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The impact of Covid-19 on the global insurance industry – Spain

Wednesday 13 July 2022

Jorge Angell
L C Rodrigo Abogados, Spain
jangell@rodrigoabogados.com

Spain

General questions

Yes/

No/

N/A

Additional comments, if any.

1

Does the country that you are reporting on follow common law jurisprudence?

No

2

If the answer to the above question is no, does the country you are reporting on follow a civil code? Please describe the judicial system in short.

Yes

There is a civil code. Civil justice is administered in a three- instances court system: first instance, provincial courts (courts of appeal) and Supreme Court (with limited access). There are also Superior Courts of Justice in each of the 17 autonomous communities in Spain. Evidence may be reviewed in full in the first two instances, whilst the Supreme Court is a court of cassation. Recourse to the Constitutional Court is available in the event of violation of fundamental rights. The civil dispute system is basically adversarial, not inquisitorial.

3

Please provide a brief description of the legal framework applicable to insurance coverage disputes in the country you are reporting on. In so doing, please consider the following questions:

The legal framework is made up basically by the general obligations and contract law as codified in the Civil Code, the Insurance Contract Act of 1980, and the civil procedure rules.

4

Does the insured bear the burden of establishing coverage of a claim, or does the insurer bear the burden of establishing no coverage? Please give a short description of the legal basis in your country.

Yes

Under Article 217 of the Civil Procedure Act, each party bears the burden of proving those facts supporting the position they are defending in the proceedings. Therefore, the claimant (insured) will have to prove those facts that in the light of the applicable legal provisions allow to conclude that there is coverage. While the defendant (the insurer) will have to prove those facts that in the light of the applicable rules prevent, extinguish or thwart the legal efficacy of the facts proved by the claimant. For example, the fact of an exclusion and the legal effect of such exclusion. The subject matter of evidence is, as defined in Article 281 of the Civil Procedure Act, those facts related to the actual protection sought in the proceeding.

5

Are coverage provisions in policies interpreted broadly or is there a presumption in favour of coverage? Please give a short description of the legal basis in your country.

Yes

Although there is no legal presumption in favour of coverage, coverage provisions are interpreted broadly, namely in the case of so-called mass or consumer risks. In case of doubt courts usually find in favour of the insured. Saying it in passing, presumptions are admitted in Spain as evidence. From an admitted or proven fact the Court may presume the certainty of another fact provided that between the proven fact and the presumptive fact there is a direct and precise link in accordance with human criteria (Article 386 of the Civil Procedure Act).

6

Are exclusions interpreted narrowly or is there a presumption against finding that an exclusion to coverage applies? Please give a short description of the legal basis in your country.

Narrowly. Particularly, clauses that restrict the rights of the insured must be accepted explicitly by the insured and highlighted in bold letters. Detrimental clauses (cláusulas lesivas) are banned and thus are null and void. This is not necessarily applicable where the so-called large risks are concerned where parties are free to agree as they wish, subject to the general limits to party autonomy.

7

Are there universally accepted definitions for:

  • event
  • occurrence
  • damage
  • cause
  • originating cause
  • natural peril
  • force majeure
  • loss
  • consequential loss

If the answer is yes, please, give a short description of each definition and the legal basis for that definition (ie, a rule of law, case law etc).

event

The contingency the risk of which happening is the subject matter of the insurance cover (Article 1, Insurance Contract, and related case law).

occurrence

As opposed to claims made, where the event envisaged in the contract takes place within the period of insurance.

damage

Comprises the actual loss suffered, and the profit lost (Art 1106, Civil Code). Damages for which the bona fide debtor shall be liable are those which are envisaged or could have been envisaged at the time of contracting the obligation and which are a necessary consequence of their failure to perform. In the event of fraud, the debtor shall be liable for all damages arisen from the failure to perform the obligation (Art 1107 Civil Code).

cause

It is the set of antecedent empirical conditions that provide the explanation, in accordance with the laws of scientific experience, for the result to have occurred (case law construing Art 1902 Civil Code).

originating cause

The proximate cause after eliminating all those hypotheses far or very far in the causal chain, which leads to the harmful result being a natural, adequate, and sufficient consequence, assessed in accordance with the circumstances that good sense requires in each case (case law construing Art 1902 Civil Code).

