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São Paulo State Court of Appeal rules over an empty arbitration clause and indicates understanding about the impossibility of collecting insurance indemnity for damages resulting from intentional wrongful acts

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9/11/2018 12:00 AM Demarest News

On August 1st, the São Paulo State Court of Appeal, on the judgment of Appeal No. 1011986-32.2017.8.26.0000, reached an understanding stating that an empty arbitration clause in the General Conditions of the Insurance Policy does not bind the parties, as well as suggested that the Insured cannot claim insurance indemnity for events resulting from corruption acts. 

In summary, the Insured claimed under Article 7th, 3rd paragraph, of the Law No. 9.307/96, the constitution of an arbitration agreement to resolve a conflict arising from a D&O Insurance Policy, due to the existence of an empty arbitration clause in the General Conditions of the contract. 

The Insurer, in its defence, claimed that the parties did not enter into a D&O Policy with arbitration clause; instead, they agreed in the contract that any conflict arising from the Insurance Policy should be resolved at São Paulo District Court. In addition, it argued that the contractual provision for the arbitration clause provided by the standard General Conditions of the Insurance Policy does not bind the parties, once it is required an explicit and unequivocal manifestation of the parties' intention to submit conflicts to the arbitration. 

The First Instance Court Judge granted the Insured's claim under the understanding that the arbitration clause provided by the standard General Conditions of the Insurance Policy bound the parties, taking into consideration that there was no indication of the term to enforce it  and that the insurance contract is of adhesion. 

The Appeal filed by the Insurer was granted to dismiss the claim under the understanding that the Insured has no stand to sue the Insurer. The Court of Appeal held that there was no arbitration clause in place as, in the opinion of the majority of the judges, it is necessary an explicit manifestation of the intention of the parties to submit conflicts to the arbitration in order to make valid the arbitration clause. 

However, it is worth noticing the winning vote given by the 5th Judge, who, in addition to the discussion of the existence of an arbitration clause, raised the possibility of extinguishing the proceedings ex officio, due to the illegality of the object pursued by the Insured. 

In the case under analysis, the Insured claimed the payment of defence costs incurred in a particular Criminal Action, in which the practice of corruption acts was acknowledged even by a confession of one of the defendants' director.

In this scenario, the 5th Judge, discoursing about the impossibility of obtaining court protection for illegal acts, concluded that the Insured cannot sue the Insurer to claim the payment of the insurance indemnity for damages arising from criminal acts, since "it is insured what can be lawfully insured (REsp 1.601.555) ". Thus, any lawsuit should be terminated ex officio.

The vote of the 5th Judge of the São Paulo State Court of Justice, in theory, strengthens the Insurer's position to deny the payment of the insurance indemnity based on the exclusion for intentional wrongful acts, as it supports that any lawsuit brought by the Insured to claim the insurance payment due to intentional wrongful acts should be terminated ex officio.

The ruling also makes it clear that the empty arbitration clause in the insurance policies only indicates the possibility of establishing an arbitration, which does not mean that it is mandatory in case of lack of consensus between the parties regarding the adoption of the arbitration to resolve conflicts.

Demarest has specialised Arbitration, Insurance and Reinsurance teams, being entirely available to provide legal assistance in the interpretation and consequences of the understanding set forth in the ruling No. 1011986-32.2017.8.26.0000.

Demarest Advogados 


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