(Modified by Law 20667 entered into force on 1 December 2013)

SECTION ONE. COMMON RULES FOR ALL TYPES OF INSURANCE

Art. 512. The insurance contract. Insurance contract means transferring one or more risks to the insurer in exchange for the payment of a premium, whilst the latter is obliged to compensate the insured for whatever damage has been done or to pay an amount, an income or whatever other benefits have been agreed. The risks involved may refer to certain goods, to the right to require certain benefits to be provided, to the equity as a whole and to an individual's life, health and physical or intellectual integrity. Not only death but also survival amount to risks susceptible to being covered by insurance. The rules mentioned in this title govern all private insurance. They do not apply to social security, to health contracts regulated by Statutory Law N° 1 of 2006 of the Ministry of Health which establishes the abridged, coordinated and systemized text of Decree Law N° 2.763 of 1979 and Acts N° 18.933 and N° 18.469, nor to insurance covering industrial securities and occupational illnesses. Art. 513. Definitions. For all of the purposes of the regulations governing insurance, the following definitions are defined:

a) Insured: is whomsoever is affected by the risk that is transferred to the insurer.

b) Insurer: whoever bears the risk.

c) Loss payee: whomsoever, even when not insured, is entitled to compensation in the event of a loss.

d) Certificate of cover and a definitive certificate: a document that mentions that an insurance has been taken out and issued albeit subject to a collective or a floating insurance policy.

e) Provisional certificate: a document that mentions the terms of an insurance contract entered into and which is subject to the condition that the insured complies with the requirements stipulated, within a given deadline.

f) Contractor, contracting party or policyholder: whoever enters into the insurance with the insurer and upon whom, generally speaking, the obligations and the burdens of the contract fall.

g) Quote: the written offer made by the insurer in order to enter into an insurance contract.

h) Deductible: The stipulation under which the insurer and the insured agree inasmuch as the latter will bear, in any event, up to the amount of whatever loss has been agreed.

i) Abandonment: the transfer of the object of the insurance in favor of the insurer, in the event of a loss.

j) Endorsement: a written modification of the policy, unless this term appears to have been used as commonly accepted.

k) Exemption: a stipulation in which the insurer and the insured agree that the former will bear the burden of the whole of the damage when it exceeds whatever amount was agreed.

l) Guarantees: the requirements devoted to circumscribing or reducing the risk, stipulated in an insurance contract, such as the conditions that have to be complied with for compensation to be paid in the event of a loss.

m) Under-insurance or insufficient insurance: that in which the amount insured is lower than the value of the object insured at the time of the loss.

n) Interest insurable: that which the insured has when the risk is not undertaken, regardless of what is set forth in article 589 in relation to insuring persons.


ñ) Total assimilated or constructive loss: reasonably abandoning the object insured, either because the total actual loss appears inescapable or because it cannot be avoided without incurring in expenses that exceed three quarters of its value after disbursement has been made.

o) Total real or actual loss: whatever completely destroys or irremediably deprives the goods insured, or in such a manner that it damages it which makes it definitively lose the ability of performing the purpose for which it was to be devoted. A loss that causes damage to at least three quarters of a good's value will amount to it being considered a total loss thereof.

p) Policy: the document vouching for the insurance.

q) Proposal: the written offer for contracting the insurance, addressed to the insurer by the contracting party, the insured or a third party acting on their behalf.

r) Floating insurance policy: a normative contract that spells out, in general terms, what stipulations have been agreed for specific relations of insurances that will be formalized at a later date.

s) Premium: the retribution or price of the insurance.

t) Risk: the possibility of a loss befalling the insured or loss payee or a necessity susceptible to being estimated in money.

u) First loss insurance: is that in which it is stipulated that, even though under-insurance might exist, the insured will not bear any part whatsoever of the loss, except in the case that this loss exceeds the sum insured.

v) Remote insurance: one that has been agreed between the parties by means of any transmission system and a digital or electronic record of the written or spoken word.

w) Collective insurance: one which, in one sole policy, covers the same risks, of a determined or determinable group of persons.

x) Loss: the occurrence of a risk or a damaging event mentioned in the contract.

y) Over-insurance: one in which the amount insured exceeds the value of the object insured at the time of the loss.

Art. 514. Proposal. The proposal to enter into an insurance contract shall set down the cover, all background information and the circumstances necessary for appraising the extent of the risks involved.

For this purpose, the insurer shall hand over to the policyholder, in writing, all of the information relating to the contents of the contract to be entered into. This shall contain, at least, the type of insurance being dealt with; what risks are covered and any exclusions; the amount insured, how it was determined and any deductibles; the premium or method for calculating it; the duration of the insurance contract as well as an explanation of the date cover begins and ends.

Art. 515. Entering into and proving the insurance contract. An insurance contract is consensual.

The existence and stipulations of the contract may vouch for all of the means of proof envisaged by law, always provided that there exists a principle of proof in writing that stems from a document consisting of a telex, fax, electronic mail message and, generally speaking, any transmission system and a digital or electronic record of the written or spoken word.

The insurer will not be allowed any proof whatsoever that is contrary to the sense of the policy he has issued after the contract has been entered into.

If the insurance consists of a certificate of definitive cover, it will be understood that the terms and conditions of the corresponding collective or floating insurance policy are part and parcel of it.

Art. 516. Ways in which to contract the insurance. An insurance on behalf of someone else. The insurance may be contracted by oneself or on behalf of a third party by virtue of a special or general power of attorney and even without the other party's consent or authorization. It may also be contracted on behalf


of an undefined, but determinable third party, as stipulated by the parties, identifying the insured in the policy under the formula of "to whomsoever it may refer".

It will be understood that the insurance refers to whoever has contracted it, so long as the policy does not express that it is on behalf of or for a third party.

With insurance on behalf of someone else, if the policyholder is in possession of the policy, he is entitled to collect any compensation, albeit the insurer is entitled to require that the policyholder vouch beforehand the insured's consent or demonstrates that he is acting with a mandate from the latter or out of a legal obligation or interest.

Art. 517. Contracting a collective insurance. Collective insurances are contracted in those cases in which, by means of one sole policy, a determined or determinable group of persons linked to or acting on behalf of the policyholder are covered.

In this case, the policyholder or the contracting party is the one who enters into the contract on behalf of an insured group.

Through the policyholder, the insurer shall hand over a copy of the policy, or at least a certificate that vouches for cover, to each one of the insured parties joining the collective insurance contract. In the last mentioned case, both the insurer as well as the policyholder and the insurance broker shall keep a copy of the policy at the disposal of the interested parties.

The insurer shall also notify the insured parties, through the policyholder, of any modifications to the insurance, which may only be made and come into force as from the next renewal of the contract. Any modifications not notified will be the responsibility of the insured party.

In that case, the insured may abandon the contract by means of a written communication to the insurer, within ten days from receiving the notification, in which case he shall be reimbursed with whatever premium had been credited since the modification.

If the communication concerning the abandonment has been submitted to the policyholder or the intermediary, knowledge of it by the insurer will be presumed as from the date of its submission.

The policyholder will be responsible for any damage caused as a result of his acts in the collective policies in which he takes part, regardless of the insurer's liability for whatever steps he had requested. The insurer may not take exception to the insured over any errors, omissions or deficiencies made by the policyholder.