natural peril

The following natural phenomena: earthquakes and tsunamis, extraordinary floods, volcanic eruptions, atypical cyclonic storms, and falling of sidereal bodies and aerolites (Art 6 Legal Statute of the Insurance Compensation Consortium).

force majeure

No one shall be liable for events which cannot be foreseen or which, being foreseeable, are inevitable or irresistible (Art 1105, Civil Code and related case law).

loss

It is the materialisation of the risk covered in the insurance contract. Despite the continuous references to loss (siniestro) in the Insurance Contract Act, there is no specific legal definition of loss, although the concept may be inferred from Article 1 of the Insurance Contract Act. Normally, insurance policies provide a definition of loss.

consequential loss

The lucrum cessans or loss of profit the creditor has failed to obtain (s 1106 Civil Code).

Loss causation

Yes/

No/

N/A

Additional comments, if any.

8

Did the country that you are reporting about issue lockdown, stay-at-home or no-travel restrictions in response to Covid-19?

Yes

All of them

9

If the answer to the question above is yes, were such orders issued nationally, by state/region or by local city/town. Please give a short description of the issuing authority and the orders issued.

Nationally. Central Government/Congress, along with twice declaring the state of alarm (emergency), issued a hefty package of laws and lower rank regulations, touching on a variety of aspects such as employment, social security, taxation, housing and commercial rents, corporate matters, financing, stay of court proceedings, limitation of procedural terms, moratorium of mortgages, suspension of insolvency procedures and of cool-off periods to return purchases of consumer goods. The Autonomous Communities also issued orders of regional scope.

10

If the answer to the above question is yes, were the lockdown, stay-at-home or no-travel restrictions mandatory or recommended?

They were mandatory.

11

If the country that you are reporting about did issue lockdown, stay-at-home or no-travel restrictions, were those orders suspended or revoked at any point in time? If the answer is yes, please, give a short description of the timeline.

Yes

They were gradually eased and revoked. More importantly, the state of emergency was ruled contrary to the Constitution by the Constitutional Court. This was after the lockdown expired.

12

If the answer to the above question is yes, were subsequent lockdown, stay-at-home or no-travel restrictions issued at any point in time? Please give a short description of the timeline.

See above, the lockdown and travel restrictions were extended on several occasions, but restrictions were gradually eased.

13

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss?

Yes

There are several judicial opinions from lower courts analysing this issue.

14

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss? If the answer is yes, please, give a short description of the conclusions in the judicial opinions or guidance.

No

Neither

15

If the answer to the question above is yes, did the highest court in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by the virus? Please give a short description of the conclusions in the judicial opinions or guidance.

To date, no determinations or guidance from the highest court in Spain (the Supreme Court).

16

If the answer to the above question is no, did the highest court in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by government lockdown or stay-at-home orders? Please give a short description of the conclusions in the judicial opinions or guidance.

To date, no determination or guidance by the Supreme Court, but there is determination by lower courts.

17

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss? If the answer is yes, please, give a short description of the conclusions in the judicial opinions or guidance.

No

There are several lower court judgments dealing with claims for business interruption in the context of Covid-19 but none to our knowledge has made the distinction between ‘originating cause’ and simply ‘a cause’.

Generally, not having reviewed all existing judgments from the lower courts but just a selection, the approach of lower courts is divided into two main trends: some have denied indemnities for business interruption understanding that this cover is generally conditioned to physical and direct damage to the insured property deriving from the events listed in the policy which did not include pandemics; others have awarded such indemnities resorting to the breach of formal requirements where so-called limitative clauses (of the rights of the insured) are concerned.

18

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss, have other courts in the country issued such opinions?

Yes

Some lower courts have considered irrelevant whether the virus or the lockdown were ‘a cause’. Particularly, the decision of the Court of Appeal of Gerona dated 3 February 2021 (JUR/2021/44439) considered these to be ‘dogmatic disquisitions’ since the main practical consequence is that the insured will see their income reduced as a consequence of either the virus or the lockdown.

