LEGAL NEWS / INSURANCE
"Gunfight at the OK CORAL" (How the subrogatory action works with the CORAL convention)
28 August 2023
Our experience in litigation relating to the insurer's subrogation rights has led us to inform you of recent court rulings which have a significant impact on insurers who are members of the France Assureurs (FA) conventions.
Before taking any legal action against the insurer of the liable third party, the subrogated insurer shall prove that it has implemented the escalation procedure provided for in article 4 of the Convention des Règlements Alternatifs des Litiges (Convention "CORAL").
Failure to comply with this escalation procedure means that the claim is inadmissible under article 122 of the French Code of Civil Procedure.
This solution now seems to be well established, although the Paris Court of Appeal recently distinguished itself by stating that: "the fin de non-recevoir to sanction non-compliance with CORAL is unfounded" (Paris Court of Appeal, Pôle 4 - Chambre 8, September 7, 2022, 20/02479).
Nevertheless, other Courts of Appeal have regularly upheld the inadmissibility of the action (Courts of Appeal of Dijon, Rouen, Chambéry, Amiens and Aix-en-Provence, among others):
"The escalation procedure, the first stage in the amicable settlement of disputes between insurers, is mandatory and constitutes a compulsory prerequisite to conciliation, arbitration and referral to the courts" (CA Aix-en-Provence, ch. 1 3, July 6 2023, no. 22/14890).
This obligation applies "to cases in which an escalation procedure ("chef de service" level) is initiated on or after January 1, 2016", regardless of the date of the claim (Chambéry Court of Appeal, 2nd chamber, April 27, 2023, no. 21/01055). In other words, all recourse between insurers is now covered by these provisions.
In addition, the Convention provides for the possibility of interrupting the limitation period at the "Management" level; the validity of this conventional cause of interruption has been judicially recognized (Versailles Court of Appeal, 3rd chamber, December 9, 2021, n°20/02794; Besançon Court of Appeal, 1st chamber, May 16, 2023, n°21/02074).
It should be noted that the latest edition of the Convention, effective May 2022, also provides for the possibility of interrupting or suspending the "foreclosure" period. We have serious reservations on this point, since article 2254 of the French Civil Code only provides for contractual arrangements in matters of "prescription". We are actively monitoring any court rulings on this subject.
For more details on this Convention, our information note is available on request. If you have any questions about this article, please do not hesitate to contact us.
Christophe Adrien & Florent Schapira Partners