Legal Update for Insurance Sector in France

Discover latest legal developments relating to insurance in France.

Contents

1. Regulations and recommendations

• 1.1 Promulgation of the law on emergency measures to protect purchasing power
• 1.2 Supervision of telephone marketing of insurance products
• 1.3 ACPR recommendation on the handling of complaints
• 1.4 Affinity insurance
• 1.5 Natural disasters
• 1.6 Cyber
• 1.7 Integration into the 2023 Finance Law of provisions concerning captive reinsurance companies
• 1.8 Disciplinary sanction imposed by the ACPR on a broker
• 1.9 Sustainability in the financial services sector

2. Case Law

• 2.1 Conditions of guarantee, exclusions and forfeitures
• 2.2 Reporting the risk
• 2.3 Admissibility of the direct action against the insurer
• 2.4 Starting point of the two-year limitation period
• 2.5 Car insurance
• 2.6 Damage covered by an insurance policy "Product liability"
• 2.7 Insurance intermediaries
   

1. Regulations and recommendations

1.1 Promulgation of the law on emergency measures to protect purchasing power (law n°2022-1158 of 16 August 2022)

The law on emergency measures to protect purchasing power was enacted on 16 August 2022 and published in the Official Journal on 18 August 2022.
The text, which aims to protect consumers, includes a section on insurance. Two points to keep in mind :

• The option of cancelling an insurance contract online, whether or not it was taken out electronically (addition of a paragraph to Article L. 113-14 of the French Insurance Code). 
  • Insurers will have to provide an easy-to-access online "cancellation button" by 1 June 2023 at the latest. It should be noted that these new provisions also apply to contracts in force on the same date. 
  • A decree of 16 March 2023 (decree no. 2023-182) specifies the terms and conditions of access and use of the electronic termination and denunciation functionality.
• The cancellation period for an affinity insurance contract has been extended from 14 days to 30 days from the date of subscription, without the need to provide proof of previous cover for one of the risks covered by the new contract (amendment to Article L. 112-10 and the appendix to Article A. 112-1 of the French Insurance Code on 1 January 2023). 
   

1.2 Supervision of telephone marketing of insurance products

1.2.1 The law aimed at regulating telephone canvassing and combating fraudulent calls has introduced a certain number of requirements for professionals, including those in the insurance sector (law no. 2020-901 of 24 July 2020)

These obligations include the obligation to respect the days, hours and frequency on which telephone canvassing is possible.

1.2.2 A decree sets these days, times and frequency (decree n°2022-1313 of 13 October 2022 - entry into force of the provisions on 1 March 2023)

• The text allows calls from Monday to Friday, from 10 am to 1 pm and from 2 pm to 8 pm. However, they are prohibited on Saturdays, Sundays and public holidays.  

• Limitation of the number of requests: 

  • A potential customer may not be contacted for commercial prospecting purposes "more than four times a month by the same professionnal or by a person acting on his behalf". 

  • Similarly, if the consumer refuses to be contacted during the conversation, the "professionnal shall refrain from contacting or attempting to contact the consumer until sixty calendar days have elapsed from the date of such refusal".

• This framework will apply both to persons not registered on the Bloctel list and to those who are registered but are being contacted in the context of a current contract. However, it will not apply if the consumer has given his or her express prior consent to be called, as the professional must justify this. 

• In the event of non-compliance, the professionals concerned are liable to an administrative fine of EUR 75 000 for a natural person and EUR 375 000 for a legal person.

1.2.3 ACPR issues formal notice to a broker after finding several breaches (ACPR press release, 22 December 2022) 

• The first infringement concerns the marketing of an insurance product without the assistance of a duly authorised insurer. 

• The other infringements relate to the arrangements put in place for the marketing of an insurance product by means of telephone canvassing with regard to contractual information. The violations concern :

  • The content of the information given to the customer during the sales call, the way in which the documents are handed over and the time allowed for reading them before the subscription. 

  • The collection of customer requirements and needs and the adequacy of the advice given. 

1.2.4 DGCCRF decision on telephone canvassing (DGCCRF, 17 January 2023)

• On 17 January 2023, the DGCCRF imposed an administrative penalty of €8,790 on an insurance broker for breaches of the rules related to the telephone canvassing. 

• The DGCCRF is accusing the insurance broker of having telephonically canvassed 879 consumers registered on the Bloctel list, in violation of Article L. 223-1 of the French Consumer Code. 

1.3 ACPR recommendation on the handling of complaints (ACPR recommendation 2022-R-01 of 9 May 2022)

• ACPR Recommendation 2022-R-01 of 9 May 2022 on the handling of complaints has been applicable since 31 December 2022 (update of the former Recommendation n°2016-R-02 of 14 November 2016 amended on 6 December 2019). 

