COLOMBIA Law and Practice Contributed by: Rebeca Herrera Diaz, Rebeca Herrera Abogados
cal provisions and to implement IFRS 17. This new regulation mandates that any contract involving risk- bearing obligations for its parties, including those that ART activities may involve, must implement IFRS 17. These new provisions enter into force on 1 January 2027; however, there is a bill currently under consid- eration that would extend this date to 1 January 2028. 7.2 Foreign ART Transactions In Colombia, ART transactions conducted in other jurisdictions are not classified as insurance or rein- surance contracts. Specifically regarding reinsurance, Article 1134 of the C.Com states that reinsurance is an agreement between an insurer and a reinsurer, where the reinsurer assumes the same risk as the reinsured insurance. Therefore, if the parties involved are not insurers and reinsurers, the contract does not qualify as reinsurance under Colombian law. Foreign ART transactions are not regulated in Colom- bia. However, domestic insurance companies are allowed to use or invest in such transactions if they do so with funds other than those allocated to techni- cal provisions. 8. Interpreting an Insurance Contract 8.1 Interpretation of Insurance Contracts and Use of Extraneous Evidence According to Law 1480 of 2011, insurance contracts in Colombia are considered consumer contracts. As a result, they are classified as adhesion contracts, where one party – the insurer – determines the terms, and the other party – the insured – simply accepts them. The interpretation rules for contracts are set out in Articles 1618 to 1624 of the Civil Code (C.C.). Spe- cifically, Article 1624 states that any ambiguous claus- es in adhesion contracts must be construed against the party that drafted them. Consequently, insurance contracts are interpreted based on the literal wording of their terms, and in cases of ambiguity, the inter- pretation must favour the insured. Likewise, Article 34 of Law 1480 of 2011 confirms that in consumer contracts, ambiguous clauses should be construed in favour of the consumer.
Recent case law has provided guidelines for distin- guishing between consumer insurance contracts and commercial insurance contracts. In cases where an insurance contract is considered commercial rather than consumer-led, general contract interpretation rules apply, following this order: • the parties’ intention; • the literal meaning of the contract; • the interpretation that gives the contract effect; • the nature of the contract; • a systematic interpretation of all clauses; • consideration of specific cases within the contract; and • in the event of ambiguous clauses, interpretation in favour of the party bearing the obligation. Since an insurance contract is consensual, its exist- ence does not rely on a specific document. This means that different types of evidence can be used to establish the contract’s existence and terms, not just a single document. The policy itself serves as proof of the contract, but negotiations and the circumstanc- es under which the contract was made can also be reviewed to determine its specific terms. 8.2 Warranties Under Colombian law, warranties are strict obligations that the insured must comply with, regardless of their materiality to the risk. These warranties are promises made by the insured to either perform or refrain from performing a specific act, fulfil a particular condition, or confirm or deny the existence of a specific fact. Article 1061 of the C.Com requires that a warranty must be explicitly included in the policy or an ancillary document. The wording should leave no doubt about the insured’s intention to uphold the warranty. If the insured breaches a warranty, the insurer may void the entire insurance contract. This holds even if the warranty covers an event that occurs after the agreement ends, and the insurer can terminate the contract as soon as the breach occurs. 8.3 Conditions Precedent Colombian law does not explicitly define conditions precedent, nor has Colombian case law provided a clear framework for their interpretation. In practice,
115 CHAMBERS.COM
Powered by FlippingBook