19

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether Covid-19 is a ‘cause’ of insured loss? Please give a short description of the conclusions in the judicial opinions or guidance.

No

No uniformity. See above. In any event, judgments from lower courts are not precedents.

20

If the answer to the above question is yes, do courts in the country you are reporting about hold that losses related to Covid-19 were ‘caused’ by the virus? Please give a short description of the conclusions in the judicial opinions or guidance.

As stated above, there is no uniformity or consistency in the interpretation.

21

If the answer to the above question is no, do courts in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by government lockdown or stay-at-home orders? Please give a short description of the conclusions in the judicial opinions or guidance.

We have not seen actual determinations of causation based on the lockdown decreed by the government. However, the introductory premise/context of several judgments is precisely the government lockdown.

22

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss?

No

23

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss, have other courts in the country issued such opinions? If yes, please give a short description of the conclusions in such judicial opinions or guidance.

No

24

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’?

Yes

See above, one of the trends of lower courts judgments.

25

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’? Please give a short description of the conclusions in the judicial opinions or guidance.

No

26

If the answer to the question above is yes, did the highest court in the country you are reporting about determine that losses related to Covid-19 were covered ‘events’? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

27

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’, have other courts in the country issued such opinions?

Yes

As stated above one of the trends of lower court judgments is to consider that Covid-19 is not a covered event.

28

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether Covid-19 is a covered ‘event’? Please give a short description of the conclusions in such judicial opinions or guidance.

No

There is no uniform interpretation, as stated above there are at least two main trends. At any rate, lower courts decisions are not precedents.

29

If the answer to the above question is yes, do courts in the country you are reporting about hold that losses related to Covid-19 are covered ‘events’? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

30

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 in the context of loss causation.

No

There are no other official sources or authorities offering contributions.

Aggregation of claims

Yes/

No/

N/A

Additional comments, if any.

31

Does the country you are reporting on permit aggregation of claims arising out of a single originating cause? Please give a short description of the legal basis.

Yes

There is no statute providing for aggregation. Aggregation is a matter of contract between the parties.

32

Does the country you are reporting on permit aggregation of claims arising out of a single cause? Please give a short description of the legal basis.

Yes

See above. The basis is contractual.

33

Does the country you are reporting on permit aggregation of claims arising out of a single event? Please give a short description of the legal basis.

Yes

See above. The basis is contractual.

34

Does the country you are reporting on use an accepted test for determining whether claims can be aggregated? For example, does the country you are reporting on apply to four unities test to determine whether aggregation is appropriate? Please give a short description of the legal basis.

No

35

Have courts in the country you are reporting on issued jurisprudence concerning whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the legal basis.

No

36

Has the highest court in the country you are reporting about issued judicial opinions or guidance concerning whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

37

If the answer to the question above is yes, did the highest court in the country you are reporting about determine whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

38

If the highest court in the country you are reporting on has not issued such jurisprudence, have other courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether insureds may aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

39

If the answer to the above question is yes, do courts in the country you are reporting about permit insureds to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

40

Do the courts in the country you are reporting on permit an insured to aggregate claims related to multiple properties or business locations arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

I have seen no judgments relating to this.

41

Do the courts in the country you are reporting on permit an insured to aggregate claims related to multiple lockdown or stay-at-home orders arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

I have seen no judgments relating to this.

42

Have courts in the country you are reporting on issued jurisprudence concerning whether cedents can aggregate claims arising out of Covid-19? Please give a short description of the legal basis.

No

43

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether cedents may aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

44

If the answer to the above question is yes, do courts in the country you are reporting about permit cedents to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

45

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 and aggregating claims.

N/A

No other official sources or authorities.

Property damage

Yes/

No/

N/A

Additional comments, if any.

46

Have courts in the country you are reporting on issued jurisprudence concerning whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the legal basis.

No

47

Has the highest court in the country you are reporting about issued judicial opinions or guidance concerning whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the conclusions in such judicial opinions or guidance.

No

48

If the answer to the question above is yes, did the highest court in the country you are reporting about determine whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

49

If the highest court in the country you are reporting on has not issued such jurisprudence, have other courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether losses arising from Covid-19 constitute property damage? Please give a short description of the conclusions in such judicial opinions or guidance.

