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Brazil

Last Verified on Friday 3rd March 2017

    Regulation

    • Brazil

      The sources of insurance law are the Civil Code (articles 757 to 802, on questions of insurance in general and insurance of things and persons), as well as the Consumer Defense Code, applicable to insurance relations pursuant to its article 3, § 2. It is also necessary to mention the Law-Decree No. 73 of 1966, which is still in force. It defines the organisation of the National System of Private Insurance, the duties of the regulators (Superintendency of Private Insurance – SUSEP) and the National Council of Private Insurance (CNSP), the role of the brokers, insurance companies etc.      

      Regarding the sources of reinsurance law, the Complementary Law No. 126 of 2007 that, after 70 years, created the Brazilian reinsurance market, ending with IRB’s monopoly (IRB used to be the sate controlled reinsurer). This Complementary Law enacts several rules applicable to the reinsurance business, such as the types of reinsurers (local, admitted and occasional), right of preference to the locals, intragroup operations etc.  

      Moreover, the insurance and the reinsurance markets are subject to several administrative rules enacted by SUSEP and CNSP. With regard to the reinsurance business, it is important to mention the following ones: Resolutions 168, 224, 225, 232, 241, 330, among others.

      Finally, in relation to case law, as a rule, it is not binding, as it in the common law system. Due to the enormous number of lawsuits driven to the higher courts (The Supreme Court, which is a constitutional one, and the Superior Court of Justice, which is the highest infra-constitutional court in the country), the Brazilian Congress recently enacted the brand new civil procedure code, that creates several different mechanisms in order to bring speed and agility to the solution of the lawsuits. In this sense, there are some remedies called “Binding Precedent” that are binding to all other Brazilian courts. There are some legal requirements to create a “Binding Precedent” such as relevance, social and economic impacts, etc.

      Last verified on Friday 3rd March 2017

    • Brazil

      The entities responsible for regulating the insurance/reinsurance market are the National Council of Private Insurance (CNSP) and the Superintendency of Private Insurance (SUSEP); both created by Law-Decree No.  73, of 1966. The CNSP is essentially responsible for formulating overall policy while SUSEP is responsible for oversight, control and preparation of regulations, etc.

      Last verified on Friday 3rd March 2017

    • Brazil

      The answer to this question is well defined by articles 19 and 20 of Complementary Law No. 126/2007 that opened the Brazilian reinsurance market.

      The analysis of the article 19 defines that the hiring of mandatory and non-mandatory insurance, which aim risks in national territory, must be held in Brazil. The only exceptions are ruled by article 20.

      The item I of article 20 only allows the hiring of coverage abroad if such equivalent coverage is not available domestically. The respective conditions in order to comply with the exceptions were defined by Resolution CNSP 197/2008 and “Circular” SUSEP 392/2009.

      It’s important to clarify that the exceptions treated by these administrative rules start from the perspective of the non-existence of coverage in the country (Resolution CNSP 197/2008, article 6, item I) and, furthermore, the non-acceptance of the risk by domestic market. (Resolution CNSP 197/2008, article 6, paragraph 1).           

      The non-acceptance must be proved with the consultation of at least 10 local insurers and their refusal to contract. SUSEP has power to determine the demonstration of the local insurers’ refusal (Circular SUSEP 392/2009, article 11).

      Last verified on Friday 3rd March 2017

    • Brazil

      Reinsurers must obtain prior authorisation from SUSEP to operate in Brazil.

      The regulations require foreign companies that want to operate in Brazil to choose one of the three following categories (local, admitted and occasional) and to satisfy the respective criteria.

      Local reinsurer: Based in Brazil, organised as a corporation and supervised by SUSEP. Local reinsurers have a right of first refusal (market reserve) of at least 40 per cent of the reinsurance ceded by insurers. The minimum market share reserved for local reinsurers is not totally inflexible, however, because the regulations only require that local reinsurers be formally consulted first to accept or decline the risk offered, and then they are given another preferential right to accept any excess risk offered to admitted and/or occasional reinsurers.

