And what are the most common violations, which the insured individuals allow
Insurance occurs as a necessity in antiquity, but it invariably accompanies the socio-economic life until today. The modern world perceives it as an activity, related to indemnification of damages that occur after realization of the relevant risks.
Following one of the fundamental principles of voluntary insurance, the legislation, concerning this institute, introduces the insurance contract as a sole legal operative event of the relations between the insurer and the insured.
Legislative framework
In Bulgaria, the general regime, regulating these relationships, can be found in the Insurance Code, but there are special provisions, relating to the contract of marine insurance, and they apply in chapter ten of the Merchant Shipping Code as of 2002.
Subject of the marine insurance can be any property interest, related to the shipping, appreciable in money, such as a ship in operation, repair or construction, cargo, freightage, price for rent of a ship, remuneration of passengers’ transport, profit, expected from the arrival of the cargo at the destination, the costs of general accident, the obligations and the securities, associated with the ship, cargo or freightage, the obligations for wages of the captain and the crew members, etc.
Under the contract of marine insurance the insurer undertakes to cover the agreed maritime risks to which the insured interest is exposed and to pay within the insured sum a compensation for the damages, if this interest is affected by the occurrence of such risks. This obligation of the insurer involves certain rights and should also be accompanied by the obligatory actions of the insured, the failure of which is the most frequent subject of insurance disputes.
Pre-contractual obligation for informing
The legislator introduces obligations on the person who will acquire the status of insured before concluding the contract of marine insurance. This person shall notify the insurer of all circumstances known to him/her or which, with the due diligence, could be known to him/her and are essential for assessing the risk by the insurer, the terms of the contract and the decision to accept the proposal. Materially significant are those circumstances, under which the degree of probability of occurrence of the risk is so great that it can affect the discretion of the insurer on conclusion of the insurance and the conditions under which to conclude it.
Failure to notify can occur in two forms – through action, expressed in wrong declaring of the existence of certain circumstances or by omission – reticence of certain circumstances, which were explicit interest for the insurer.
Both forms of failure lead to the same consequences for the insured. For the insurer arises the right to withdraw from the contract, keeping the entire insurance premium, and if they do not exercise this right within seven days from the day they became aware of the unreported or incorrectly reported circumstances, they may refuse to pay the indemnity upon the occurrence of the covered risk if this risk is associated with some of these circumstances.
Contractual obligations
From the moment of signing the contract of marine insurance, for the insured arises the obligation within a reasonable time after becoming aware, to notify the insurer of any circumstance, which leads to a significant increase in the risk of significant delay of the load’s sending, deviation from the specified or usual route, changes in the way of transportation, the place of transfer, the appointment of the cargo and unloading, leaving the ship during the winter, not regulated in the contract, etc. Increasing of the risk occurs when the degree of probability of occurrence of an insured event is increased to a degree that the insurer would not cover the risk or would cover it, but under other conditions.
An increase of the risk could occur as a result of objective prerequisites beyond the control of the insured, as well as because of his/her fault. If it does occur due to circumstances, for which the insured is not responsible, for the insurer arises the legal right to demand payment of an additional premium, proportionately with the increased risk. In the event that the insured by his/her fault behavior causes an increasing of the risk, the insurer could terminate the contract and keep the premium if they do not prefer to seek payment of the relevant additional premium.
Another important obligation of the insured is in case of occurrence of a risk, covered by the insurance, immediately to notify the insurer of this. The notification shall contain all facts and circumstances regarding the occurrence of the insured event – when and where it occurred, what are the damages, their amount, etc.
The Merchant Shipping Code does not regulate explicit legal consequences of failure to perform this obligation, but in practice it is assumed that in this case the insurer has the right to refuse to make payment of insurance sums.
For the insured exists also an obligation, directly connected with the moment of occurrence of the insured event. The legislator accepts that this is the person, which is most close to the insured good, and considering this requires them to take all depending on it reasonable measures necessary to rescue the subject of insurance and to prevent or limit the damages, and to secure the claims for compensation against the persons, responsible for these damages. Furthermore – if the insured receives instructions from the insurer in response to the notification of the occurrence of the risk, he/she must take exactly the measures said in it.
In the event that the damages to the insured object have occurred because the insured person consciously or recklessly fails to take these measures due, the insurer shall not be liable for compensation.
When the damage to the insured object, is caused guiltily by a third party, after paying the compensation to the insurer, arises the subrogation right to intervene in the rights of the insured against this third party to pay for damages and losses. If the insured has renounced their rights to claim damages and losses against third parties, who have caused the damage, covered by the insurance, or has made guiltily impossible their implementation, the insurer could refuse to pay the insurance compensation in whole or in the relevant part.
Under the general rules of insurance, the insured is obliged to assist the insurer during the whole period of their relationships. This includes the proper storage of the evidences on the occurrence of an insured event, the provision of access for inspection of the insurer to the insured good in case of occurrence of a covered risk, and of course, providing any documents, requested by the insurer in connection with the insured event.
The insurance law regulates the social and economic relationships that are essential to the modern world. Its norms do not only protect the property and private interest, but provide adequate security in the entire civil and commercial turnover.
The article has been published in Bulgarian, in Capital Daily.