With these types of insurance contracts, any compensation stemming from the losses is assigned to the insured party affected by them, or the loss payee, whichever the case may be.

Art. 518. Wording of the policy. The insurance policy shall express the following at least:

1. An identification of the insurer, that of the insured and that of the contracting party if he is not the same person as the insured. If a loss payee has been appointed, he will be identified or how he can be identified;

2. A specification of the matter insured;

3. The interest insurable;

4. What risks are transferred to the insurer;

5. The time when the risk for the insurer begins and ends;

6. The amount insured, or how it will be determined;

7. The value the goods insured, if this has been agreed;

8. The premium of the insurance and the time, place and method of payment;

9. The date on which it is entered into and the insurer's material or electronic signature, and

10. The signature of the insured on all of those policies as required by law.


It will be assumed that whoever signs the policies or any documents modifying them are acting on behalf of the insurer, and that their signatures are authentic.

Art. 519. Delivery of the policy. The insurer shall hand over the policy or the certificate of cover, whichever the case may be, to the contractor of the insurance or to the broker taking part, within a deadline of five business days as from when the contract is ready.

The broker shall hand over the policy to the insured within five business days from receipt thereof.

Any non-compliance with the obligation to hand over the policy will entitle the insured to lodge a claim with the insurer or the broker, whichever the case may be, for damages.

Art. 520. The interest insurable. The insured must have a present or future insurable interest regarding the object of the insurance. In any event, it is necessary that such an interest exist the moment a loss occurs.

If the interest were to never exist, or it were to cease whilst the insurance is in force, the contract will end and the insured will be entitled to reimbursement of the portion of the premium not earned by the insurer corresponding to the time not run.

Art. 521. Essential requirements of the insurance contract. Nullity. The risk insured, a stipulation of the premium and the insurer's conditional obligation to compensate are the essential requirements of an insurance contract.

Should one or more of these elements not exist, the contract will become null and void.

Any contracts that are made for objects stemming from illegal trade as well as those not exposed to the risk insured or which have already run are also absolutely null and void.

Art. 522. Assigning the policy. An insurance policy may be nominative or to the order.

Assigning a nominative policy or any of the rights stemming from it requires the acceptance of the insurer.

Assigning the policy to the order of someone else may be carried out by simply endorsing it.

However, any credits owing to the insured as a result of compensation of a loss already occurred, may be assigned in accordance with the general rules concerning assigning credits.

The insurer may take exception to the assignee or the endorsee concerning any objections he might with regard to the insured or the loss payee.

Assigning the policy means transferring all of the rights which, for the insured, stem from the contract as well as those by law.

Art. 523. Validity of cover. The terms of the validity of the contract will be established in the policy.

Failing any stipulation concerning the beginning of cover, all risks will be borne by the insurer as from the moment the contract is ready for signing.

Lacking any stipulation concerning its extinction, it will be up to an appropriate court of law to determine until when the risks will be run by the insurer, bearing in mind the nature of the insurance, the clauses in the contract, custom and usage as well as any other pertinent circumstances.

Art. 524. The insured's obligations. The insured will be obliged to:

1. Sincerely declare all of the circumstances requested by the insurer in order to identify the object insured and appraise the extent of the risks;

2. Inform, whilst acting upon a request from the insurer to do so, concerning the existence of any other insurance covering the same object;


3. Pay the premium in the manner and at the time agreed;

4. Exercise all of the due care and watchfulness of a diligent father of a family aimed at preventing the loss;

5. Not aggravate the risk and notify the insurer of any circumstances he comes across that are of the characteristics mentioned in article 526;

6. In the event of a loss, exercise whatever safeguards are necessary to save the object insured or to conserve its remains;

7. Notify the insurer, as soon as possible once he has been notified of the occurrence of any event that could become or which is already a loss, and

8. Vouch for the occurrence of the loss reported and truthfully declare, without reticence, its circumstances and the consequences stemming there from.

The insurer shall reimburse any expenses in which the insured has reasonably incurred, in order to comply with the obligations expressed in number 6 and, in the event of an imminent loss, also what is set forth in number 4. Any reimbursement may never exceed the sum insured.

If the policyholder of the insurance and the insured are different persons, it will be up to the policyholder to comply with the obligations in the contract, except for those which, by their very nature, must be complied with by the insured.

The policyholder's obligations may be borne by the insured.

Art. 525. Declaration concerning the state of the risk. In order to provide the declaration referred to in number 1 of the previous article, it will suffice that the contracting party inform regarding whatever the insurer has requested concerning the events or circumstances he is aware of and which are able to identify the object insured as well as appraise the extent of the risk.

Once the insurance contract has been agreed and although the insurer has not asked for the declaration concerning the state of the risk, the latter may not allege errors, reticence or inaccuracies concerning the contracting party and neither any of those events or circumstances that are not included in that request.

If no loss has occurred and the contracting party had incurred, inexcusably in any determined errors, reticence or inaccuracies regarding the risk insured in the information he is requested to produce by the insurer in accordance with number 1 of the previous article, the insurer may rescind the contract. If any of the errors, reticence or inaccuracies made by the contracting party do not involve any of those characteristics, the insurer may propose a modification to the terms of the contract in order to adapt the premium or the conditions of cover to the circumstances not informed. If the insured rejects the insurer's proposal and does not reply to him within a deadline of ten days after the date on which it was sent, the latter may rescind the contract. In this last mentioned case, such a rescission will take place upon expiry of the deadline of thirty days as from the date the corresponding communication was sent.

If the loss has indeed occurred, the insurer will be exonerated from his obligation to provide compensation if it stems from a risk that had given rise to the rescission in accordance with the previous paragraph or, otherwise, he will be entitled to reduce compensation in proportion to the difference between the premium agreed and that which would have been agreed had he been aware of the real state of the risk.

These penalties will not apply if the insurer, prior to entering into the contract, were aware of the error, reticence or inaccuracies in the declaration or should have been aware of them or if, after entering into it, it is agreed that they be remedied or he expressly or tacitly accepts them.

Art. 526. Aggravating the risks insured. The insured or the contracting party, whichever the case may be, shall inform the insurer of any events or circumstances that substantially aggravate the risk declared and which arise after entering into the contract, within five days after having become aware of them, always provided that, because of their nature, they could not have been known in any other manner by the insurer.


It is assumed that the insured is aware of any aggravations of the risk that stem from events that occurred with his direct participation.

If a loss has not occurred, the insurer, within a deadline of thirty days as from the moment when he became aware of the aggravation of the risks, shall notify the insured of his decision to rescind the contract or propose a modification to the terms of it in order to adapt the premium or the conditions of cover under the policy. If the insured rejects the insurer's proposal or does not reply to him within a deadline of ten days as from the date it was sent, the latter may rescind the contract. In this last mentioned case, rescission will take place upon expiry of the deadline of thirty days as from the date on which the corresponding communication was sent.

If a loss has occurred and the insured or the contracting party, whichever the case may be, had indeed made the declaration concerning the aggravation of the risks mentioned in paragraph one, the insurer will be exonerated from his obligation to pay any compensation regarding the covers of the insurance affected by the aggravation. Nonetheless, in the event that the aggravation of the risk had led the insurer to enter into the contract in more onerous conditions for the insured, any compensation will be reduced proportionally with the difference between the premium agreed and that which would have been applied had the real amount of the risk been known.