• Compared to the old recommendation, the new recommendation includes the following innovations:

  • While it still defines a complaint as an expression of dissatisfaction with a professional, it specifies that it can be made by any person, even if there is no contractual relationship with the professional. 

  • Complaints should be dealt with in any way they are expressed, including verbally. 

  • Response times should be consistent with the subject matter of the dissatisfaction expressed, particularly where this relates to a delay in performance. 

  • The response must mention the mediator who may be called upon and the practical arrangements for referral. 

  • As in the past, professionals need to identify, through complaints and mediation requests, malfunctions and the like, in order to take corrective action to remedy them. 

  • However, they must also analyse the quality of the complaints handling system and, at least once a year, submit a report to the governance bodies on the quality of the system in place, the malfunctions observed and the corrective measures planned or implemented.

1.4 Affinity insurance (opinion of the Comité consultatif du secteur financier of 17 January 2023)

• The Comité Consultatif du Secteur Financier (CCSF) has adopted an opinion on affinity insurance contracts offered as an option to customers who take out a contract for non-business purposes when purchasing a good or service (travel insurance, insurance for nomadic products and extended warranty insurance for everyday consumer products), excluding fixed-term contracts that include a single premium. 
• The four recommendations address good practice:
  • On the collection of consent. For example, after signing the insurance contract, a welcome letter is given to the insured person as soon as possible in paper form or by e-mail. The notice specifies the information that must be included in this welcome letter. 
  • On the annual sending of full information to the policyholder, which is provided on a durable medium (if the annual information is provided in the customer area, the policyholder is notified by mail, e-mail or SMS). The notice specifies the information that must be included in this annual information. 
  • On the reinforcement of information for contracts aimed at extending the guarantee of a product or a service. For example, the distributor must specify to the consumer that this is an insurance contract and not a legal or commercial guarantee. The insurer, in view of the time lag of several years in its activation, will have to send a reminder to the consumer 2 months before the guarantee takes effect. 
  • On the distribution of affinity insurance contracts. It is recalled that the method of remuneration linked to the sale of affinity insurance contracts effectively meets the requirements of the regulations, particularly with regard to the prevention of conflicts of interest. 

1.5 Natural disasters

1.5.1 Ordinance relating to the assumption of responsibility for the consequences of disorders caused by the natural phenomenon of differential land movements resulting from drought and soil rehydration (Ordinance n°2023-78 of 8 February 2023)

• On 8 February, the Minister of the Economy presented to the Council of Ministers an order relating to the assumption of responsibility for the consequences of disorders caused by the natural phenomenon of differential land movements resulting from drought and soil rehydration. 

• The aim of this ordinance is to increase the number of municipalities eligible for recognition of a state of natural disaster and to improve the way in which the slow and gradual nature of the phenomenon of drought and soil dehydration is taken into account in the natural disaster regime. 

• The ordinance adds to the list of damages that can be considered as the effects of natural disasters and specifies the conditions for compensation of losses resulting from differential land movements due to drought and soil rehydration. 

• There is a new obligation regarding the use of compensation received for a loss caused by the phenomenon of drought and soil dehydration. From now on, victims must use the compensation to carry out lasting repairs to their homes in order to avoid the consequences of possible future ground movements. 

• The text also lays down specific rules for the supervision of insurance expertise in the field of drought and soil rehydration and defines a system of checks and sanctions for experts. 

• The ordinance must come into force on a date to be determined by decree and no later than 1 January 2024, except for the provisions relating to experts which will come into force no later than 1 January 2025. 

1.5.2 Natural disasters: two texts of 30 December 2022 set out the new compensation arrangements

Decree no. 2022-1737 of 30 December 2022, supplemented by the Order of 30 December 2022, specified four areas for improving the natural disaster compensation system: 

• The conditions for covering the costs of emergency rehousing. This cover must be included in any property damage insurance policy taken out by any occupant who is an insured person and whose dwelling is the main residence. 
• The modulation of deductibles is ended and the amount of the deductible is applied for each contract: once per motorised land vehicle, once per professional establishment, on the totality of the damage caused on the goods covered by the same contract for the other goods or per risk for the contracts covering several risks. 
• Formal and procedural requirements for decisions on recognition or non-recognition of the state of natural disaster.
• The rules governing the composition, organisation and operation of two advisory commissions (the National Advisory Commission on Natural Disasters and the Interministerial Commission for the Recognition of the State of Natural Disaster). 

