The French regulatory and supervisory authority in charge of insurance activities is the 'Autorité de contrôle prudentiel et de résolution' (ACPR), with competence for supervising insurance companies and insurance intermediaries. The French regulations that apply to insurance activities are based on the provisions of the Insurance Code. Insurance activities can be performed in French territory by:
- French companies that have been granted an insurance licence by the ACPR. Licensing requirements include the obligation to submit a business plan. The ACPR assesses the adequacy of the technical and financial means of the applying company with the proposed business plan and takes into account the allocation of corporate capital and the shareholders. The granting of the licence may be conditional on specific commitments imposed on the applying company. The duration of the licensing procedure cannot in principle exceed six months from the moment the application file is completed. Licensed French insurance companies can perform their activities in France either through their French headquarters or through a branch established in another EU Member State.
- EU insurance companies licensed in their home country that have passported their activities licensed under their home country regulations. Such companies can perform their activities in France (subject to the relevant home country authorities notifying the ACPR) either through a French branch (on a freedom-of-establishment basis) or directly through their home country headquarters or through a branch established in another EU Member State (on a freedom-of-services basis). If operating via a French branch, EU insurers must appoint a general representative who must be a French resident (either an individual or a corporate entity having its registered office in France and represented by a French resident individual).
- Insurance companies licensed in an EEA, but non-EU, country. Such companies can establish a branch in France subject to a licence being granted by the ACPR (the licensing requirements are lighter than those applying to non-EEA insurers. This includes Swiss insurance companies). Alternatively, they can provide their services directly from their home country headquarters (on a freedom-of-services basis), and do not require a licence for large risks (i.e. risks related to airplanes, trains, ships and vessels, freight, credit insurance to professionals or the activities and assets of large businesses as identified by turnover, number of employees and total balance) or subject to prior licensing by the ACPR for mass risks.
- Non-EEA insurers acting through a French branch licensed by the ACPR and that have appointed a French resident as their general representative in France, who must be agreed on by the ACPR.
- Any foreign insurer that wishes to insure motor vehicles in France must appoint a special representative based in France for claims management purposes.
2. Effects of misrepresentation and/or non-disclosure
Where the insured has intentionally misrepresented or not disclosed a fact that would impair the insurer’s assessment of the risk, the insurance contract is void and the insurer is entitled to keep all paid and outstanding premiums.
In the case of non-intentional misrepresentation or non-disclosure, the insurer is entitled to increase the premium, provided the insured agrees to the increased premium, or to terminate the insurance contract with a pro-rata reimbursement of the premium. If the insurer becomes aware of the misrepresentation or non-disclosure only after a loss has occurred, the insurer is entitled to reduce the claim payment by taking the premium actually paid as a percentage of the premium that would have been due had the misrepresentation or non disclosure not occurred; for example, if a premium of EUR 100 would have increased to EUR 150, the claim payment will be reduced by a third.
3. Effect of breach of warranty and condition precedent
The concepts of “warranty” and “condition precedent” do not exist as such under French law but both fall into the category of condition for guarantee.
A breach of a condition for guarantee entitles the insurer to deny liability even if this breach is not related to the loss claimed (unless provided otherwise in the insurance contract). It lies on the insured to prove that the condition has been complied with.
There is a very thin line between the notions of “condition for liability” and “exclusion” under French law, courts having full power to qualify the nature of the provision at stake. If the provision is qualified as an exclusion clause, it shall be void if it is not written in apparent letters, and if its terms are not precise and limited. Moreover, it lies on the insurer to prove that the claim falls under the exclusion clause.
4. Consequences of late notification
The parties to an insurance contract can agree that the insurer has the right to refuse to pay a claim where the insured notifies late (although where the insured was late in providing documentation following notification of the claim to the insurer, an insurer cannot refuse to pay a claim, but can reduce the claim payment in proportion to the amount of loss suffered by the insurer). However, such clause cannot apply if the delay is the result of a force majeure or fortuitous event, or if it has not actually been prejudicial to the insurer. The time limit for notifying a loss must be clearly stated in the insurance contract and cannot be less than five working days.
5. Entitlement to bring a claim against an insurer
Third parties do not usually have a right to bring a claim directly against an insurer. However, under third-party liability insurance contracts, third parties who have suffered a loss have the right to bring a claim directly against the insurer. Beneficiaries also have direct rights against an insurer under life insurance contracts.
6. Entitlement to damages from an insurer for late payment of claim
In case of late payment of a claim, the insurer can be subject to the payment of default interests and, possibly, of compensatory damages. The default interest rate can be provided in the insurance contract. Otherwise, the legal rate applies. Default interests run from the date of the payment demand made by the insured. The insurer may also be sentenced to pay compensatory damages where the insured suffered a specific loss and late payment resulted from the insurer’s bad faith.
7. General rules concerning the limitation period for claims
The limitation period for all claims arising out of an insurance contract is two years.
This period starts on the date that the insured became aware of the loss or, for third-party liability insurance, on the date the third party commences court action against the insured or is indemnified by the insured.
For life insurance, the limitation period within which the third-party beneficiary must bring a claim is ten years.
8. Policy triggers with respect to third-party liability insurance
Under third-party liability insurance, where the insured is an individual and the insurance contract is not a professional indemnity policy, the policy trigger will be the occurrence of the insured event. In other cases, the parties can agree whether the insurance contract will be a claims-made or occurrence based policy.
Claims-made policies must provide for a run-off period starting from the date of termination of the policy and having a minimum duration of five years (for some professional liabilities this is increased to ten years). Claims made during the subsequent period are insured only if they relate to insured events that occurred during the policy period. The limit of indemnity during the run-off period must be the same as the limit during the last year of the policy.
9. Recoverability of defence costs
In principle, the party who loses court proceedings shall compensate the legal costs incurred by the opposing party. However, courts enjoy full discretion as to the amount awarded to compensate such legal costs, and often grant lower allowances than the amount of fees actually incurred. The court may also rule that equity imposes that each party shall bear its own costs.
10. Insurability of penalties and fines
As a general principle, criminal penalties and fines are not insurable where the insured is the person held criminally liable. However, it is debated whether penalties and fines are insurable where the insured is not personally criminally responsible, but is civilly liable for the penalties imposed on third parties (e.g. the employer for some offences committed by its employees).