These penalties will not apply if the insurer, as a result of the nature of the risks, had known them and had expressly or tacitly accepted them.

Except in the case of deceitful aggravation of the risks, with all of the situations in which, in accordance with the previously mentioned paragraphs, the contract may be ended, the insurer shall reimburse the insured in accordance with whatever proportion corresponds to the period in which, as a result thereof, he is exonerated from the risks.

Except for the type of insurance involving personal accidents, the rules concerning the aggravation of risks will not apply to personal insurance.

Art. 527. Concerning the premium. The insurer is owed the premium from the very moment in which the risks begin to run on his behalf and he will be entitled to receive or withhold its total in the event that compensation is due for a loss involving a complete write-off or validity has ended in accordance with article 523. Once the validity for cover has been agreed for a determined period, the premium will accrue proportionally for whatever time has lapsed.

The premium may consist of an amount of money, delivery of an object or an event estimable in money.

Except for anything agreed to the contrary, payment of the premium will be made the moment the policy, the certificate of cover or the endorsement, whichever the case may be, is handed over and it shall take place in the domicile of the insurer or in that of one of his representatives, agents or appointees for collection.

Art. 528. Non-payment of the premium. Non-payment of the premium will automatically mean termination of the contract once the deadline of fifteen days has expired as from the date the communication is sent which, with that aim in mind, is addressed by the insurer to the insured and it will entitle the former to require payment of the premium accruing up to the date of termination and all expenses involved in preparing the contract.

Once termination occurs, the insurer's liability for any losses thereafter will cease by law, without the need for any judicial declaration whatsoever.

Art. 529. The insurer's obligations. Besides what is set forth in article 519, the insurer is bound by the following obligations:

1) If the insurance is contracted directly without the mediation of an insurance broker: render advice to the insured, offer him the most appropriate covers for his needs and interests, enlighten him regarding the conditions of the contract and help him whilst the contract is in force, being modified or renewed and whenever a loss occurs. When the insurance is contracted in this manner, the insurer will be responsible for any violations, errors or omission committed and any damages caused to the insured parties.


2) Compensate any loss covered by the policy.

Art. 530. Risks borne by the insurer. The insurer will respond for any of the risks described in the policy, with the exception of whatever situations are expressly mentioned in it.

Failing a stipulation, the insurer will respond for all of the risks which, because of their nature, are involved, except for those excluded by law.

Art 531. Losses. Presumption of cover and exceptions. A loss is presumed to have occurred as a result of an event for which the insurer is liable.

The insurer may claim that a loss has been caused as a result of an event that does not make him liable for its consequences according to the contract or the law.

Art. 532. Time of the loss. If the loss were to begin whilst the insurance is still in force and continues after it has expired, the insurer will be liable for the total amount of the damages. But if it were to begin before and continue after the risks had begun to run on behalf of the insurer, he will not be liable for the loss.

Art. 533. Plurality in the causes of a loss. If the loss stems from several causes, the insurer will be liable for the loss if any of the concurrent causes amounts to a risk covered by the policy.

Art. 534. Subrogation. As a result of payment of compensation, the insurer is subrogated so far as the rights and actions are concerned that the insured might have against any third parties as a result of a loss.

The insurer will not be entitled to subrogation against a producer of the loss who happens to be the spouse or a consanguineous parent of the insured along the whole of the straight line and as far as the second degree inclusive of the collateral line, and for all of those persons on behalf of whom the insured has to respond civilly. Nonetheless, the doctrine of subrogation will exist if the liability stems from deceit or is covered by an insurance, but only with the amount for which it is covered.

The insured will be liable for his acts or omissions that could be detrimental to exercising any action in which the insured has been subrogated.

The insured will retain his right to sue the parties liable for the loss.

In the event of the insurer and the insured concurring when faced with third parties liable, whatever is obtained after collection thereof will be split between both in proportion to their respective interests.

Art. 535. Cases of deceit and gross negligence. The insurer will not be liable to compensate a loss that is caused as a result of the insured's deceit or gross negligence, unless anything to the contrary has been agreed in the case of gross negligence.

Art. 536. Extinction and a reduction of risks. The insurance will come to an end if the risk extinguishes after the contract has been entered into.

If the risk insured decreases, the premium will be adjusted in accordance with the risk that the insurer actually assumes from the very moment in which he learns of it. This rule will not apply to personal insurance, except when dealing with those concerning personal accidents.

Art. 537. Premature termination. The parties may agree that the insurer bring the contract to an end prematurely, expressing good grounds for doing so, unless they are legally bound otherwise.

In any event, ending the contract will occur upon the expiry of the deadline of thirty days as from the date that the corresponding communication is sent.

The insured may bring the contract to an end prematurely, unless legally bound not to do so, notifying it to the insurer.

The premium will be reduced in proportion to the period run, but in the event that a loss has occurred involving a total write-off, it will be considered as having totally accrued.


Art. 538. Retracting from a remote insurance contract. With insurance contracts entered into at a distance, the contracting party or the insured will be entitled to retract within a deadline of ten days as from when he receives the policy, without the need to give any reason whatsoever, with the right also to reimbursement of whatever premium had until then been paid by him.

This right may not be exercised if a loss can be vouched for, neither in the case of insurance contracts whose effects end prior to the deadline mentioned in the previous paragraph.

Art. 539. Other causes for the inoperativeness of the contract. An insurance contract becomes null and void if the insured, knowingly, provides the insurer with information that is substantially untrue when making the declaration referred to in number 1 of article 524, and it is also terminated if he incurs in such conduct when claiming compensation as a result of a loss.

In such cases, once the insurance has been announced null and void, the insurer may withhold the premium or require it be paid and also collect any expenses incurred in doing so, even though no risk whatsoever has run, regardless of whatever criminal action he may be entitled to take.

Art. 540. Situations in the event of a bankruptcy. Once an insurer's bankruptcy has been declared and any risks are still pending, the insured may bring the contract to an end prematurely, in which case he will be entitled to a proportional reimbursement of the premium or require a guarantee given at a meeting of creditors that the bankrupt's obligations will be complied with.

The insurer has the same option if the insured's bankruptcy were to occur before the whole of the premium is paid.

If the meeting of creditors or the receiver does not grant the guarantee within five days after the corresponding judicial request, the insurance will come to an end.

In the event of the insurer's bankruptcy, any credits owed by the insured parties as a result of losses occurred prior to the bankruptcy will enjoy the preference of number 5 of article 2472 of the Civil Code.

All in all, any payments for reinsurance will be to the benefit of the insured parties, whose credits for any losses to will take priority over any others that might be taken against the insurer, regardless of having to contribute toward any overheads involved in the bankruptcy or winding up, whichever the case may be.

Art. 541. Prescription. Any action stemming from an insurance contract ends after a term of four years as from the date on which the corresponding obligation became enforceable.

Other than for legal reasons, the prescription running against the insured may be interrupted as a result of a report on a loss and the new deadline will then run from the moment in which the insurer notifies his decision regarding it.

With life insurance, the statute of limitations for the loss payee will be four years and it will run as from whenever the existence of his right became known, but under no circumstances will it exceed ten years as from the date of the loss.