1.6 Cyber

1.6.1 Inclusion of insurance against the risks of cyber attacks in the Insurance Code (law No. 2023-22, 24 January 2023, Articles 5 and 29)

The law inserts a chapter in the French Insurance Code devoted to the insurance of risks of cyber attacks. The law makes compensation by the insurer conditional on the filing of a complaint, which must be made at the latest within 72 hours of knowledge of the breach. 

The new article will come into force on 24 April 2023, its current numbering, L. 12-10-1, is unusual (in the initial version of the bill the numbering chosen was L. 129-2). 

1.6.2 Creation of two new insurance categories for cyber risk (Order of 13 December 2022 on the classification of insurance commitments resulting from attacks on information and communication systems)

• Two categories of operations dedicated to "cyber" risk in the French Insurance Code (Article A. 344-2 of the French Insurance Code) have been created:
  • Category 32. Damage to property resulting from damage to information and communication systems ; 
  • Category 33. Financial loss resulting from damage to information and communication systems. 
• The creation of these categories only has an impact on accounts opened on or after 1 January 2023. 

1.7 Integration into the 2023 Finance Law of provisions concerning captive reinsurance companies (Finance Law No. 2022-1726 of 30 December 2023)

• Article 6 of the Finance Law for 2023 concerning captives aims to facilitate the creation of reinsurance captives in France by creating a specific provision to meet expenses, tax-free. 
• In a decision of 29 December 2022, the Conseil constitutionnel rules that this internal risk management system for companies complies with the Constitution.

1.8 Disciplinary sanction imposed by the ACPR on a broker (decision of the ACPR Enforcement Committee, 17 October 2022, No. 2021-04)

The ACPR considers that "a serious failure to comply with the information and advice requirements is a total disregard of the requirements of the profession [of insurance intermediary]".
The grievances notified to the broker are as follows: 

• Failure to provide pre-contractual information on a durable medium in the context of distance selling ;
• Failure to provide pre-contractual information in good time before the conclusion of the contract ;
• Inaccuracy and inadequacy of the pre-contractual information provided;
• Lack of compliance with obligations under the duty to advise.

In addition, the manager and the majority shareholder were held personally liable and a financial penalty was imposed on the broker, the manager and the majority shareholder, along with a ban on practising insurance intermediation for a period of between five and seven years.  

1.9 Sustainability in the financial services sector (ACPR Instruction n°2022-I-24 of 14 December 2022)

In its instruction of 14 December 2022, the ACPR specifies the procedures for disseminating information on sustainability commitments that insurers must bring to the attention of the ACPR as part of the requirements set out in the EU Regulation 2019/2088, known as the "SFDR". 

2. Case Law

2.1 Conditions of guarantee, exclusions and forfeitures

2.1.1 Conditions of guarantee

Cass. civ. 2, 15 December 2022 (n°20-22.356) 
The Second Civil Chamber of the French Supreme Court rules that clauses in an insurance contract setting out general and specific requirements to be met by the insured constitute conditions of guarantee. According to the Court, it is irrelevant that the sanction for non-compliance with these conditions of guarantee is not expressly mentioned.

2.1.2 Exclusion of guarantee - aknowledgement of the exclusion of guarantee clause

Cass. civ. 2, 31 March 2022 (n°19-17.927) 
The French Supreme Court states that the insurer must establish that it brought the exclusion of guarantee clause to the attention of the insured before the loss occurred. In the judgment of 31 March 2022, the Court notes that this condition was not met by simply sending the special conditions to the insured, since the special conditions were not signed by the insured and referred, in general terms, to the general conditions, which were themselves unsigned.

2.1.3 Exclusion of coverage - formality and limitation of the exclusion clause

Cass. civ. 2, 31 March 2022 (n°19-24.847) 
The French Supreme Court considers that a clause excluding coverage for mental illnesses, without any other specification than that including nervous breakdowns, is not formal and limited. Therefore, the exclusion clause cannot be applied, even if the condition suffered by the insured was listed in the clause.

Cass. civ. 2, 7 July 2022 (n°21-14.288) 
In order to be formal and limited within the meaning of Article L. 113-1 of the French Insurance Code, clauses excluding guarantee must refer to precisely defined facts, circumstances or obligations, so that the insured can know the extent of his guarantee. 

In this case, the insured, who had taken out a policy guaranteeing payment of a capital sum in the event of death, died while scuba diving. His heirs sued the insurer who refused to cover him on the grounds that a clause in the policy taken out by the deceased excluded cover for losses resulting from the practice of high-risk sports, such as scuba diving, which was not supervised by a federation or an approved sports club.

