I. Brief introduction to life insurance

At Belzuz Abogados, as expert lawyers in Insurance Law, we receive numerous queries and cases related to all branches of this speciality, which means that we are always up to date on the subject.

Life insurance is one of the most dynamic branches of the insurance sector, due to the numerous possibilities and modalities that reality allows in relation to life cover. This type of insurance is regulated in articles 83 and following of Law 50/1980, of 8 October, on Insurance Contract (hereinafter "LCS"). In particular, article 83 LCS, in its first paragraph, establishes that:

"By life insurance the insurer is obliged, by means of the collection of the stipulated premium and within the limits established in the Law and in the contract, to pay the beneficiary a capital sum, an income or other agreed benefits, in the event of the death or survival of the insured, or of both events jointly".

II. Summary of the procedure

The Supreme Court decision we are examining today is motivated by a procedure in which the insured had taken out a life insurance policy linked to a mortgage, in which the payment of a determined amount in the event of death was established, the time limit of the cover being "the end of the annuity in which the insured reaches 65 years of age". The problem lies in the fact that the policy was taken out on 15 December, so the insurance company argued that the annuity in which the insured had reached the age of 65 had ended on 15 December 2010.

However, the insured's family argued that the concept of "annuity", as stated in the policy, implied that the coverage extended until 31 December, the date of the insured's death.

Also, as is usual in this type of insurance, a benefit had been agreed in the policy in the event of permanent disability of the insured, a situation that had been recognised some time before, the family of the deceased claiming, subsidiarily, the payment of the amount fixed as compensation for the case of permanent disability.

The Court of First Instance no. 5 of Valencia issued a judgement in favour of the claimants, considering that the expression "end of the annuity in which the insured person reaches 65 years of age" could logically be understood by the insured persons as referring to the calendar year, and not to the expiry period of the insurance annuity, so that its obscure nature would not exceed the requirements of article 3 LCS, which we have already mentioned in other articles (that the limiting clause is specially highlighted and accepted in writing).

The insurer filed an appeal against this judgement, which was heard by the Provincial Court of Valencia, without success for the insurer, since the judgement fully confirmed all the arguments sustained by the Court of First Instance.

In response to this decision, the insurance company lodged an appeal in cassation before the Supreme Court.

III. Examination of the Supreme Court judgement

Once the cassation appeal was admitted for processing, the Supreme Court ruled on it in STS no. 3996/2023, of 3 October (ECLI:ES:TS:2023:3996), upholding the insurance company, reasoning the following arguments:

a. Regarding the infringement of the requirements of article 3 LCS

As we have said, article 3 LCS establishes that the general and particular conditions must be drafted in a clear and precise manner, and the clauses limiting the rights of the insured must be specially highlighted and accepted in writing. It is therefore a question of first determining whether we are dealing with a clause limiting rights or merely delimiting the risk (a distinction that we have already addressed in other articles) and, in the first case, of controlling compliance with the special requirements of article 3 LCS.

Well, the Supreme Court points out, citing abundant case law, that the merely delimiting conditions of the risk are those that come to specify the object of the insurance contract (risk, amount, term, time scope) while the limiting conditions are those that come to limit or "worsen" the position of the insured, once the risk occurs.

In this case, the nature of the insurance (part-time life insurance) means that the existence of the time limit is an essential element of the insurance contract itself, so that it can neither be considered as limiting the rights of the insured, nor surprising in any way, given that the fact that the cover only lasts until the insured reaches a certain age is a usual and defining element of this type of product.

Moreover, in this case, the clause in question appeared highlighted in bold and under a special warning to read it with caution and to sign it only in case of agreement with its content, with the signature of the insured.

The Supreme Court explains that the expression "at the end of the annuity in which the insured reaches 65 years of age" is sufficiently clear and implies the cessation of the coverage on 15 December 2010, the date on which the annuity of the policy in which the insured reached 65 years of age ended, so that to agree with the plaintiff and extend the coverage until 31 December would be absurd and unfair, according to the Supreme Court, as it would imply in practice a renewal of a contract for a new period, without payment of premium, which is unacceptable.

b. Regarding the coverage of permanent incapacity

In this case, it was not disputed that the insured had been declared in a situation of absolute permanent disability during the validity of the policy, which as we have said was a covered risk, as is usual in life insurance policies. The reason for the recognition of the situation of incapacity was "depressive disorder, asymptomatic bronchial asthma and HTA".

The argument put forward by the insurance company to deny coverage in this case was the fact that the insured had not informed, during the questionnaire prior to taking out the insurance, that he suffered from a major depressive disorder of long duration, serious and requiring medication, even though the questionnaire asked, among other things, if the insured "has suffered or suffers from an illness, or is subject to medication".

As we have stated in other publications, Article 10 LCS establishes the obligation of the policy holder to respond truthfully to the questions that the insurer submits to him prior to contracting the policy, as long as they are within the legal limits.

The Supreme Court considers, in view of the statements of the doctor, who declared that he had been treating the insured for major depression for more than ten years, that there was at least gross negligence on the part of the policyholder in answering the questionnaire denying that he was suffering from a serious illness of which he was perfectly aware and which, in the end, was the cause of the incapacity, a statement which is entirely attributable to the insured, given that his signature appears at the bottom of the questionnaire.

IV. Conclusions

The Supreme Court overturns the decision of the Court of First Instance and the Provincial Court and upholds the insurance company in relation to the non-existence of coverage in a life and permanent disability insurance policy in which the insured had died barely 15 days after the end of the coverage.

The SC considers that the time limitation cannot be considered as a clause limiting the rights of the insured in this type of product (temporary life insurance), but that, by its very nature, the delimitation of the temporal scope is an essential condition of the policy, which cannot be considered either limiting or surprising. The clause was sufficiently clear and, moreover, complied with the requirements of article 3 LCS as it was specially highlighted and accepted in writing.

With regard to the coverage of permanent disability, the SC considers that there is serious fault on the part of the insured when he deliberately omits in the previous questionnaire to be suffering from a long term or chronic illness, with medication, even if it is a mental illness (depression) and even if the questionnaire question is generic and does not refer to a particular illness or group of ailments.

From the Insurance Law Department of Belzuz Abogados, we are at your disposal to analyse and defend your problem in matters of civil liability and insurance in the most professional and efficient manner.

 Adrián Macias Catalina 

Belzuz Abogados SLP

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