The deadline for prescription may not be abbreviated under any manner of expiry or based on the principle of estoppel and, with the insurance referred to in article 570, this period may not be less than that of whatever action is taken by the third party sustaining the damage against the insured.

Art. 542. The imperative nature of the rules. The provisions governing an insurance contract are of an imperative nature, unless they set forth otherwise. Nevertheless, any contractual stipulations that are more beneficial for the insured or the loss payee will be considered as being valid.

Quite apart from the foregoing, damage insurance contracted individually, where both the insured as well as the loss payee are legal bodies and the amount of the annual premium that is agreed is greater than 200 Indexation Units (UF) and hull and marine and air carriage insurance.


Art. 543. Resolving conflicts. Any difficulty arising between the insured, the contracting party or the loss payee, whichever the case may be, and the insurer, either in relation to the validity of inoperativeness of the insurance contract or as a result of an interpretation or application of its general or special conditions, compliance or non-compliance with it or concerning the origin of the amount of compensation claimed under it, will be resolved by a mediating arbitrator, appointed mutually by the parties whenever a dispute arises. If the interested parties are unable to reach an agreement as to who the arbitrator will be, he will be appointed by the lower courts of law and, in this case, the arbitrator will have the powers as such as regards procedure, albeit he must pass sentence in accordance with the law.

Under no circumstances, may the arbitrator be appointed in the insurance contract beforehand.

In any disputes between the insured and the insurer that arise as a result of a loss whose amount is less than 10,000 Indexation Units (UF), the insured may decide to exercise his actions in a court of law.

An ordinary or mediating arbitration tribunal appointed to hear the case will have the following powers:

1. Admit, at the request of either of the parties, besides the means of proof established in the Civil Proceedings Code, any other type of evidence.

2. Officially decree, at any stage of the proceedings, whatever evidence it deems is necessary, whilst summoning the parties.

3. Call the parties to appear so that they can acknowledge documents or instruments, justify their contests, with the ability to resolve them, without this meaning a pre-judgment as regards the core element under discussion.

4. Appraise the proof in accordance with the rules of healthy criticism, also being under the obligation to mention in the judgment the grounds for such an appraisal.

It will be up to the appropriate tribunal to hear, among the causes that the insurance contract gave rise to, the domicile of the loss payee.

All insurance companies shall send to the Securities and Insurance Superintendence an authorized copy of the final sentences that are handed down on matters included in this law, based on the processes to which they have been party, which will remain at the disposal of the public.

Art. 544. Classifying insurance. Insurance covers either damages or persons. Those concerning damages are real or equitable.


SECTION TWO. CONCERNING INSURANCE COVERING DAMAGES

& 1. GENERAL RULES

Art. 545. Aim. Insurance of this kind is aimed at compensating any damages sustained by the insured and which could affect corporeal objects, rights or equity.

Art. 546. Interest insurable. Anybody having an equitable interest, present or future, legal and estimable in money, may enter into an insurance contract against damages.

If there is no insurable interest at the time a loss occurs, the insured may not claim any compensation; but, in any event, he will be entitled to be given the benefit of paragraph two of article 520.

Art. 547. The concurrence of insurable interests. Different insurable interests may concur over the same object insured and which may be covered simultaneously, alternately or successively until such time as the value of each interest concurs.

Art. 548. Insuring universalities. Industrial, mining, agricultural, commercial establishments as well as land, maritime and aerial cargos and, generally speaking, the universalities of the whole of goods which, because of their location or some other circumstance, are the matter of the one same insurance, may be insured with or without a specific designation of the goods they contain or consist of.

The furniture that makes up the contents of a house may also be insured in the same manner, except for those that have a high value, such as jewelry, very expensive items, objects of art or the like, which shall be insured with a specific designation.

With one or the other insured, the insured shall identify the objects insured and justify their existence and value at the time of a loss.

Art. 549. Inherent defects. The insurer may not be held liable for any loss or damage stemming from inherent defects in the object insured, unless anything is stipulated to the contrary.

An inherent defect is the germ of destruction or deterioration that objects bear as a result of their very nature or use, even though they are assumed to be of the most perfect quality of their kind.

Art. 550. The principle of compensation. Regarding the insured, insurance against damages is merely a compensatory contract and it may never be utilized by him as an opportunity to earn money or become wealthy.

Art. 551. Insuring loss of earnings. So that an insured's loss of earnings may be covered, it shall be expressly agreed.

Art. 552. Sum insured and limits to compensation. The sum insured amounts to the maximum limit to compensation that the insurer is obliged to pay in the event of a loss and it does not represent a valuation of the goods insured.

With real insurance, any compensation will not exceed the value of the good nor the respective insurable interest at the time the loss occurs, even though the insurer has been held liable for a sum exceeding it.

If the amount insured were to consist of one amount only, it will be understood that this refers to the value the object has at the time of the loss.

With equitable insurance, compensation may not exceed, within the limits of the agreement, any detriment the insured's equity sustains as a result of a loss.

Art. 553. Proportional rule. If, at the time of a loss, the sum insured is lower than the value of the goods, the insurer will compensate the damage in a proportion between the amount insured and that which is not.


However, the parties may agree not to apply the proportional rule envisaged in the previous paragraph, in which case the insurer will not bear any part whatsoever of the damage if a loss occurs, unless it happens to exceed the sum insured.

Art. 554. Valuing the object insured. With real insurance, the value of the objects insured may be established by means of an estimation expressly agreed at the time the contract is entered into.

Merely announcing the sum insured or a declaration relating to the value of the goods made unilaterally by the insured in the proposal or in any other documents does not amount to an agreed valuation.

Should an agreed valuation exist, determining what damage is compensable will be done starting with that value, and article 552 will not apply.

The value agreed may only be contested by the parties if the stipulation suffers from a lack of consent.

Once the source of a contest has been established, the sum insured and the premium will be reduced until such time as the real value of the good insured is reached.

Art. 555. Insurance at replacement value. With real insurance, at the time that the insurance is contracted, the parties may stipulate that payment of any compensation will be made on the basis of the replacement or reposition value of the goods insured, without exceeding the limit of the sum insured. When dealing with merchandise, it may be agreed that any compensation be equal to its sales price on the market.

Art. 556. The effects of the plurality of insurance. Whenever more than one insurance has been contracted that covers the same matter, interest or risk, the insured may lodge a claim with any of the insurers regarding payment of the loss, according to the corresponding contract, and then any of the others for the balance not covered. The total amount of the compensations received by the insured may never exceed the value of the object insured.

If the insured has received more than what he was entitled to, those insurers who had paid out the excess will be entitled to seek restitution from him and they will also be entitled to collect any damages if it involved the insured's misconduct.

When reporting the loss, the insured must notify all of the insurers with whom he has contracted, of any other insurance covering it.

The insurer paying for the loss, is entitled to take action against any of the others regarding the amount it is entitled to regarding the compensation, depending on the amount covered by the corresponding contracts.

Art. 557. Co-insurance. Co-insurance exists if, with the insured's consent, two or more insurers agree to a determined risk together. In this case, each insurer is obliged to pay compensation in proportion to the respective amounts in which they participated.

If one sole policy is issued, it will be assumed that the co-insurer issuing it is the principal acting on behalf of all of the others for the purpose of the contract.