The Court of Appeal noted that the clause opposed by the insurer excluded from guarantee "the regular or non-regular practice, not supervised by a federation or an approved sports club, of the following risk sports [...] diving with self-contained equipment" and held that the application of the exclusion presupposed determining whether or not the risky activity in question was supervised and that the insured had perfectly understood the exact meaning of the term "supervision". Thus, the Court of Appeal considered that the clause was indeed formal and limited (and therefore applicable), which was approved by the French Supreme Court.

2.1.4 Exclusion of coverage - Covid-19 business interruption losses

Cass. civ. 2, 1 December 2022 (n°21-15.392, 21-19.341, 21-19.342 and 21-19.343) 
In this case, several restaurant owners had taken out "multi-risk professional" insurance policies with the same insurer, including "financial protection" and "business interruption following administrative closure" cover. These restaurant owners were forced by orders and decrees to close their doors to the public for several periods due to the spread of Covid-19. 

They then reported the loss to their insurer in order to be compensated for their business interruption losses.

The insurer refused to cover them, citing a clause that excluded "[...] operating losses when, on the date of the closure decision, at least one other establishment, whatever its nature and activity, is subject to an administrative closure measure in the same departmental territory as that of the insured establishment, for an identical reason".

In four rulings handed down on 1 December 2022, the French Supreme Court validates the above-mentioned exclusion of coverage clause, considering that it is formal and limited. 

Paris Court of Appeal, 21 June 2022 (n°20/10832) 
For the Paris Court of Appeal, the clause by which the insurer excludes all coverage in the event that "the provision of such coverage, the payment of such a claim or the provision of such assistance would expose the insurer to any sanction, prohibition or restriction by virtue of UN resolutions, laws and regulations enacted by the EU or any other State imposing economic or commercial sanctions" is an exclusion clause within the meaning of Article L.113-1 of the French Insurance Code. Consequently, the Court considers that the above-mentioned clause is not formal and limited and that it is therefore unenforceable against the insured, in that it does not allow him to know precisely the extent of the circumstance that is excluded.

2.1.5 Forfeiture of guarantee

Cass. civ. 2, 15 December 2022 (n°20-22.836) 
The French Supreme Court considers that the forfeiture of coverage in the event of a false declaration relating to the consequences of the loss does not constitute a disproportionate sanction, provided that the insurer establishes the bad faith of the insured. The Court also recalls that the parties may freely stipulate forfeiture of coverage clauses in very visible characters in an insurance contract. 

Cass. civ. 2, 1 December 2022 (n°21-19.343) 
Forfeiture of coverage is a conventional sanction, which can be freely stipulated by the parties. However, it is subject to conditions: it must be shown that the insured was aware of the forfeiture clause and accepted it.
In this case, the Court consideres that the insurer did not demonstrate, in the absence of production of the general conditions of the contract signed by the insured or a reference to them in the special conditions, that the latter had been aware, prior to the loss, of the clause of forfeiture of guarantee invoked and had accepted it.
 

2.2 Reporting the risk 

Cass. civ. 2, 31 August 2022 (n°20-22.317) 
The French Supreme Court holds that the insurer, who offers coverage for the risks of disability or death, cannot ask any questions relating to genetic tests and their results. Consequently, the Court considers that the person who has undergone such tests is not obliged to mention them in his answers to the health questionnaire submitted to him at the risk declaration stage.

2.3 Admissibility of the direct action against the insurer  

Cass. civ. 3, 11 May 2022 (n°21-12.478) 
The inadmissibility of the claims made by the injured party against the liable insured does not affect the admissibility of his direct action against the latter's liability insurer.

2.4 Starting point of the two-year limitation period

Cass. crim. 21 June 2022 (n°20-84.428) 
In the context of an action by the insured which has as its cause of action the recourse of a third party, which is exercised by bringing a civil action before the criminal court, the French Supreme Court holds that the starting point of the two-year limitation period is the day on which the third party is constituted as a civil party before the criminal court, as long as this constitution manifests the intention to engage the civil liability of the perpetrator of the damage, even if the civil party does not formulate any claim for payment at this stage.

2.5 Car insurance

Cass. civ. 2, 25 May 2022 (n°21-10.439) 
The insurer covering the liability of the driver of a vehicle involved in an accident must make an offer to the victim with all the elements of compensation. If the offer has not been made within the time limit, the amount of the compensation shall automatically bear interest. Moreover, the insurer's offer can only relate to elements of which he was aware.

Cass. civ. 2, 25 May 2022 (n°20-21.387) 
If the victim invokes the insufficiency of the offer, it is up to the insurer to produce the offer and to prove that it is sufficient and that it covers all the compensable elements of the loss.