      Admitted reinsurer: a foreign reinsurer with more than five years of operation in the international market. Must be registered in SUSEP, have a representative office in Brazil and maintain foreign currency account linked to SUSEP to guarantee its operations in the country. Must meet the minimum economic and financial capacity requirements, assessment of creditworthiness by a rating agency (credit rating) and financial guarantees with funds being made in the country.

      Occasional reinsurer: a foreign reinsurer with more than five years of operation in the international market, without a representative office in Brazil. To be registered in SUSEP, will present minimum economic and financial capacity assessment of creditworthiness by a rating agency (credit rating) and appoint attorney resident in Brazil with full administrative and judicial powers. Foreign reinsurance companies based in tax havens cannot operate in the Brazilian market.

      Last verified on Friday 3rd March 2017

  • Classification of terms

    • Brazil

      Even though the expressions “conditions, conditions precedent or warranties” are not recognised by Brazilian law, a very similar structure is in force in order to provide clear information by the insured to the insurer. If the insured do not comply with the obligation to inform clearly about it personal data (life insurance, for example), business relevant information (financial lines policies) etc, the insurer will be authorised to deny coverage.

      Article 766 of the Civil Code establishes the loss of the right to the guarantee if the insured or representative thereof makes an inexact declaration or omits information that could influence the acceptance of the proposal or the premium rate. If the inaccuracy or omission in the statements does not result from the insured’s bad faith, the insurer shall have the right to dissolve the contract or to collect, even after occurrence of the insured event, the difference in the premium. The burden of proving the misstatement or omission of information rests with the insurer.

      Article 768 of the Civil Code establishes that the insured shall lose the right to the guarantee, if he intentionally aggravates the risk covered by the contract.

      Last verified on Friday 3rd March 2017

  • Duty of good faith, non-disclosure and misrepresentation

    • Brazil

      Article 765 of the Civil Code provides that both the insurer and insured must act according to the principle of utmost good faith regarding the veracity of information, before, during and after the contractual period. Regarding the duty to inform of the insured, the questionnaire formulated by the insurer to assess the risk of the prospective insured should be carefully drafted to avoid doubts and subjective questions, because any unclear aspects will invariably be interpreted by the judiciary in favour of the insured.

      Last verified on Friday 3rd March 2017

    • Brazil

      Article 762 of the Civil Code establishes that a contract guaranteeing a risk arising out of a wrongful act (dolus conduct) by the insured, the beneficiary or the representative of either shall be null.

      Article 766 of the Civil Code establishes the loss of the right to the guarantee if the insured or representative thereof makes an inexact declaration or omits information that could influence the acceptance of the proposal or the premium rate. If the inaccuracy or omission in the statements does not result from the insured’s bad faith, the insurer shall have the right to dissolve the contract or to collect, even after occurrence of the insured event, the difference in the premium. The burden of proving the misstatement or omission of information rests with the insurer.

      Article 768 of the Civil Code establishes that the insured shall lose the right to the guarantee, if he intentionally aggravates the risk covered by the contract.

      Finally, article 773 of the Civil Code establishes that an insurer which, at the time the contract is made, knows that the risk for which the insured intends to obtain coverage has passed and nevertheless issues the policy, shall pay double the stipulated premium.

      Last verified on Friday 3rd March 2017

    • Brazil

      Yes. The insurer and insured must act according to the principle of utmost good faith (a mais estrita boa-fé) regarding the veracity of information, before, during and after the contractual period. If the insured do not comply with this duty the head of the article 766 of the Brazilian Civil Code determines that he will lose the right to be indemnified.  

      Article 766: If the insured himself or his representative makes inaccurate statements or omits circumstances that could influence acceptance of the application or the premium rate, he shall lose the right to the guarantee, in addition to being obligated to pay the premium due. 

