Insurance activities in Belgium can be undertaken by a Belgian company as well as by a foreign company either through a branch office or directly without any establishment in Belgium, provided that a licence has been obtained from the National Bank of Belgium (NBB).
The licence can only be obtained if certain criteria regarding solvency margins and organisation are met. The licence is granted for a branch or a group of branches of insurance undertakings.
Specific rules apply to insurance companies that undertake insurance activities in Belgium but are based in another Member State of the EEA. Such companies can operate with the licence obtained in their country of origin, but nevertheless need to observe Belgian legal provisions protecting the general good. Before the insurer commences activities in Belgium, its home country regulator must submit a file to the NBB. Although the supervision of these companies is based on the ‘home country control’ principle, the NBB retains the power of supervision over these companies and must inform the European Commission if certain measures are taken against such companies.
It is forbidden for a Belgian insurance company to undertake both life insurance and non-life insurance activities, except if both activities were already carried out before 15 March 1979 and provided that the management and accounting of the life and non-life business are split. It is similarly forbidden for Belgian branches of non-EEA insurance companies to undertake both life insurance and non-life insurance activities, without any exception available.
From 2015, insurers and insurance intermediaries have become subject to more constraining rules of conduct, inspired by the MiFID rules. This regime anticipates certain rules of the Insurance Distribution Directive and will have to be adjusted upon implementation of the directive (by January 2018 at the latest). The Financial Services and Markets Authority monitors compliance with these rules.
Belgian insurance contracts are governed by the 2014 Insurance Act, which contains a number of mandatory provisions (e.g. regarding non-payment of premiums, misrepresentation or non-disclosure of risks and late notification).
2. Effect of misrepresentation and/or non-disclosure
In addition to the general principles of Belgium law that declare an agreement void due to material error or fraud, insurance law has specific rules with respect to misrepresentation and non-disclosure of risks. These allow the insurer to amend, terminate or annul the insurance contract if there have been omissions or errors in the disclosure or representation of the risk made by the insured.
If the insured deliberately fails to disclose a risk or deliberately misrepresents the risk, the insurer can request the annulment of the insurance contract if the deliberate misrepresentation or non-disclosure has misled the insurer in its assessment of the risk. In this case the insurer retains the paid premiums and has the right to claim for the premiums due until the misrepresentation was brought to his attention.
If the risk was unintentionally misrepresented or not disclosed, the contract will either be amended or terminated. The insurer is entitled to propose an amendment to the contract within one month after the misrepresentation or the non-disclosure has come to the insurer’s knowledge. The amendment will often be an adaptation of the premium. If the insured refuses the proposed amendment (or does not respond within one month after having received the proposed amendment), the insurer can terminate the contract within 15 days after the refusal by the insured (or in case of non-response of the insured, within 15 days after expiry of the one-month response period). The contract can also be terminated by the insurer within one month after having gained knowledge of the misrepresentation or the non-disclosure, if the insurer can prove that it would not have entered into the policy if it had known about the non-disclosed or misrepresented circumstance or event. If the insurer does not propose an amendment nor terminates the contract within the one-month period, the contract will continue at the terms and conditions as originally agreed between parties.
Losses that occurred prior to the entry into force of the proposed amendment or termination of the contract shall have to be compensated by the insurer if the misrepresentation or non-disclosure is not imputable to the insured. If the misrepresentation or non-disclosure is however imputable to the insured, the insurer shall only be held to pay on the basis of the ratio between the paid premium and the premium that the policyholder would have had to pay if he had disclosed the risk properly. If the insurer can however prove that it would under no circumstances have insured the risk should the risk have been disclosed properly, the insurer shall only be held to pay an amount that is equal to the paid premiums.
3. Effect of breach of warranty and condition precedent
Belgian insurance law is silent on breach of warranties. A breach of warranty will likely be construed as a misrepresentation of the risk, giving rise to the effects and consequences applicable to such misrepresentation (see above).
Likewise, condition precedents are not explicitly foreseen under Belgian insurance law. In the absence of any specific (mandatory) insurance law, general contract law is applicable which allows condition precedents in a contract.
The insurance contract can also impose a specific obligation on the insured and can link a loss of right to the non-respect of this obligation insofar there is a causal link between the non-respect of the obligation and the occurrence of the loss.