Art. 558. Over-insurance. If the sum insured exceeds the value of the good insured, either of the parties may require its reduction, as well as that of the premium, except in case that value had been agreed in accordance with article 554.

If a loss were to occur in such circumstances, any compensation will cover the damage caused depending on the real value of the goods.

If over-insurance stems from the insured's misconduct, then the contract will become null and void, notwithstanding which the insurer will be fully entitled to the premium as a penalty, regardless of any criminal action he may wish to take.

Art. 559. Transmitting the insurance. Once the ownership of the object insured has been transmitted universally or singularly, the insurance will run to the advantage of the assignee from the moment in which the


risks refer to him, unless the insurance had been consented to by the insurer to the original person involved. Once the insurance has ended as a result of this cause, whatever is set down in paragraph two of article 520 will apply.

Art. 560. Transferring the insurance. If the object of the insurance or interest insurable were to be transferred, the insurance will legally cease to exist at the end of the period of fifteen days as from the date of the transfer, unless the insurer agrees that it continue on behalf of the acquirer or that the policy be to the order.

Nonetheless, if the insured were to conserve some or other interest in the object of the insurance, it will continue to his benefit until such time as their interests concur.

Art. 561. Loss of the object insured. Any loss or destruction of the object insured or over which there exists an insurable interest caused by something not covered by the insurance contract, will produce its termination and place upon the insurer the obligation to return the premium in accordance with what is established in paragraph two of article 520.

If the loss or destruction were to be partial, the amount insured and the premium will be reduced in whatever proportion it amounts to.

Art. 562. Insured parties are obliged to keep an accountancy. If the insured happen to be persons legally obliged to keep accounts, they shall vouch for their stocks with the corresponding inventories, books and accounts records, regardless of the merits of other proof that the parties are able to provide.

Art. 563. The manner in which to compensate. The insurer shall compensate any loss in money, unless it has been stipulated that he may do so by means of replacing or repairing the object insured.

Art. 564. Abandonment. The insured may not abandon the object insured, unless otherwise agreed.

Art. 565. Exercising third party rights over compensation. The object of the insurance will be subrogated for the amount insured for the purpose of exercising over it any of the privileges and mortgages established over the former.

For that, the respective creditors shall notify the insurer of the existence of his privileges or mortgages.

The same rules will apply whenever whatever was insured has been the object of an injunction, seizure order or is subject to a legal right of retention.

& 2. CONCERNING FIRE INSURANCE

Art. 566. Concept. With fire insurance, the insurer is under the obligation to compensate any material damages sustained by the object insured as a result of the direct action of fire and those that are as a result of any immediate consequences thereof, as well as those caused by any heat, smoke, steam or the means used to extinguish or contain it as well as any demolitions necessary or those ordered by the appropriate authorities. Additional insurance may also be taken out as an extension or enlargement of the fire cover so as to protect the insured against other risks.

Art. 567. Contents of the policy. Besides the wording required by article 518, the policy shall express the location, destination and use of the real estate insured as well as any adjacent buildings, as these circumstances could have an influence on an estimation of the risks.

The policy shall contain the same descriptions regarding the real estate on which any movable goods are placed or stored whenever an insurance deals with the latter.

& 3. CONCERNING INSURANCE COVERING ROBBERY, THEFT AND OTHER STOLEN GOODS

Art. 568. Damages insurable for these types of insurance. Damages may be insured that are caused as a result of objects stolen in illegal acts being committed or any other illegitimate conduct that a policy mentions.


Also, any damages that are the result of the destruction or deterioration of the object insured may be covered by this insurance, always provided that they were caused whilst these acts were being carried out.

Art. 569. The loss of the right to compensation. If the risk insured consists of an offence, the insurer may take action for recovery of the compensation paid if it is declared judicially that no such offence took place.

& 4. CONCERNING CIVIL LIABILITY INSURANCE

Art. 570. Concept. Under civil liability insurance, the insurer is obliged to compensate any damages caused to third parties for which the insured is civilly liable concerning an event and in the terms set forth in the policy.

With civil liability insurance, the insurer will pay the compensation to the third party sustaining the damage by virtue of an enforced sentence or a judicial or non-judicial transaction entered into by the insured with his consent.

Art. 571. Notification. The insured shall notify the insurer within a reasonable amount of time of any news he receives either regarding the intentions of the third party affected, or his assignee, aimed at claiming compensation or any threat of action being taken against him; concerning any judicial notifications he receives or the occurrence of any event or circumstance that could give rise to a claim being filed against him.

Art. 572. Extent of the cover. Unless it is protected by special cover, the amount insured includes both the damages caused to third parties as well as any expenses and procedural costs that they or their assignees cause the insured.

Unless otherwise agreed, the policy does not cover the amount of any pledges that the insured has to provide, nor any fines or pecuniary penalties which he is sentenced to pay.

Art. 573. The insured's defense. The insurer is entitled to bear the judicial defense of the insured in the event of a claim filed by a third party. If he does so, he will be able to appoint a lawyer who will defend him and the insured will be obliged to entrust his defense to whomsoever the insurer indicates. The insured will provide the insurer, or whoever acts on his behalf whilst defending him, with whatever information and cooperation that is needed.

Notwithstanding the foregoing, when whoever files the claim is also insured with the same insurer or there is some other conflict of interests, the latter will immediately notify the insured of the existence of these circumstances, regardless of taking those steps which, because of their urgent nature, are necessary for his defense. in such cases and when dealing with criminal matters, the insured may always decide between leaving his judicial defense with the insurer or leave his own defense with another person. in this last case, the insurer will be liable for all judicial defense costs up to the amount agreed in the policy.

Art. 574. Transaction. The insured is forbidden from accepting the other party's claim or judicially or non-judicially entering into an arrangement with the third party affected without the insurer's prior acceptance thereof. Any non-compliance with this obligation will exonerate the insurer from his obligation to compensate.

Non-compliance does not exist as a result of the fact that the insured, in any declarations he makes, acknowledges truthful events from which his liability stems.

& 5. CONCERNING LAND TRANSPORT INSURANCE

Art. 575. Concept and extent of cover. Regarding land transport insurance, the insurer undertakes to compensate any material damages sustained by the merchandise and the means used to package them; whilst they are being loaded, unloaded or transported over land.

Unless otherwise agreed, cover by the insurance will include provisional custody of the merchandise and whilst the vehicle remains idle or it is changed during the journey when such events are due to circumstances involving the transport itself or which are caused by any of the events excluded by the policy.


Art. 576. Rules and validity of cover. Land transport insurance may be contracted per journey or for a determined amount of time.

Unless otherwise agreed, the insurance begins from the moment the merchandise is delivered to the forwarder and it ends when it is delivered to the assignee at the point of destination.

Unless the insurance happens to be per journey, delivery to the assignee must take place within the deadline envisaged in the policy.

Art. 577. Supplementary rules. In those cases not envisaged in this paragraph, the provisions found in Title VII of Book III of this Code called "Concerning Marine insurance" will apply.

& 6. CONCERNING A LOSS OF PROFITS

Art. 578. Concept and scope. For loss of profit insurance, the insurer is obliged to compensate the insured for any reduction in revenue and profits from the activity described in the policy, had the loss never occurred.

