The Supreme Court of the Russian Federation banned insurers from changing the meaning of legal terms in contracts

The Supreme Court of the Russian Federation (SC) issued a precedent decision aimed at preventing the manipulation of terms in insurance rules. Thus, the definition of theft in the terms of the insurer is not just “secret theft of someone else’s property”, but necessarily “with illegal entry into the premises” is an abuse of the right, if without this sign the company refuses to consider the incident an insured event. The SC emphasized that legal terms cannot be “arbitrarily distorted”. Lawyers believe that the position of the Supreme Court will allow businesses to more effectively challenge unfavorable insurance conditions, and insurers will have to remove the most dubious wording from them.

Burglary terminology

Sun clarified limits of freedom of the insurance contract and determination of its conditions by the insurer. An important decision for practice was made in the framework of the dispute between IP Larisa Dubrovina and Helios Insurance Company LLC. In January 2021, the IP entered into a property (jewelry) insurance agreement with LLC, providing for the payment of compensation in the amount of 10 million rubles. in case of loss, destruction, shortage or damage to products. One of the insurance risks was theft.

After the theft of gold rings with diamonds worth 2.94 million rubles from the store of Larisa Dubrovina. a criminal case was initiated about the theft, and the individual entrepreneur turned to the insurer. But the company refused to pay, not recognizing the incident as an insured event. “Helios” referred to the fact that in its insurance rules the theft is defined as “secret theft of someone else’s property with illegal entry into the premises”, but there was no such entry, the theft was committed during the store’s working hours. The IP demanded compensation in court, but the arbitration courts of three instances rejected the claim.

According to the courts, one should be guided by the definition of theft in the company’s rules, so the situation does not fall under insurance coverage.

Larisa Dubrovina appealed the refusal to the Supreme Court, insisting that the insured event occurred, since the LLC undertook to compensate, among other things, for losses incurred “as a result of unlawful actions of third parties,” and the materials of the criminal case confirm the theft. For these reasons, the case was referred to the Economic Collegium of the Armed Forces, which canceled the decisions of the courts.

The Supreme Court recalled that one of the goals of the insurance institute is to provide the insured with “guarantees for the protection of property interests.” At the same time, an event related to an insured risk should have “signs of probability and randomness of its occurrence”, and a description of its nature should “provide the possibility of proving the fact of its occurrence,” the board continued. By concluding an agreement with the LLC, the IP wanted to protect the objects belonging to it, including from “illegal actions of third parties, qualified by the Criminal Code of the Russian Federation as theft.” And since the legislator is obliged to formulate criminal law prescriptions “with a sufficient degree of clarity” that allows a person to correlate his behavior with them and foresee the consequences of a violation, the norms of the Criminal Code are “mandatory in nature and cannot be applied with any distortion of their legal nature,” explained Sun.

By defining the term differently in its rules, “the insurance company arbitrarily distorted” the content of the legal concept of “theft”, “which is well known and forms reasonable expectations of participants in legal relations”, giving a “narrower concept” of the term, the ruling says.

In fact, such actions “led to the fixation of a new concept of criminal law, which is a gross violation of the Criminal Code of the Russian Federation and is unacceptable,” the Supreme Court noted.

But “insurance rules can only be applied in a way that does not violate the provisions of the law,” and legal terms should be interpreted as they are defined in the laws, the board pointed out. Otherwise, in the actions of the insurer, one can see signs of abuse of the right in order to “avoid the payment of insurance compensation,” the Sun pointed out. The dispute was sent for a new consideration to check the calculation of the amount of the insurance payment.

Law above rules

“It’s no secret that many insurers include clauses and provisions in their insurance conditions that minimize the risk of insurance payments,” says Orchards partner Yuri Aksenov. real possibility to eliminate these unfavorable conditions”. In order to counter this, the Supreme Court uses the principle of contra proferentem, that is, it interprets dubious conditions against the one who drafted the text of the contract and the rules for it, explains Andrey Sharkov, managing partner of SHAGI law firm.

According to him, the case in the Armed Forces is a typical case when the insurer, in its own rules, gives the term a different interpretation than that defined in the law: was lower. According to Rimma Malinska, a partner in the commercial disputes practice at MEF Legal, here “one can draw an analogy with small unreadable print in advertising for financial services, which also creates deceived expectations, hiding the real conditions.”

Now, if the concepts in the rules of the insurer and the law do not coincide, it is the wording of the law, and not the contract, that should be taken into account, Yury Aksenov clarifies.

“Based on this precedent, insurers from the business environment will be able to argue with insurers more effectively,” he believes. Rimma Malinskaya also believes that the decision of the Supreme Court can “significantly strengthen the position of insurers”, since it recognizes “the impossibility of avoiding compensation by manipulating the legal terms in the contract.”

In her opinion, all insurers should review their agreements for conditions that unreasonably limit their liability: “Otherwise, this can have serious consequences, given that the same conditions are reproduced in tens, hundreds and thousands of the same type of agreements.” However, Yuri Aksenov believes that “insurers will remove the most dubious wording from their rules, but are unlikely to abandon the very approach to such risk and loss management.” Mr. Sharkov also admits that in some cases the terms in the insurance rules “will still differ” from those established by law, “on the other hand, the lack of familiar wording should motivate consumers and entrepreneurs to study insurance conditions more carefully.”

SOGAZ and SberStrakhovanie did not respond to requests from Kommersant. “We believe that this is a private insurance dispute that will not affect judicial practice,” Ingosstrakh told Kommersant. They added that the parties to the contract “have the right to agree on a specific list of insured events,” and the concept of theft with “illegal entry into the premises” is in the Criminal Code of the Russian Federation and does not violate the law.

Lawyers interviewed by Kommersant explain that this sign (illegal entry into a premises or storage facility) is specified in paragraph “b” of Part 2 of Article 158 of the Criminal Code and is an aggravating circumstance, but is not included in the general concept of theft.

Anna Zanina, Ekaterina Volkova