LIMITATION PERIOD INSURANCE AND REINSURANCE Report no 8

LIMITATION PERIOD INSURANCE AND REINSURANCE Report no. 8 – Reinsurance Working Party Peggy Sharon, Adv. Levitan, Sharon & Co. Israel Presentation at AIDA Budapest 26 th November 2008

Limitation Period – Why? Balance between conflicting interests: • Claimant: to enforce right through legal proceedings 2

• Defendant: to be discharged of being subject to a potential court claim 3

Limitation Period – General (Contractual Claims) 3 years 5 years 7 years 4

10 years 20 years 5

Limitation – Procedural or Substantive? Most jurisdictions - substantive. Expiration of the limitation period – extinguishes the right 6

Limitation – Procedural or Substantive? Israel, UK and USA -procedural. Expiration of the period – bars the remedy 7

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. 8

Circumstances affecting the Period Fraud • Fraud - the limitation period does not commence until the fraud is discovered 9

Admission of Liability – Stay of the Running • The limitation period is suspended and begins to run anew by the debtor’s express admission of the debt 10

Special (Personal) Circumstances • Minors, mentally disturbed persons, or matrimonial relationships – stay of limitation period or delayed commencement. 11

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. 12

• Yes: In the majority of legal systems, the parties are free to stipulate regarding the limitation period by agreement. 13

Reinsurance Claims Are there specific laws regarding these claims? In most countries - no specific rules apply to reinsurance claims. NO YES 14

Specific rules concerning limitation period for reinsurance claims – two years. Specific Rules in Marine and Aviation – five years. 15

Commencement of Limitation Period in Reinsurance Contract - Contract of Indemnity. On what date the cause of action of the reinsured accrues? Different answers. ? 16

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. 17

• The date of judgement/settlement against the cedent – establishment of liability: 18

• The date of the occurrence – the insured event 19

Cut-Through Clause Undeveloped Areas 20

• Does it change the relationship of the Original Insured vs Reinsurer to be identical to direct insurance, including for purposes of the Limitation Period? 21

Cut-Through Clause • Assignment of right – including the period to enforce it – as in contracts? 22

Cut-Through Clause • Direct privity towards Reinsurer – direct insurance claim – shorter period 23

Thank You תודה Köszönöm

LIMITATION PERIOD INSURANCE AND REINSURANCE Report no. 8 – Reinsurance Working Party Peggy Sharon, Adv. Levitan, Sharon & Co. Israel Presentation at AIDA Budapest 26 th November 2008