The insurer may also cover any overheads that the insured had to continuing disbursing whist the establishment remained at a total or a partial standstill as well as any extraordinary expenses defrayed so as to resume the activities.

& 7. CONCERNING CREDIT INSURANCE

Art. 579. Concept. By insurance credit, the insurer is obliged to compensate the insured for any losses the latter sustains as a result of a non-compliance with a monetary obligation.

Art. 580. Source of the claim for compensation. Payment under this insurance will take place:

a) If the debtor has been declared bankrupt as a result of a firm judicial sentence.

b) If any agreements have been entered into with his creditors granting him a cancellation of his debts as regulated by the Bankruptcy Act.

c) If, after having been effectively sued, it is established that the debtor does not possess sufficient assets with which to resolve the debt or which, because they have been hidden, makes it impossible to proceed with the trial.

d) If the insured and the insurer agree that the credit is irrecoverable.

e) In any other cases the parties agree.

Art. 581. Debt collection expenses. The parties may agree that, besides the unpaid debt, the sum insured also cover any expenses arising out steps taken aimed at debt collection or any others.

& 8. CONCERNING SURETY INSURANCE

Art. 582. Concept. With surety insurance, the insurer is obliged to compensate the insured with any equitable damages sustained in the event of any non-compliance by the policyholder of the insurance or the secured party of their legal or contractual obligations. Any payment made by the insurer shall be reimbursed to him by the policyholder of the insurance.

Any plea or defense that the policyholder holds against the insured party alleging that no non-compliance has existed of the obligations guaranteed by the policy, will not prevent the insurer from paying the compensation requested.

Art. 583. The insured's obligations. As soon as the policyholder or the secured party incurs in any act or omission that could give rise to an obligation that must be covered by the insurer, the insured shall take whatever measures are pertinent to prevent that obligation from becoming more onerous and safeguard his right to reimbursement; especially filing the corresponding judicial action.


Any non-compliance with these obligations will give rise, depending on their seriousness, to a reduction in the compensation, or dissolution of the contract.

This type of insurance may be on first demand, in which case the compensation will be paid to the insured within the deadline established in the policy, and any objections to pleas may not be invoked to condition or defer such payment.

& 9. CONCERNING REINSURANCE CONTRACTS

Art. 584. Concept. In a reinsurance contract, the reinsurer undertakes to compensate the reinsured, within the limits and types established in the contract, as a result of any liabilities affecting his equity stemming from whatever obligations the latter has entered into in one or more insurance or reinsurance contracts.

Reinsurance covering the reinsurer goes by the name of retrocession.

With these contracts, international usage and customs concerning reinsurance matters will act to interpret the will of the parties involved.

Art. 585. Extent. Reinsurance does not alter an insurance contract in any way whatsoever and the insurer may not defer payment of any compensation on a loss insured as a result of reinsurance existing.

Art. 586. The insured's actions against a reinsurer. Reinsurance does not confer direct action by the insured against the reinsurer, unless it is set down in the reinsurance contract that any payments owing to the insured as a result of any losses be made directly by the reinsurer to the insured or, in the event that, once a loss has occurred, the direct insurer assigns over to the insured all of the rights stemming from the reinsurance contract so as to collect from the reinsurer.

None of these conventions will exonerate the direct insurer from his obligation to pay the insured when a loss occurs.

Art. 587. The imperative rules of reinsurance. The provisions of articles 585 and 586 are of an imperative nature.

SECTION THREE. CONCERNING PERSONAL INSURANCE

Art. 588. Concepts. Personal insurance is that which covers any risks that could affected people's existence, physical or intellectual integrity or their health and that which guarantees them, within or at the end of a deadline, a capital payment or a temporarily income or an annuity.

With a personal insurance, the insurer is under the obligation, in accordance with the type and limits established in the contract, to pay out a sum of money to the contracting party or to the beneficiaries, if the insured dies or survives beyond the date stipulated.

An annuity means a type of life insurance by means of which the insurer receives a capital from the contracting party and undertakes to pay him or his beneficiaries an income until his or their death.

With personal accident insurance, the insurer undertakes, in accordance with the types stipulated, to compensate the insured or his beneficiaries, for any bodily injuries, disabilities or death sustained by him as a result of an accident.

With health insurance, or any of the types of other insurances that include this type of cover, the insurer undertakes to pay, in the manner stipulated in the contract, any medical, clinical, pharmaceutical expenses, hospitalization or any others in which the insured incurs if the latter or his beneficiaries were to require medical treatment as a result of an illness or accident.

Art. 589. The interest insurable with personal insurance. Personal insurance may be contracted by the insured himself or by anybody possessing an interest. Life insurance may be stipulated over one's own life or that of a third party, both in the event of death as well as for that of survival or both together.


With insurance in the case of death, if the persons taking out the insurance and the insured are different, the latter needs to give his consent in writing, with an indication of the amount insured and who the loss payee is. No insurance may be contracted in the case of death on behalf of minors or the disabled.

Any insurance taken out in violation of these rules will become absolutely null and void and the insurer will be obliged to return any premiums received, albeit he will be able to withhold the amount of his expenses if he has acted in good faith.

Art. 590. Health declarations and examinations. The insurer may only require background information relating to the health of a person in the manner established in article 525, albeit he will be able to request medical examinations to be undertaken in accordance with what is established by law.

Art. 591. Pre-existing illnesses and disorders. Only those illnesses, disorders or health situations diagnosed or known by the insured or by whomsoever is contracting on his behalf will be considered as pre-existing.

Art. 592. Indisputability. After two years have lapsed since the beginning of the insurance, the insurer may not invoke the reticence or the inaccuracy of any declarations that might have an influence on an estimation of the risk, unless an element of deceit had existed.

Art. 593. Appointing a loss payee. Appointing a loss payee may be carried out in the policy in a subsequent declaration in writing notified to the insurer or set down in a will.

If, at the time of the real or presumed death, there were no beneficiaries nor rules with which to determine it, the deceased's heirs will be considered as such. Those beneficiaries who happen to be heirs will remain as such even though they may repudiate their inheritance.

The same proviso will apply when the insured and the sole loss payee die simultaneously or it is not known which of them died first.

Appointing a spouse as the loss payee will be construed as done regarding the person who happens to be so at the time of the death of the insured.

Art. 594. A plurality of beneficiaries. If the appointment is made in favor of several beneficiaries, the benefit agreed will be distributed, unless there is any stipulation to the contrary, in equal parts. When it is made in favor of the heirs, distribution will take place in proportion to their shares in the deceased's estate, unless agreed otherwise. The part not acquired by a loss payee will be shared among the remainder.

Art. 595. Revoking a loss payee. The contracting party to an insurance may revoke the appointment of a loss payee at any given time, unless he has waived this power in writing. In this last mentioned case, his consent must have been sought in order to change the loss payee.

The revocation shall be carried out in the same manner as that established for the appointment.

Art. 596. A loss payee's rights. The amount of compensation stemming from life insurance is assigned exclusively to the loss payee.

For all legal purposes, a loss payee's rights arise at the same time as the loss envisaged in the policy and as from when a claim may be lodged with the insurer regarding the benefit agreed.