      Last verified on Friday 3rd March 2017

  • Reinsurance issues

    • Brazil

      Those clauses are recognised by local law, but they are not mandatory. Therefore, the parties may negotiate them freely. The mandatory clauses in reinsurance contracts are laid down in articles 33/41 of the CNSP Resolution 168/07: (i) insolvency clause (article 33); (ii) Intermediation clause if a broker is involved (article 35 and article 16 of Complementary Law 126/2007); (iii) The contractual formalisation must occur within 270 days of the start of the coverage, and must state the date of the proposal and acceptance, starting date and place for use as a time zone reference of the starting and ending times (article 37); (iv) Reinsurance of risks in Brazilian territory are subject to Brazilian legislation and judicial resolution of disputes, unless the parties expressly stipulate otherwise, such as arbitration (article 38); and (v) Starting and ending date of the rights and obligations of each party, precise stipulation of the risks covered and excluded and criteria and procedures for cancellation.

      Last verified on Friday 3rd March 2017

  • Claim process

    • Brazil

      The basic rule on production of evidence is that the duty to produce evidence rests with the party that alleges a determined right or the existence of a fact. Thus, the fact constitutive of the right must be proved by the plaintiff (insured), while any fact that impedes, modifies or extinguishes the mentioned right must be demonstrated by the defendant (insurer). However, by application of the Consumer Defence Code (article 6, VIII), there is the possibility of inverting the burden of proof in favour of the consumer.

      On a very pragmatic way, once the event occurs and the insured notifies it to the insurer, it is commonly understood that the insured’s duty is done so far. Then, the all the weigh of the burden of proof will rely on the insurer’s back. 

      Last verified on Friday 3rd March 2017

    • Brazil

      Brazilian law does not specify a fixed period of days for a loss to be reported by the insured. Article 771 of the Civil Code states that: “Under pain of losing the right to the indemnity, the insured shall report the loss to the insurer, as soon as learning thereof, and shall take immediate measures to minimise the consequences.” Obviously the expression ‘as soon as learning’ cannot be interpreted irresponsibly, as if to suggest that the insured can delay in reporting the loss. In any event, it is only good sense for the insured to report a loss event as soon as possible. This also depends on the type of insurance contract under discussion. To exemplify, if the case relates to a huge fire that is destroying a property, it seems clear that the communication to the insurer must be done real fast; in the other hand, if the discussion is about a life insurance with guarantee for insured’s death, if the event already happened, it does not make any difference if it is communicated in two or 20 days. There is not a possibility to adopt any salvage nor precautionary measures. Our jurisprudence is sensitive to this kind of thinking. 

      Last verified on Friday 3rd March 2017

    • Brazil

      According to Circular SUSEP 256/2004, the settlement of claim shall be made within a period not exceeding 30 days, from the delivery of all basic documents submitted by the insured or beneficiary. The time period may be suspended when, in the case of justified and justifiable doubt, new documents are requested by the insurer, returning to run from the business day following that on which the requirements are fully met by the insured or beneficiary.

      A “circular” is an administrative rule, such as a Resolução, Carta circular, among others. In comparison with law – stricto sensu – the administrative rules are of a lower hierarchy. Their goal is to explain, to bring detailed regulation to the law.

      Last verified on Friday 3rd March 2017

    • Brazil

      The basic rule on production of evidence is that the duty to produce it rests with the party that alleges a determined right or the existence of a fact. Thus, the fact constitutive of the right must be proved by the plaintiff, while any fact that impedes, modifies or extinguishes the mentioned right must be demonstrated by the defendant. The Consumer Defense Code does not apply to reinsurance contracts.

      In relation to the other questions, it is important to clarify that the legislation (Complementary Law 126/2007 and CNSP Resolution 168/2007) makes no reference about the deadlines for sending notification, confirm cover, pay the claim or deny coverage.

