CHILE Trends and Developments Contributed by: Daniel Silva and Pía Parmar, Silva & Parmar Abogados
that the general rule is the presumption of coverage, although the insurer may prove that the loss was caused by an event that exempts it from liability due to being excluded from cover, with the burden of proof resting on the insurer. Case law has ruled on the interpretation of coverage exclusions, stating that “they must be interpreted restrictively as they constitute exceptional provisions, and, in such event, a broad interpretation or one anal- ogous to cases not expressly provided for in the rel- evant limitations and/or exclusions is not appropriate” (Supreme Court, Case No 139761-2022). Insurance and Reinsurance Independence in the event of non-payment Decree with Force of Law No 251, Article 28 enshrines the principle of autonomy, stipulating that reinsurance shall in no way alter the contract entered between the ceding insurer and the insured. Accordingly, the insurance contract and the reinsurance contract are independent and autonomous. This same principle is reflected in Article 585 of the Commercial Code. Furthermore, as a consequence of the independ- ence between both contracts, the insurer may not defer payment of the indemnity to the insured on the grounds of, or by invoking, the reinsurance; therefore, a “Z clause” is invalid under Chilean law. Absence of direct action By virtue of the principle of autonomy, Article 586 of the Commercial Code expressly provides that the insured generally has no direct right of action against the reinsurer. An exception applies where the reinsurance contract stipulates that payments due to the insured in respect of losses shall be made directly by the reinsurer, or where, in the event of a loss, the direct insurer assigns to the insured the rights arising under the reinsurance contract to recover from the reinsurer. In any case, even if direct payment is provided for in the reinsurance contract or rights are assigned, the direct insurer cannot be released from its obligation to pay the loss to the insured.
Articles 585 and 586, to which reference has been made, are mandatory provisions and any agreement contrary to them shall be of no effect. Jurisdiction In matters of jurisdiction, Article 29 of Decree with Force of Law No 251 provides that any disputes aris- ing in connection with direct insurance and reinsur- ance contracts subject to that law shall be submitted to Chilean jurisdiction, and any agreement to the con- trary shall be null and void. Notwithstanding this restriction on the choice of juris- diction, the parties may agree that such disputes be resolved in accordance with the rules on international commercial arbitration set out under Chilean law. In the event of a dispute, the Commercial Code stipu- lates that, in reinsurance contracts, international rein- surance practices and customs shall serve to interpret the parties’ intentions. Conflicting reinsurance contractual clauses In reinsurance contracts, it is common to find co-oper- ation and control clauses that are particularly relevant to reinsurers but which, if not drafted with due regard to the Chilean claims settlement process, may be difficult to apply in full, owing to the strict regulatory requirements imposed on insurance companies. Problems frequently arise in relation to time limits, as the settlement process is governed by Supreme Decree No 1055, which prescribes specific deadlines that must be observed. The direct insurer may find itself in a complex position, having to fulfil its obliga- tions both to the insured and to the reinsurer. For its part, the CMF monitors compliance with the settle- ment regulations, so where deadlines do not coincide the ceding company may be unable to meet the time- frames set out in the control clause. Finally, discrepancies are often found between the jurisdiction indicated in the reinsurance slip, the cover note and the local policy, giving rise to disputes as to which jurisdiction applies when a conflict arises in connection with the reinsurance.
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