SWITZERLAND Law and Practice Contributed by: Peter Ch Hsu, Daniel Flühmann and Tiffany Ender, Bär & Karrer
have to form tied assets, it is much easier for them to effectively resort to risk transfer through ILS.
the conclusion of the insurance contract in advance. Additional rules apply to GTC, such as the “rule of unusual clauses” ( Ungewöhnlichkeitsregel ) and the “rule of ambiguity” ( Unklarheitsregel ). In the context of consumer contracts, the use of GTC that, to their detriment and contrary to the require- ment of good faith, create a significant and unjustified imbalance between contractual rights and contractual obligations, is prohibited by unfair competition law (Article 8 Swiss Federal Act Against Unfair Competi- tion). 8.2 Warranties Swiss law does not require warranties to be specifi- cally identified as such. 8.3 Conditions Precedent In Switzerland, parties may agree that the liability of the insurance undertaking is subject to the condition that the policyholder has complied with certain spe- cific obligations. However, the insurance undertaking may not deny coverage based on a breach of a condi- tion precedent, if the breach cannot be regarded as the fault of the policyholder (Article 45 paragraph 1 ICA). The insurance undertaking may not deny cover- age if the policyholder’s breach of its duty to reduce the risk or to prevent an increase in risk did not influ- ence the occurrence of the feared event and/or the scope of the insurance undertaking’s obligation (Arti- cle 29 paragraph 2 ICA). The ICA itself provides for certain obligations of the policyholder. Accordingly, the insured is obliged to notify the insurance undertaking as soon as it becomes aware of the occurrence of the insured event and of the claims under the insurance policy (Article 38 para- graph 1 ICA). In principle, late notification does not have any legal consequences for the insured except where it is at fault and the delay leads to an increase in the loss. In severe cases, the compensation may be forfeited entirely. Furthermore, in the event of gross negligence causing the insured event, the insurance undertaking may reduce the compensation (Article 14 paragraph 2 ICA). If the insured event is caused intentionally, the
8. Interpreting an Insurance Contract 8.1 Interpretation of Insurance Contracts and Use of Extraneous Evidence The rules applying to the interpretation of insurance contracts and general insurance terms and conditions (GTC) under Swiss law correspond with those applica- ble to the interpretation of contracts in general (Article 100 paragraph 1 ICA). The same applies to reinsur- ance contracts (Article 101 paragraph 2 in conjunction with Article 101 paragraph 1 no 1 ICA). This means that the starting point of every interpretation is the wording of the agreement (ie, grammatical interpreta- tion), based on the usual meaning of the words and expressions used. Furthermore, not only the wording but the mutually agreed true intention of the parties is decisive (Article 18 paragraph 1 CO). To establish the true intention of the parties under Swiss law, all relevant circumstances must be taken into consideration. These include, in particular: • the place, time and other circumstances of the formation of the contract; • the behaviour of the parties previous to the forma- tion of the contract and during contract negotia- tions, including possible drafts of the contract; • the behaviour of the parties after the formation of the contract, such as performance of an obligation under the contract; • the interests of the parties at the formation of the contract; and • the prevailing custom in the industry. The relevant clause must not be interpreted sepa- rately, but within the context of the entire agreement. If the true intention of the parties cannot be estab- lished, their behaviour must be interpreted in accord- ance with the principle of good faith: the true intention is replaced by the intention that reasonable parties would have agreed on. GTC form an integral part of the insurance contract if the parties have accepted them in the context of
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