LIMITATION PERIOD INSURANCE AND REINSURANCE Report no. 8 Reinsurance Working Party

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LIMITATION PERIOD INSURANCE AND
REINSURANCEReport no. 8 Reinsurance Working
Party

• Peggy Sharon, Adv.
• Levitan, Sharon Co.
• Israel
• Presentation at AIDA Budapest
• 26th November 2008

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Limitation Period Why?

• Balance between conflicting interests
• Claimant to enforce right through legal
  proceedings

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• Defendant to be discharged of being subject to a
  potential court claim

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Limitation Period General(Contractual Claims)
3 years
5 years
7 years
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10 years
10 years
20 years
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Limitation Procedural or Substantive?

• Most jurisdictions - substantive.
• Expiration of the limitation period
  extinguishes the right

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Limitation Procedural or Substantive?

• Israel, UK and USA -procedural.
• Expiration of the period bars the remedy

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Commencement

• The limitation period commences on the day on
  which the cause of action accrued
• the date of the violation of the right, or
• When the obligation becomes due.

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Circumstances affecting the PeriodFraud

• Fraud - the limitation period does not commence
  until the fraud is discovered

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Admission of Liability Stay of the Running

• The limitation period is suspended and begins to
  run anew by the debtors express admission of the
  debt

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Special (Personal) Circumstances

• Minors, mentally disturbed persons, or
  matrimonial relationships stay of limitation
  period or delayed commencement.

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Stipulation regarding the limitation period -
Possible?

• No The length of the limitation period is
  regulated by the law and the parties are not at
  liberty to change it.

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• Yes In the majority of legal systems, the
  parties are free to stipulate regarding the
  limitation period by agreement.

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Reinsurance Claims
Are there specific laws regarding these
claims? In most countries - no specific rules
apply to reinsurance claims.
NO
YES
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Specific rules concerning limitation period for
reinsurance claims two years.
Specific Rules in Marine and Aviation five
years.
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Commencement of Limitation Period in Reinsurance

• Reinsurance Contract - Contract of Indemnity.
• On what date the cause of action of the
  reinsured accrues? Different answers.

?
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Commencement - Reinsurance

• Possible Dates
• The day on which the cedent paid the original
  insured
• In the USA reinsurer's obligations under the
  reinsurance contract are not triggered until at
  least when the ceding company paid a claim.

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• The date of judgement/settlement against the
  cedent establishment of liability

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• The date of the occurrence the insured event

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Cut-Through Clause
Undeveloped Areas
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• Does it change the relationship of the Original
  Insured vs Reinsurer to be identical to direct
  insurance, including for purposes of the
  Limitation Period?

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Cut-Through Clause

• Assignment of right including the period to
  enforce it as in contracts?

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Cut-Through Clause

• Direct privity towards Reinsurer direct
  insurance claim shorter period

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Thank You???? Köszönöm

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LIMITATION PERIOD INSURANCE AND
REINSURANCEReport no. 8 Reinsurance Working
Party

• Peggy Sharon, Adv.
• Levitan, Sharon Co.
• Israel
• Presentation at AIDA Budapest
• 26th November 2008