In this case, the insured, having been the victim of a traffic accident involving two insured vehicles, requested, in compensation proceedings, the doubling of interest at the legal rate on the amount of the offer made by the insurer which he considered to be manifestly insufficient. The Court of Appeal rejected his request for double the legal interest rate, on the grounds that the insured did not produce the offer which he had to prove was insufficient. 

The French Supreme Court censures this reasoning by recalling Article 1353 of the French Civil Code: "The one who claims the performance of an obligation must prove it. Conversely, one who claims to be discharged must justify the payment or the fact which produced the extinction of his obligation". The French Supreme Court indicates that in accordance with Articles L.211-9 and L.211-13 of the French Insurance Code, if the insurer fails to present the victim with an offer including all the elements of the loss that can be compensated within the time limit, the amount of the compensation offered by the insurer or awarded by the judge shall bear interest at double the legal interest rate as from the expiry of the time limit and until the date of the offer or the judgment that has become final.

2.6 Damage covered by an insurance policy "Product liability" 

Cass. civ. 2, 7 July 2022 (n°20-18.070) 
The Court considers that it follows from the contractual definition of the risks covered under "product liability" and the clause excluding damage to or defects in products supplied by the insured, that material damage to the product delivered by the insured is not covered. 

Consequently, the destruction of one or more batches of milk contaminated by salmonella or suspected of being so, delivered by the insured, does not constitute material damage that may be covered under the "product liability" policy, which only covers damage caused by the product delivered and not damage suffered by or affecting this product.

2.7 Insurance intermediaries

2.7.1 Clarification of the concept of "insurance intermediary" by the CJEU

CJEU, 29 September 2022, Case C-633/20 
The concept of "insurance intermediary" covers a legal person whose activity consists of taking out a group insurance contract with an insurer and then offering individuals the opportunity to subscribe to this insurance contract. 

2.7.2 Obligations and liability of intermediaries

Cass. civ. 2, 25 May 2022 (n°19-22.149) 
The French Supreme Court validates the reasoning of the Court of Appeal, which noted, firstly, that the broker had taken the time to carry out a personalised study with the insured and, secondly, that the health questionnaire specified, near the place reserved for the insured's signature, that the latter acknowledged being informed that any reticence or false declaration would lead to the nullity of the contract on the grounds of intentional false declaration. 

Under these conditions, the French Supreme Court considers that the broker cannot be held liable for not having reminded the insured of the obligation to answer with loyalty and sincerity the questions asked by the insurer when taking out insurance. The Court recalls that this obligation is part of the obligation of good faith which is imposed in contractual matters. 

Cass. civ. 2, 15 September 2022 (n°21-15.528)
The French Supreme Court considers that a broker who misled the insured on the risks covered by not specifically drawing their attention to the need to take out optional supplementary insurance is in breach of his duty to advise. 

In this case, the organisers of motor events took out an insurance policy through a broker to cover the risks associated with these events. During a show, volunteers were electrocuted. The organisers were ordered to pay compensation for the damage caused to them, but discovered that they were not covered by their insurer, which was only obliged to cover the risks relating to vehicles, in accordance with the policy, and not those relating to the installations.

The French Supreme Court notes that the broker admitted that he had considered that the risks covered by the application were not limited to motor risks. Consequently, it considered that the broker's breach of his duty to advise was established by the fact that the broker did not specifically draw the organisers' attention to the need to take out optional supplementary insurance.

Cass. civ. 2, 15 September 2022 (n°21-13.670)
The French Supreme Court holds that an intermediary who fails to advise his insured of a cover better suited to his needs necessarily causes him damage.

In this case, the bank which offers its client, to whom it grants a loan, to subscribe to the group insurance contract it has taken out to guarantee, in the event of the occurrence of various risks, the performance of all or part of its commitments, is obliged to inform the client of the adequacy of the risks covered to his personal situation as a borrower.

The damage resulting from this failure is analysed as the loss of a chance to take out insurance adapted to his personal situation and any loss of chance gives rise to a right to compensation, without the borrower having to show that, better informed and advised by the bank, he would have taken out insurance that would have guaranteed the risk involved.

Cass. com. 2 February 2022 (n°19-18.704)
The insurance broker has an obligation to assist his client in the handling of claims, the proof of compliance with which lies with him. 

In this case, the Court of Appeal had dismissed the broker's liability on the grounds that it had not been established that the broker had to assist his client in managing the disputed claim, as this task was the responsibility of the insurer. The French Supreme Court censures the Court of Appeal's decision, considering that assisting the client in managing the claim is part of the broker's duty to advise and that he must prove that he did so.