SHOULD FOREIGN INSURANCE POLICIES BE SUBJECT TO THE PUBLIC POLICY PROVISIONS OF THE FRENCH INSURANCE CODE?

The French Supreme Court (Cour de Cassation) issued two highly criticized rulings in 2023, stating that the public policy provisions of the French Insurance Code should apply “regardless of the law governing the contract”. This position was reversed in a ruling handed down on December 19, 2024 ...

December 19, 2024

The question arises in the context of the serial photovoltaic claim brought by our firm on behalf of a Dutch insurer, which has given rise to several rulings by the French Supreme Court.

More specifically, the subject concerns the fate of exclusion clauses in a Dutch policy, which under French law must meet the formal and substantive conditions laid down in Articles L. 112-4 (wording in very visible characters) and L. 113-1 of the Insurance Code (formal and limited nature), as well as the implementation of direct action by the injured third party (Article L124-3 of the same code).

In ruling that the public policy provisions of French law governing the validity of exclusion clauses (articles L. 112-4 and L. 113-1 of the French Insurance Code) were applicable “regardless of the law governing the contract” (Cour de Cassation, 2nd Civil Chamber, June 15, 2023, no. 21-20.538; solution reiterated on October 12, 2023, no. 21-25.308), the Cour de Cassation drew fierce criticism from legal writers and insurance professionals.

Indeed, the Court seems to have equated the internal public policy of the Insurance Code with international public policy, whereas it is a matter of principle that a rule of public policy under domestic law does not necessarily constitute a "policy law" within the meaning of private international law.

Thus, in private international law, only those provisions that are designed to preserve the higher interests of France, and not merely to protect policyholders, qualify as public policy legislation.

In addition, the 2023 ruling created major legal uncertainty for insurers issuing policies applicable in France but subject to the law of another country (which is very often the case in international insurance programs).

Thus, after having strongly contested the solution adopted in 2023, we have just obtained a new decision from the same chamber of the Cour de Cassation, handed down on December 19, 2024 (n°22-17.119), which adopts a much more nuanced line of reasoning, the importance of which is underlined by its forthcoming publication in the official "Bulletin".

With regard to the public-order formalism of exclusion clauses (article L112-4 of the French Insurance Code), the Court confined itself to noting, in line with its previous case law, that “since only the parties to the insurance contract can invoke non-compliance with the formalism provided for in this text, the Court of Appeal was not required to carry out a search that was inoperative”, since only a third party to the contract was invoking this formalism. This avoids the need for the Court to rule from the angle of private international law.

Secondly, and this is the real interest of the ruling, the Court adopts a reasoning more in line with the notion of international public policy, with regard to the direct action regime (article L124-3 of the French Insurance Code).

The appeal claimed that a clause limiting the duration of liability coverage to a period (2 years) shorter than that during which the insured's liability could be sought was contrary to public policy, in accordance with articles L124-3 and L181-3 of the Insurance Code.

In its ruling, the French Supreme Court (Cour de Cassation) stated that such a clause must be deemed unwritten under domestic law. However, in the case of a contract governed by Dutch law, it points out that it is necessary to verify whether the contract is contrary to a “loi de police”, within the meaning of article L181-3 of the Insurance Code.

To carry out this verification, the Court refers to the case law of the Court of Justice of the European Union, which considers that: “the classification by a Member State of national provisions as police and security laws relates to provisions compliance with which has been deemed crucial to the safeguarding of the political, social or economic organization of the Member State concerned, to such an extent as to require compliance by any person (...) or legal relationship (...)”. It must therefore be apparent that the national legislator adopted this law in order to protect “an interest deemed essential by the Member State concerned”. Thus, national provisions whose sole aim is to protect individual interests cannot be classified as public policy legislation.

In the Court's view, it is these principles which must lead it to classify a national provision as a mandatory rule, with reference to both the Rome Convention and article L181-3 of the Insurance Code.

In its ruling of December 19, 2024, the Court therefore held that article L124-3 of the Insurance Code, “insofar as it does not allow for a guarantee period shorter than the duration of the insured's liability, is not a law whose observance, in matters of optional insurance, is so necessary for safeguarding the political, social and economic organization of the country as to imperatively govern the situation, whatever the applicable law, and, consequently, does not constitute a policy law”.

This reasoning is very interesting, as it strongly nuances the solution adopted in 2023 by the same chamber, which had established the principle that “in matters of non-compulsory damage insurance, the public policy provisions of articles L. 112-4 and L. 113-1 of the Insurance Code are applicable regardless of the law governing the contract”.

Although the December 19, 2024 ruling only considers the provisions of article L124-3 (and not those of articles L112-4 or L113-1) of the French Insurance Code, the reasoning adopted seems to have a general scope, so that the analysis of the existence of “an interest deemed essential” should also be carried out with regard to articles L112-4 and L113-1 of the French Insurance Code. To our knowledge, however, the Cour de Cassation has so far failed to do so.

It is therefore to be hoped that, in its forthcoming rulings on the cases we have referred to it, the Court will adopt a similar analysis with regard to the provisions of articles L112-4 and L113-1 of the Insurance Code, thus more clearly modifying its 2023 case law.

When domestic public policy and international public policy come into play in foreign insurance policies... Subtleties and legal consequences that are sure to enliven our upcoming legal debates!

If you have any questions about this article, please do not hesitate to contact us. Christophe Adrien / Florent Schapira / Benjamin Dufraiche Attorneys - Adrien & Associés