Constitutional Court rules on statute barred period for life insurance contracts

In a recent judgment (number 32 of 2024), the Constitutional Court ruled on the illegitimacy of article 2952, paragraph 2, of the Civil Code, specifically of the text version introduced by article 3, paragraph 2-ter, of Law-Decree no. 134 of 28 August 2008 (Urgent provisions on the restructuring of large companies in crisis), The law was introduced by article 3, paragraph 2-ter, of Law-Decree no. 134 of 28 August 2008 (Urgent provisions on the restructuring of large companies in crisis). It was converted, with amendments, into Law No. 166 of 27 October 2008¹ and, prior to that, replaced by article 22, paragraph 14, of Law-Decree no. 179 of 18 October 2012 (Further Urgent Measures for the Country's Growth). It was then converted again, with amendments, into Law no. 221 of 17 December 2012.²

 

The facts

The case related to the stipulation of an index-linked policy in 2002. The policyholder, who died in 2009, had designated his son as beneficiary, who requested the liquidation of the death benefit in 2015. The insurance company rejected the claim, using the expiry of the statute barred term in force at the time (two years from the day the right was founded). The insurance company devolved the sums payable to the Dormant Policy Fund.

The beneficiary brought an action before the ordinary Court of Lucca, requesting the nullity of the policy. He said it was a financial product, which would have required a framework contract or general investment contract, pursuant to article 23 of the Financial Consolidated Act (TUF). The beneficiary also requested the payment of the policy amounts, considering the ten-year statute barred period, starting from the beneficiary's actual knowledge of the policy underwritten by his father.

The Court of Lucca declared the contract null and void, deeming it to be a financial instrument, making no further ruling and ordering the insurance company to refund the premium.

The insurance company appealed against the ruling. The Court of Appeal of Florence ruled out the nullity of the policy (which was qualified as a life insurance policy, falling within class III of life insurance business). It also raised ex officio the issue of the constitutional legitimacy of article 2952, paragraph 2, in the version before the amendment introduced by article 22, paragraph 14, of legislative decree no. 179 of 18 October 2012, for violation of articles 3 and 47 of the Constitution,³ which stipulates “Other rights arising from the insurance contract […] shall be time-barred in two years from the day on which the event on which the right is based occurred.”

The judge argued that the questions on the constitutionality of the censured provision were not manifestly unfounded. The judge mentioned the historical evolution of the 2008 amendment, followed by the 2012 amendment, and recalled how, before the first amendment, the statute barred period (at that time only annual) had been considered unreasonable by the Insurance Supervisory Authority (at the time, ISVAP). In circular no. 403/D of 16 March 2000 ISVAP had invited insurance companies to pay death benefits, even for late claims (the Authority had already noted at the time that beneficiaries were not necessarily aware of the existence of policies concluded for their own benefit).

The Court of Appeal also noted the unreasonableness of the time limits for the devolution of unclaimed death benefits to the Dormant Policy Fund due to the short statute barred period. The court considered that, for other contractual relationships, article 3 of Presidential Decree no. 116/2007 (Implementing Regulation on Dormant Deposits) provides for the prior sending, by registered letter, of an invitation to the beneficiaries containing instructions within the term of 180 days from receiving the letter.

 

The considerations of the Constitutional Court

The Supreme Judge held that the questions raised by the court were well founded. In fact, although it acknowledged that the legislator has wide discretion in applying the statute barred period, it considered that this discretion is limited by the actual exercise of the right to which the statute barred period refers. This is especially where the calculation of the dies a quo is identified with events (death or survival at the expiry of the contract), not necessarily known in time by the beneficiary and on which the acquisition of the right depends. This, in the context of life policies, has features of manifest unreasonableness, according to the court.

With respect to life insurance, which, according to the Supreme Judge, does not perform “[...] an indemnity function with respect to the occurrence of an accident, but [...] a prevalent function of social security, related to the risk of human life. [...],” as testified by the fact that “[...] the sums owed by the insurer cannot be subjected to executive or precautionary action (article 1923, first paragraph, of the Civil Code) [...],” a short statute barred term is manifestly unreasonable. It makes it excessively difficult or impossible to enforce it, aggravated by the obligation for the insurance undertakings to devolve the sums owed to the Dormant Policy Fund, once the statute barred period has expired.

The Constitutional Court declared the constitutional illegitimacy of the second paragraph of Article 2952 of the Civil Code, in the wording before the 2012 amendment, opening the way to the revival of rights that the insurance companies considered statute barred at the time.

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¹Article 3, paragraph 2-ter, of Law-Decree no. 134 of 28 August 2008, as subsequently converted, provided as follows: “The second paragraph of article 2952 of the Civil Code shall be replaced by the following: ‘The other rights deriving from the insurance contract [...] shall be time-barred in two years from the day on which the event on which the right is based occurred.'”
²Article 22, paragraph 14, of Law-Decree no. 179 of 18 October 2012, as subsequently converted, provided as follows: “In order to overcome possible unequal treatment between consumers in the field of life insurance policies, the second paragraph of Article 2952 of the Civil Code shall be replaced by the following: 'Other rights arising from insurance contracts and reinsurance contracts shall be time-barred in two years from the day on which the event on which the right is based occurred, with the exception of life insurance contracts whose rights shall be time-barred in ten years.'”
³Article 3 of the Constitution states: “All citizens have equal social dignity and are equal before the law, without distinction of sex, race, language, religion, political opinion, personal and social conditions.” Article 47, first part of the Constitution states that: “The Republic shall encourage and protect savings in all its forms; [...]”.