CZECH REPUBLIC Law and Practice Contributed by: Eva Nováková, Michaela Šmotková, Martin Sztefek and Kateřina Chizzola Bardonová, JŠK, advokátní kancelář, s.r.o.
8. Interpreting an Insurance Contract 8.1 Interpretation of Insurance Contracts and Use of Extraneous Evidence The interpretation of insurance contracts is not signifi- cantly different from other types of contracts. How- ever, certain differences may apply, particularly due to the fact that the insurer is obligated to exercise due professional care and is therefore perceived as a professional. The dominant principle of contract interpretation (and in Czech law in general) is the principle of interpret- ing legal actions according to the will of the parties involved. It is therefore, to a certain extent, irrelevant how a specific legal act is named, but what is decisive is the will of the parties and the characteristics that the legal action actually exhibits (although there are legal acts that must be named in accordance with their content for the sake of certainty). Extraneous evi- dence, including evidence about the negotiations or the “usual practice”, may also be used to determine the will of the parties. In cases where the will is uncertain, individual princi- ples of interpretation are applied to assess the case. In insurance (given the way insurance contracts and insurance terms and conditions are created), the dom- inant interpretation method is contra proferentem – ie, interpretation to the detriment of the party who pro- posed and used the provision first, which is usually the insurer. In consumer cases, the decisive principle is interpre- tation in favour of the consumer – ie, if the meaning of any provision of the contract or insurance terms appears to be contentious, it will be interpreted in a manner more favourable to the consumer. This inter- pretation is relatively common in consumer cases and is widely applied by civil courts. 8.2 Warranties In the Czech legal system there is no specific concept of “warranty” as recognised in common law jurisdic- tions. Rather, insurance contracts refer simply to the rights and obligations of the parties, where some of the contractual provisions may correspond to what would be called a warranty under common law. In
addition, some provisions may take the form of con- ditions precedent or subsequent. The rights and obligations of the parties arise not only from the contract itself, but can also arise from the operation of the law. 8.3 Conditions Precedent Czech law does recognise the concept of conditions and differentiates between suspensive and resolu- tive conditions. In principle, these terms correspond to common law concepts of conditions precedent and conditions subsequent, respectively. As with any other contractual provision, conditions must also be expressed in a clear and comprehensible manner. However, it is not necessary to denote a specific con- tractual term as a suspensive or resolutive condition, which ultimately is the result of contract interpretation. 9. Insurance Disputes 9.1 Insurance Disputes Over Coverage The insurance disputes over coverage are the most common types of disputes in the insurance field and are handled by the civil court. If one of the parties to the dispute is a consumer, then the dispute may be settled in a specific alternative dispute resolution mechanism set out in 9.7 Alternative Dispute Reso- lution . If reinsurance is also arranged in a certain situation, the reinsurer can only be a party to a potential dis- pute as an intervener on the insurer’s side, because the person entitled to claim insurance benefits has no claim against the reinsurer, but only against the insur- er. An intervener is a party to the proceedings with the rights and obligations of a party to the dispute, and their participation is conditioned, for example, in the case of reinsurance, by a direct financial interest in the outcome of the dispute. Only the insured or beneficiary may claim insurance benefits directly from the insurer. In the case of liability insurance, the injured party may only claim insurance benefits from the insurer if it is agreed in the contract or if regulated by law (an example of this regulation is compulsory motor vehicle liability insurance).
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