At MAAK Advocaten, we specialize in a variety of legal areas, one of them being insurance law and the violation of the disclosure duty by the policyholder under Dutch law. The recent ruling by the Dutch Supreme Court (HR) on July 7, 2023, offers a new perspective on the term limit for the insurance company to appeal a violation of the policyholder’s disclosure obligation, as defined by the Dutch Civil Code (Burgerlijk Wetboek, BW). In this article, we delve into the implications of this ruling, providing a nuanced analysis of the case’s background and the legal framework surrounding it.
Legal Framework Surrounding the Disclosure Duty: Article 7:928 and 7:929 BW
To contextualize, it is crucial to clarify the legal premises first. As per Article 7:928, paragraph 1 of the Dutch Civil Code (DCC), before signing the insurance contract, the policyholder must disclose all facts known or should be known to him, that could influence the insurer’s decision on whether to underwrite the policy and under what conditions. A failure to meet this disclosure obligation implies that the insurer is not obliged to pay out any claim if the insurer had not underwritten the policy had it known the true facts (as stipulated by Art. 7:930, paragraph 4 DCC).
Adding a temporal dimension to this, Article 7:929, paragraph 1 DCC mandates that the insurer can invoke the consequences of the policyholder’s failure to fulfill the disclosure duty only if the insurer notifies the policyholder within two months of discovering this failure, outlining the possible consequences.
The Case Background: Sasagar B.V. vs. Nationale Nederlanden
The case that led to this significant ruling involves Sasagar B.V., a courier service company. Among its fleet of company vehicles was a BMW, insured in 2016 by a legal predecessor of Nationale Nederlanden (NN).
In March 2018, the BMW was stolen. Sasagar filed a claim for the theft, which NN refused to pay, alleging that Sasagar had deliberately misrepresented its claim history in the application form. NN, in a letter dated August 16, 2018, cited the consequences of inaccurate application form responses, which included forfeiture of the right to compensation (as per Art. 7:928-930 BW).
Sasagar subsequently sued for compensation for the theft damage. The crux of Sasagar’s argument was that NN could not invoke a violation of the disclosure obligation since the two-month term specified by Article 7:929, paragraph 1 BW had already expired by the time NN relied on the consequences of the violation on August 16, 2018.
Court Verdict and Appeal in the Netherlands
Both the District Court and the Court of Appeal dismissed Sasagar’s claim. They concluded that given the circumstances of the case, NN could not be expected to be sure before two months prior to August 16, 2018, that Sasagar had failed to fulfill its disclosure obligation at the inception of the insurance.
Insights from the Dutch Supreme Court
Sasagar then appealed to the Supreme Court. In the appeal, the main point of contention was whether NN had invoked the consequences of not fulfilling the disclosure obligation in a timely manner. The Supreme Court centered its verdict on the interpretation of the word “discovered” as used in Art. 7:929, paragraph 1 BW. The question was whether the two-month term began when the insurer has a sufficient degree of certainty of the violation or when it could and should have discovered the violation. The Supreme Court held that the term “discovery” in Art. 7:929, paragraph 1 BW implies the insurer’s certainty of a violation, not just a suspicion of it. It further affirmed that the insurance company should not leave the policyholder in uncertainty about whether it will claim a breach of the duty of disclosure, nor should it let the matter proceed without resolution.
Concluding Thoughts
This ruling has significant implications for both insurers and policyholders, emphasizing the importance of transparency and timely communication in the insurance industry. From a legal standpoint, it provides a nuanced interpretation of the disclosure obligation and the time frame within which an insurer can invoke the consequences of its violation. At MAAK Advocaten, we continuously stay updated with the latest judicial rulings to provide our clients with the most accurate legal advice. We encourage policyholders and insurers alike to understand their rights and obligations under the law to ensure a smooth insurance experience.