All of the rights of redemption and reduction of the sum insured will be regulated in the insurance policy so that the insured will be able to become aware of the corresponding amount of redemption or reduction he is due at all times.

Also regulated in the policy shall be any concessions of upfront payments to the policyholder on account of the benefit insured.

Art. 597. Assignment and pledges. Unless an irrevocable loss payee has been appointed, the contracting party may assign or pledge the policy. The assignment or pledge will only be effective against the insurer


provided that the latter has been notified of them in writing and by a Notary Public. Any assignment or pledging of the policy means revoking the appointment of the loss payee.

Art. 598. Provoking a loss and suicide. Any loss caused deceitfully by the loss payee will deprive him from his right to the benefit established in the contract, regardless of any criminal action that could take place.

Unless otherwise agreed, the risk of the insured's suicide will only be covered as from two years after the contract has been entered into or if the insurance has been in force for the same period as a result of successive renewals.

Art. 599. Absence or disappearance of the insured. Unless there exists a stipulation to the contrary, the mere absence or disappearance of the insured does not make the benefit agreed enforceable.

Art. 600. Revoking the contract. With life insurance, the insurer will be forbidden from bringing the contract to a premature end at will and unilaterally.

Art. 601. Equitable covers. The types of insurance that cover medical, clinical, surgical and pharmaceutical expenses or any others that are of an equitable damage nature will be regulated by the rules of damage insurance, unless they happen to be contrary to its nature.


COMMERCIAL CODE

BOOK III TITLE VII CONCERNING MARINE INSURANCE

PARAGRAPH 1. GENERAL RULES

SECTION ONE. FIELD OF APPLICATION

Art. 1158. The provisions of sections one and two of Title VIII of Book II of this Code will apply to the insurance dealt with in this Title, except for the matters that regulate it in any other manner.

Art. 1159.- The rules in this title will apply by default if not included in the party's stipulations, except regarding matters in which the rules are expressly imperative.

Art. 1160.- Marine insurance may deal with:

1. A naval craft or vessel, its accessories and fixed or movable objects, wherever they might be found, even those under construction;

2. The merchandise or any other type of goods that could sustain the risk of maritime, river or lake transport;

3. Facilities and machinery devoted to meeting the needs of loading, unloading, stowing and caring for the vessels and any other goods that the parties deem may be exposed to risks related to the sea;

4. The value of the freight and any disbursements in which whoever is organizing a maritime expedition may incur, or

5. The liability of a vessel or some other object as a result of any damage they sustain with regard to third parties stemming from use or whilst at sea.

Art. 1161.- Generally speaking, marine insurance is aimed at compensating the insured regarding any loss or damage that the object insured may sustain as a result of the risks implied in maritime, river, lake or inland canal voyages.

Art. 1162.- A voyage and its length depend on whatever the parties stipulate in the insurance contract.

Notwithstanding this though, lacking any stipulation to the contrary, understood as included in the risk are those perils that stem or which could occur as a result of the vessel or the naval craft being at sea, in a port or idle, including within this concept any perils stemming from weather conditions, fire, pirates, robbers, raiders, assailants, capture, shipwrecks, foundering, boarding or collisions; forced changes in route, pillaging, confiscation by order of an administrative authority, delays caused by order of a foreign power and, generally speaking, any fortuitous events that occur at sea or by any other means.

Any exception to the perils mentioned in the previous paragraph shall be expressly set forth in the policy.

Art. 1163.- Besides the risks mentioned in the previous article, the parties may add any other risks that the object insured might be subject to in the insurance contract, either whilst it is in port, dry dock, at sea, in rivers or on lakes and in canals or whenever not dealing with a vessel whilst it is in transit by any other means of transport or in custody before or after a maritime voyage.

SECTION TWO. CONCERNING THE INTEREST INSURABLE

Art. 1164. Anybody who has an interest in conserving the object insured whilst running the risks of that kind may take out a marine insurance, either because that interest directly affects his equity or because of certain obligations of his in relation to the object insured.

It is understood that someone has an interest in avoiding maritime risks when it is in legal or de facto relation to the goods exposed to those risks and which, as a result of that relation, could be affected as a result of


damages, loss, standstill or delay in the arrival of those goods or as a result of incurring in a liability with regard to them.

Art. 1165.- The insured only has to justify his insurable interest at the time that the loss or damage occurs of the object insured.

Art. 1166.- Any insurance contracted after the risks have ceased to exist is null and void if, at the time it was entered into, the insured or whoever contracted it on his behalf, were aware that a loss had occurred, or the insurer, that the risks had ceased to exist.

Art. 1167.- If the object insured has to remain in custody or be owned by several persons whilst the risks are running, any insurance of merchandise will be understood as having been entered into on behalf of whoever those persons might be, unless the policy sets forth otherwise.

Art. 1168.- Repealed.

SECTION THREE. CONCERNING THE VALUE INSURED

Art. 1169.- With insurance of vessels, the parties may mutually fix the value of the object insured in the policy.

It will be assumed that this had been done if a value for the object insured is expressly set forth in the policy.

The insurer may require, prior to completing the contract, that such an valuation be made by a naval expert.

Unless fraud can be proven by either of the parties, the value thus established in the policy will become the sole true one for all purposes of the contract, except for any valuation conducted of the object insured done for the sole purpose of determining whether or not a loss is a total constructive or assimilated loss.

Art. 1170.- Repealed.

Art. 1171.- The sum insured in a transport insurance of objects may include, besides the value of them in the port where a journey begins, all reasonable costs defrayed in getting them to their destination, including the insurance premium.

All in all, the sum insured may reach the amount that could reasonably be obtained as a result of the sale of the objects if they were to safely reach their destination envisaged.

If there is in any doubt as to the sales price at the destination for cargo in a good condition, it may be also established by experts.

Art. 1172.- The value of the freight and any disbursements made and incurred as a result of organizing a maritime voyage, and which might not be recovered as a result of some or other maritime risk or one of another nature, expressly covered in the policy, may be insured.

PARAGRAPH 2. COMPLETING THE CONTRACT

Art. 1173. Entering into and proving a marine insurance contract will be governed by what is set forth in article 515 of this Code.

Art. 1174.- With insurance on merchandise or cargo, the insured need not be precisely identified, and it may be contracted on behalf of someone else.

When dealing with insuring a vessel that had not been contracted by its owner, the insurer shall set forth in the policy the relationship or interest insurable that exists between the person to whose benefit the policy is extended and the vessel being insured. In any event, the date and time that the risks begin to run by the insurer will be indicated.

Art. 1175.- Whenever an insurance is governed by clauses in forms supplied by the insurer, or their use assumes they are known by the parties, it will suffice for the policy to mention them so that these clauses can be understood as having been incorporated into the contract. But if there is any doubt as to the interpretation


that has to be provided regarding the specific rules incorporated, they will be interpreted against whoever issued the policy.

PARAGRAPH 3. CONCERNING THE PARTIES' OBLIGATIONS AND RIGHTS

Art. 1176. In the case of the obligations mentioned in article 525 of this Code, the insured shall fully and properly inform the insurer, before completing the contract, of any circumstance relating to the risks that are going to be insured and that he be aware of them.

It will be assumed that the insured is aware of, and so cannot ignore, any of the circumstances that might arise during the ordinary course of his business.

