Insurance law and regulation in Slovenia

1. Introduction

Insurance companies in Slovenia are generally regulated by the Insurance Act (Zakon o zavarovalništvu, “ZZavar-1”) which stipulates, among other, corporate framework for insurance companies and required authorizations and the Obligations Code (Obligacijski zakonik, “OZ”) which regulates insurance agreements.

Insurance activity in Slovenia may only be performed by (i) an insurer that has obtained authorisation from the Slovenian Insurance Supervision Agency (Agencija za zavarovalni nadzor, “AZN”), (ii) an insurer based in another EU or EEA member state that has established a branch in Slovenia or may perform insurance activity in Slovenia directly or (iii) an insurer, based in a third country, that may perform insurance activity in Slovenia directly or has established a branch in Slovenia and has obtained authorisation from the AZN to conduct insurance activity.

AZN may grant an insurance licence to a joint-stock company, societas europea or mutual insurance company.

2. Effect of misrepresentation and/or non-disclosure

When concluding an insurance agreement, the policyholder is obliged to  disclose to the insurer all circumstances, necessary for the risk assessment that were known or could not have remained unknown to the policyholder.

In case a policyholder deliberately provides false declarations or omits to disclose circumstance that could lead to an insurer to refuse conclusion of the insurance agreement, the insurer has the right to terminate the insurance agreement within three (3) months from when the insurer become aware of the false declaration or non-disclosure. If the insurance agreement is terminated for above-mentioned reason, the insurer is entitled to retain already paid premiums and request payment of the premiums for the period up to the termination.

In cases where a policyholder has provided  false declaration or has omitted duly disclosure without fault, an insurer may either (i) request termination of the insurance agreement or (ii) request payment of the proportionately higher premiums, both within one (1) month from when an insurer learns about the false declaration or incomplete disclosure. The insurance agreement terminates after the lapse of 14 days from when the insurer notifies the policyholder of termination. If the insurer wants to increase premium, the insurance agreement is automatically terminated in case the policyholder does not accept the proposed increase of premiums within 14 days following notification. In case the insurance agreement is terminated for in this paragraph mentioned reason the insurer must return to the policyholder part of the premiums pertaining to the time remaining up to the end of the insurance period. If the insured event occurs before the declaration was found to be false or incomplete, or later, but before the insurance agreement was terminated or an agreement on increase of the premium was reached, the insurance benefit is proportionately reduced.

The insurer does not have the right to invoke the above-mentioned rights granted to him due to misrepresentation and/or improper disclosure by the policyholder if the insurer was aware or could not be unaware of (true and complete) circumstances relevant for the risk assessment when the insurance agreement was concluded. The same applies in the case when the insurer obtained knowledge of misrepresentation and non-disclosure after conclusion of an insurance agreement, but it failed to timely invoke its rights.

With respect to property insurance, the policyholder is obliged to notify an insurer of every change of circumstance which might be significant for the risk assessment. With respect to personal insurance, the policyholder is obliged to notify an insurer only if the risk increases due to a change in the policyholder’s work.

The policyholder must immediately notify an insurer of the risk increase, if such increase is the result of the policyholder’s action, whereas in cases where the risk increases without policyholder involvement, the notification must be made within 14 days of when the policyholders becomes aware of the risk increase.

An insurer may either (i) withdraw from the insurance agreement if the risk increase was such that the insurer would not have concluded the insurance agreement in the first place or (ii) propose a premium increase if, being aware of such circumstances, it would have concluded the insurance agreement only subject to a higher premium. The insurance agreement terminates if the policyholder does not accept the proposed premium increase within 14 days.

If the insured event arises before the insurer was notified of the risk increase or after the insurer was notified, but before the insurer withdrew from the insurance agreement or before an increase in the premium was agreed, the insurance payment is reduced proportionally.

3. Effect of breach of warranty and condition precedent

Under Slovenian law, the parties of the insurance agreement may agree on any warranties and conditions precedent as long as they do not breach the mandatory law. The rules regulating insurance agreements are in general mandatory. They can be waived or disregarded only if permitted by law or if this is in an unambiguous interest of the policyholder.

The effect of breach of warranty and condition precedent is dependent on the contractual wording and must be assessed on a case-by-case basis. As a rule, in case the condition precedent is not fulfilled, the agreement does not take effect and if a warranty is breached, damage liability might follow. Other or different consequences might also be agreed upon.