4. Consequences of late notification
The law obliges the insured to notify the loss to the insurer as soon as possible and in any event within the period provided for by the contract. If this time period is not complied with, the insurer is entitled to reduce the coverage by the amount of damages suffered by the insurer as a result of the late notification, unless the insured has notified the loss as soon as was reasonably possible. If the insurer can prove that the insured has acted with fraudulent intent, coverage can be denied.
5. Entitlement to bring a claim against an insurer
Under a liability insurance, a third party can file a direct claim against the insurer for compensation for damages suffered as a result of an insured event. The claimed monies must be paid directly to the third party with no possibility for any creditors of the insured to claim any part of such payment.
The enforceability vis-à-vis the third party of the defences (such as nullity of the contract, loss of rights or exemptions) an insurer would have against the insured under the law or the insurance contract, depends on whether the respective liability insurance is mandatory or not. Under mandatory liability insurance (for example public buildings and motor vehicles) the insurer cannot rely on the same defences against the third party, with the exception of any annulment, termination or suspension of the contract that dates from before the occurrence of the loss (this can be invoked against the third party). Under non-mandatory insurance, the insurer can rely on defences regarding nullity or loss of rights in order to refuse coverage if they relate to events occurred prior to the loss.
6. Entitlement to damages from an insurer for late payment of claim
The insurance pay-out is a monetary debt payable by the insurer to which the general principles regarding late payment shall apply. Excluding any other type of damages, the insured (or beneficiary) shall be entitled to late payment interests in case of late payment of a claim by the insurer. In the absence of any contractually agreed interest rate, the interest rate shall be the statutory rate.
7. General rules concerning the limitation period for claims
As a general principle, the limitation period for a claim arising from an insurance contract is three years. The starting point of the limitation period is the day of the occurrence of the event giving rise to the right to make a claim. If the party making the claim can prove that it was not aware of the occurrence of that event up to a certain date, then that date will be the starting point of the limitation period. There is a long stop limitation period of five years from the occurrence of the event which gives rise to the right to make a claim.
8. Policy triggers with respect to third-party liability insurance
As a general principle, the policy trigger is the occurrence of a loss. The loss is covered if it occurs during the policy period, even if the claim is made after the end of the policy period.
Parties can agree on a claims-made policy, except in private civil liability insurance, non-industrial fire insurance and civil liability insurance for motor vehicles. However, Belgian law provides for a mandatory period of at least 36 months after the policy term, during which claims for damages having occurred during the policy term are also covered under a claims-made policy.
9. Recoverability of defence costs
Under a liability insurance, the insurer is legally obligated to compensate the costs related to civil proceedings, as well as the fees and costs of lawyers and experts, but only insofar as these costs have been incurred by the insurer or with the insurer’s consent or, in the event of a conflict of interests that is not imputable to the insured, insofar as these costs have not been made unreasonable. These costs and/or fees must be paid by the insurer even when they exceed the insured limits. For liability insurances other than the mandatory civil liability insurance for motor vehicles, the insurance contract can however limit these costs (and notably the amount of their exceedance of the insured limits) in accordance with the maximum amounts stipulated in the law.
An insured can also enter into a separate legal expenses insurance policy for coverage of his legal expenses (which do not result from a claim covered under a liability policy).
10. Insurability of penalties and fines
Mandatory Belgian insurance law stipulates that fines or settlements related to criminal proceedings cannot be the subject of an insurance contract, except for those which are borne by the person who is civilly (but not criminally) liable for the infraction and which are not related to road traffic or road transport.
There are no specific legal provisions related to the insurability of administrative penalties or fines. The majority of Belgian legal doctrine nevertheless accepts that administrative penalties or fines that have a criminal nature (which depends on the nature of the infringement and the nature and severity of the sanction) are subject to the same principles as criminal sanctions and can thus not be insured. Administrative penalties or fines that do not have a criminal nature can on the contrary be insured, as can purely contractual penalties (e.g. penalties for late-delivery).
Insurance contracts that provide coverage for criminal penalties, and fines or administrative penalties and fines of criminal nature, shall be null and void. Given that there are however no specific legal provisions related to the insurability of administrative penalties or fines, nor any leading case-law related hereto, it is to date still open for debate whether administrative penalties and fines (of whatever nature) can be insured.