No

50

If the answer to the above question is yes, do courts in the country you are reporting about permit insureds to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

51

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 and property damage.

Yes

No official sources or authorities other than the courts.

Exclusions

Yes/

No/

N/A

Additional comments, if any.

52

Has Covid-19 been deemed a ‘natural peril’ in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

No

53

Has Covid-19 been deemed force majeure in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

The force majeure defence raised by some insurers to deny payment of the indemnity for business interruption to the insureds has been turned down by some courts. These courts understand that the pandemic was foreseeable, based on some scientific studies.

54

Is Covid-19 acknowledged as a notifiable disease in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

No

55

Is it common for insurance policies issued in the country you are reporting on to include a pandemic or virus exclusion? Please give a short description of the legal basis and common insurance practice.

Yes

56

Have any courts in the country you are reporting on determined that a pandemic or virus exclusion is void as against public policy in the context of Covid-19? Please give a short description of the legal basis and relevant jurisprudence.

No

57

Have any courts in the country you are reporting on otherwise determined that a pandemic or virus exclusion is unenforceable in response to Covid-19? Please give a short description of the legal basis and relevant jurisprudence.

No

Some courts have ruled it unenforceable taking the position that it is a limiting condition of the rights of the insured which did not meet the formal requirements as set out in Article 3 of the Insurance Contract Act 1980, namely: express acceptance of the exclusion and the acceptance must be highlighted clearly and in bold letters.

58

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 in the context of exclusions.

Yes

No other official sources or authorities.

Regulatory oversight

Yes/

No/

N/A

Additional comments, if any.

59

Have insurance regulators in the country you are reporting on issued directives concerning coverage for claims arising out of Covid-19? Please describe the regulations that have been implemented.

No

60

Are regulators requiring or encouraging insurers to provide grace periods to insureds to make payments on premiums? If yes, please give a short description of the legal basis and relevant guidance.

No

Government action

Yes/

No/

N/A

Additional comments, if any.

61

Has the government in the country you are reporting on implemented relief measures for losses sustained as a result of Covid-19?

Yes

Relief measures were provided for vulnerable groups of people, small and Medium-Sized Enterprises (SME), and the self-employed.

62

If the answer to the above question is yes, are the relief measures available to both individuals and businesses?

Yes

63

Briefly describe the types of relief measures available to individuals and businesses.

Briefly listed, relief in its broadest sense included the following measures which were applied during the state of emergency:

  • The right to terminate contracts which were impossible to undertake due to Covid-19;
  • The right to terminate combined travel packages;
  • remunerated leave from work, in order to avoid transfers to work centres;
  • the temporary suspension of employment contracts;
  • a moratorium on social security contributions;
  • the postponement of social security debt;
  • extraordinary subsidy to house employees;
  • extraordinary subsidy for temporary workers whose contracts were terminated due to Covid-19 and who did not reach the minimum contributions threshold for unemployment benefit entitlement;
  • the recognition of the legal unemployment status of employees dismissed during the working trial period;
  • recognition of legal unemployment status of employees who resigned from their jobs voluntarily in expectation of a new employment contract with another enterprise that did not honour the contract due to the pandemic;
  • unguaranteed postponement of certain tax debts not exceeding €30,000;
  • mortgage deferment in favour of vulnerable debtors as defined;
  • moratorium in favour of vulnerable debtors as defined of loan agreements;
  • guarantees lines to cover renewal of loans and new financing to businesses and self-employed individuals;
  • an increase of the lending capacity of the Official Credit Institute to facilitate liquidity to businesses, particularly SMEs and self-employed individuals;
  • extraordinary Insurance coverage line by CESCE (official export credit Insurance company) for SMEs;
  • suspension of the eviction of vulnerable tenants lacking alternative housing, subject to certain requirements;
  • extraordinary extensions to house leases subject to certain conditions;
  • moratoriums and reductions of housing rentals;
  • suspension of the duty to file for insolvency proceedings; and
  • automatic extension of the so-called ‘social electricity bonus’ which provides discounts of 25 or 40 per cent, as regulated, in electricity prices for vulnerable consumers.