The obligation to inform is not limited to solely responding to the insurer's questionnaire.

Any reticence, inaccuracy or falsehood in the information that is judged as being important when it comes to determining the nature and the extent of the risk, will cause the insurance to become null and void.

Art. 1177. In order to be entitled to compensation, the insured must prove:

1. The existence of an insurance policy;

2. Shipment of the insured goods, if appropriate;

3. Loss, expenses or damages claimed, or liability, whichever the case may be, and

4. The occurrence of the reported loss, and sincerely declare, without any reticence whatsoever, the circumstances and the consequences thereof.

Art. 1178.- In the event of a loss, the insured may exercise gross/particular average actions to obtain compensation for the damages sustained by the insured goods or that of abandonment, so as require payment of the total sum insured, in those cases in which the Code or the contract authorize it.

Art. 1179.- The insured may jointly set about the taking of both action for abandonment as well as that of average, so that the latter may be filed in substitution of the former.

Art. 1180.- The insurer will be liable for any losses or damages stemming from the maritime risks or any other events covered by the policy.

Likewise, if not expressly excluded, the insurer will also pay:

1. The contribution of the insured goods for common average, unless this stems from a risk excluded from the insurance, and

2. Any expenses incurred to avoid damage to the insured goods or reduce its effects, always provided that the damage so avoided or reduced is covered by the policy.

All in all, the above-mentioned expenses may not exceed the value of the damages so avoided.

Art. 1181.- The insurer will be liable for any loss or damage to the insured goods arising from any willful misconduct or negligence by the vessel's master or its crew. However, no loss or damage to the hull will be payable that results from any negligence by the master, unless otherwise expressly stipulated.

Art. 1182.- The insurer will not be liable for any losses caused due to delays, even though they were caused by a risk covered by the policy, unless otherwise expressly stipulated.

Art. 1183.- Unless otherwise agreed, the insurer may not be liable for any ordinary loss referring to leaks, breakage, wear and tear, inherent vice or those referring to the nature of the insured goods as well as any other normal loss inherent to transport.

Art. 1184.- If the loss of or damage to the insured goods stems from several different causes, the insurer will be liable if the main or determining cause is a risk covered under the policy. All in all, with whatever


stipulations set forth in the contract, if it is not possible to establish the main cause or if several determining causes happen simultaneously and among them there was one that is covered, the insurer will be liable for the damage in the terms mentioned in the policy.

Art. 1185.- The Insurer will have the burden of proving that the loss occurred as a result of an event or a risk not included in the policy.

Art. 1186.- A loss may be total or partial. Any loss which is not within the concepts of a total loss or those defined in the articles below will be considered as being a partial loss.

Art. 1187.- A total loss may be actual or effective. It may also be assimilated or constructive.

An actual or effective total loss will exist when the insured goods are completely destroyed or end up in such a manner that they definitively loss the purpose for which they were originally designed or when the insured is irremediably deprived of them, all of which is regardless of what is set out in the policy.

Art. 1188.- If, after a reasonable amount of time has passed and no news is received of the vessel, its total effective loss will be presumed as well as that of its cargo.

Art. 1189. Unless otherwise stated in the policy, total assimilated loss will exist when the insured goods have been reasonably abandoned, either because a total effective loss appears inevitable or because the loss thereof is impossible to avoid without incurring in an expense that exceeds the value of the goods after having made the disbursement.

The following cases will especially be considered as a total assimilated loss:

1. When the insured is deprived of the vessel or the merchandise as a result of a risk covered by the policy and it is unlikely that it can be recovered or the cost of recovery exceeds the value of the vessel or the merchandise once it has been recovered;

2. When the damages caused to a vessel as a result of a risk insured is of such a magnitude that the cost of repairing it exceeds the value of the vessel, once repaired. When estimating the cost of repairs, no deduction whatsoever will be made for any contributions of gross average to those repairs to be devoted to other interests. But the expense of future salvage operations and any future contribution of gross average that might affect the vessel, once repaired will be taken into account, and

3. When the cost of its repair and sending it on to its destination exceeds the value of them on the date of arrival at its destination, if dealing with damages to merchandise or cargo.

Art. 1190.- Unless there is any stipulation to the contrary, insurance against total loss covers both the total assimilated loss as well as the actual or effective loss.

Art. 1191.- Unless otherwise stated in the policy, the insurer will be liable for any losses sustained by the insured goods during the coverage period, even though the amount of all of them exceeds the sum insured.

But if a total loss follows a partial unrepaired damage, the insured may only seek compensation for the total loss.

Art. 1192.- If the insured decides to claim total loss, he must notify the insurer of his intention to abandon goods.

Lacking such notification, the insured may only exercise gross average action.

Art. 1193.- In the case of a total assimilated loss, the insured will have a deadline of three months since effectively becoming aware of the case being so, in order to notify the insurer of his intention to abandon goods.

This expression in writing also includes doing so by telegram, telex or any other means that leaves a record of the receipt of the message sent.


Notification to the insurer of abandonment substitutes for this purpose the notice of abandonment.

The notification or claim shall unequivocally indicate to the insurer the insured's unconditional intention to abandon the insured goods.

Art. 1194.- The notice of abandonment will not be necessary when the gross average or accident, because of its nature or magnitude, makes it impossible for the insurer to adopt measures aimed at recovering or rescuing the insured goods or reducing the effects of the loss.

Art. 1195.- A notice of abandonment interrupts the time bar of any action that might be taken by the insured against the insurer.

Art. 1196.- Acceptance of the abandonment could be express or inferred by the insurer's conduct. In any event, its effects retroact to the date of receipt of the notice of abandonment or the notice for the claim of abandonment.

The insurer may, in any event, waive the requirement of the notification or the respective notice.

Art. 1197.- Acceptance of the abandonment, besides meaning it is irrevocable, will mean that the insurer acknowledge their liability for the total amount insured.

Art. 1198.- Once abandonment has been accepted or deemed final and binding, all of the rights and obligations regarding the insured goods shall be transfer to the Insurer merely by law.

Nonetheless, until such time as it is accepted or declared final and binding, the insurer may acknowledge their obligation to compensate the total loss of the insured goods and reject transfer of ownership over the insured property.

Art. 1199.- The insured goods which were abandoned remains preferentially subject to the payment of the amount insured, with preference over any other credit that might take priority over it, with the exception of any credits over the vessel set forth in articles 844, 845 and 846.

PARAGRAPH 4. LIABILITY INSURANCE

Art. 1200. With liability insurance, the insured shall inform the insurer any claim he is the object of and which could compromise the latter's liability. He will also be obliged to adopt whatever defense measure is necessary.

Art. 1201.- In those cases in which a liability insurer grants a guarantee to cover the insured's liability, they may be sued directly by the third party to whose benefit that guarantee was issued.

The aforementioned does not apply in case the insured is entitled to limit its liability and the insurer had established the corresponding limitation fund.

The liability insurance of a shipowner as a result of a collision with any stationary or floating object which is aimed at repairing the damages caused to any third parties, does not obligate to compensate unless the sum insured in the hull policy does not suffice.

Art. 1202.- Whatever the number of events occurring whilst the liability insurance is in force, the sum covered by each insurer is, for each event, the coverage limit.

NEW INSURANCE LAW - COMMERCIAL CODE

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