4. Consequences of late notification

A policyholder must (except in cases of health and life insurance) notify an insurer on the occurrence of the insurance event within three (3) days from becoming aware of it. A longer period can be contractually agreed.

In case of late notification, the policyholder must compensate the insurer for any damages. The policyholder, however, does not lose any rights due to late notification. Any contrary contractional provision is null and void.

5. Entitlement to bring a claim against an insurer

Entitlement to bring a claim against an insurer depends on the type of the insurance and the wording of the insurance agreement.

Generally, the insured (and the beneficiary, in the case of the life insurance) has the right to raise a claim against an insurer resulting from an insurance agreement. However, in third-party liability insurance, the injured person also has a right to raise a direct claim against the insurer of the person responsible for the damage.

Claims can also be posed by third parties in case they are validly assigned.

6. Entitlement to damages from an insurer for late payment of claim

The insurer musty pay the insurance benefits within the agreed deadline, which must not be longer than 14 days from receipt of notification about the occurrence of the insurance event.

In case that a longer period of time is needed to determine the existence of the insurer’s obligation or the due amount, the above-mentioned 14 days deadline runs from the day when the insurer’s obligation and the due amount  were determined.

If the amount of insurer’s obligation is not determined within 14 days from the day of the receipt of the notification of occurrence of an insurance event  the insurer must, at the beneficiary’s request, pay to the beneficiary the undisputed part of the obligation as an advance.

In case the insurer does not perform payment of the due amount, respectively does not perform the payment of the claim in due time, the insurer can be liable under the general rules on contractual damage liability. In any event, the insurer would also be liable for payment of default interest.

7. General rules concerning the limitation period for claims

Claims of policyholders or other beneficiaries form the insurance agreements become time-barred in three (3) years following the first day after the calendar year in which the claim was created. Nevertheless, claims based on life insurance agreements become time-barred in 5 years following the first day after the calendar year in which the claim was created.

If the policyholder or the beneficiary prove that  the occurrence of the insurance event was not known to them by the expiry of the limitation periods mentioned above, the limitation period begins to run on the day when they became aware of materialisation of the insurance event. In any case, however, the limitation period expires in 10 years for life insurance and in 5 years for other insurances.  

The insurer’s claim arising from the insurance agreements become time-barred in three years.

If the injured party in third-party liability insurance seeks or obtains compensation from the insured party, the limitation period for the insured party's recourse claim against the insurer begins to run from the date on which the injured party claimed compensation from the insured party in court or on which the insured party compensated the injured party.

A third party's direct claim against the insurer is time-barred at the same time as the third party's claim against the insured who is liable for the damage.

8. Policy triggers with respect to third-party liability insurance

Each policy must be reviewed on a case-by-case basis to determine what triggers policy coverage.

Under observation of compulsory provisions of the Slovenian law (e.g. limitation provision, aleatory element) the policy coverage can be triggered on several basis, such as (i) a loss occurring basis (i.e., the loss must occur during the policy period), (ii) on an act committed basis (i.e., the act causing loss must be committed during the policy period), (iii) on a discovery basis (i.e., the insured event must be discovered during the policy period), (iv) on a claim-made basis (i.e., the claim must be made within the policy period), or even by combination of above-mentioned triggers.

With respect to third-party liability insurance the policy coverage will usually be triggered on the loss occurrence basis. With respect to D&O insurance,  the claims-made principle is predominantly used in practice.

9. Recoverability of defence costs

According to the rules governing civil court proceedings, each party bears its own costs. The losing party must then compensate the winning party for duly lodged defence costs that are calculated pursuant to the attorneys’ tariff.

Depending on the coverage and the wording of the insurance agreement, the insurer can also be obliged to compensate the policyholder for defence costs under the attorney’s tariff or for reasonable defence costs which might, depending on the complexity of the case and other circumstances, be higher that the costs calculated pursuant to the attorneys’ tariff.

In event of the liability insurance the insurer bears the costs of a dispute over the insured person's liability, up to the limits of the sum insured.

10. Insurability of penalties and fines

Slovenian law does not regulate insurability of penalties and fines, however, according to legal academia, insurance may not cover the contractual penalty, money fine or any other claim which would have the nature of sanction.