      Reinsurance contracts (slips) are freely negotiated between the parties, not requiring prior approval from SUSEP. Nevertheless, according to articles 33 to 41 of CNSP Resolution 168/2007, certain clauses and stipulations are compulsory: (i) insolvency clause (article 33); (ii) Intermediation clause if a broker is involved (article 35 and article 16 of Complementary Law 126/2007); (iii) The contractual formalisation must occur within 270 days of the start of the coverage, and must state the date of the proposal and acceptance, starting date and place for use as a time zone reference of the starting and ending times (article 37); (iv) Reinsurance of risks in Brazilian territory are subject to Brazilian legislation and judicial resolution of disputes, unless the parties expressly stipulate otherwise, such as arbitration (article 38); and (v) Starting and ending date of the rights and obligations of each party, precise stipulation of the risks covered and excluded and criteria and procedures for cancellation.

      Last verified on Friday 3rd March 2017

    • Brazil

      Regardless of what the contract says, the law generally assures the right of the insurer to collect from the party responsible for the loss, after payment of the indemnity (article 786 of the Civil Code). This suit does not require the participation of the insured. However, there are certain situations that the law forbids the right of recourse from subrogation. This the case of article 786, which excepts in cases of intentional misconduct (dolo), forbids subrogation if the damage was caused by the spouse, ascendants or descendants of the insured. The article 800 of the Civil Code also establishes that in life insurance the insurer is not subrogated in the rights of the insured or beneficiary to sue the causer of the damage (eg, suits for damages for wrongful death). 

      Last verified on Friday 3rd March 2017

  • Law and jurisdiction and dispute resolution

    • Brazil

      Usually, for risks located in the Brazilian territory, the applicable law and jurisdiction will be Brazilian, unless the parties choose arbitration, in which case they are free to choose the applicable law and the chamber/forum responsible for conducting the arbitration. Under insurance contracts the arbitration would be more appropriate in high-value or strategic contracts. However, it is also possible to specify arbitration in contracts with consumers, providing the clause in a separate document, clear and transparent, so that the insured (consumer) can freely adhere (article 4º, §2º, Law No. 9.307/1996).

      Last verified on Friday 3rd March 2017

    • Brazil

      Normally disputes involving insurance contracts are decided by the state civil courts, subject to appeal to the respective state appellate court and further to the Superior Court of Justice (non-constitutional matters) and/or the Federal Supreme Court (constitutional questions). At the option of the insured, disputes involving less than 40 times the minimum monthly wage or disputes of low complexity can be filed with the small claims courts.

      An exception to the jurisdiction of the state courts is when the dispute involves the federal government (a ministry, agency or other entity or federally owned or controlled company). questions involving private parties are rarely decided in the federal courts.

      The average duration of a case, including all appeals, in the state courts is three to five years, but this varies widely according to the state, and can be substantially longer if the parties exercise all their rights to file motions and appeals. The way to abbreviate this period is to reach a settlement and submit it to the court for ratification.

      Last verified on Friday 3rd March 2017

    • Brazil

      The Brazilian Arbitration Law (Law 9,307/1996) assures the parties full freedom to choose the applicable law, except an award can be set aside by a court if any aspects involving the applicable law chosen run counter to public policy and good customs. Although enacted in 1996, the Arbitration Law only started being widely applied after it was declared constitutional in December 2001. The question hinged on the constitutional provision that no one may be deprived of the right to seek recourse in the courts. However, the Supreme Court ruled that parties can freely waive this guarantee in matters involving disposable rights, by private agreement.

      Recently the Brazilian Arbitration Law suffered some changes by Law 13.129/2015.

      The use of arbitration is common in Brazil, particularly for large risks.

      Last verified on Friday 3rd March 2017

  • Reservation of rights / without prejudice rule

  • Cost, interest, monetary correction, moral and punitive damages

    • Brazil

      Brazil follows the loser pays principle, whereby the losing party must pay the court costs, expert’s fees and legal costs of the prevailing party. Attorney’s fees are generally set at between 10 per cent and 20 per cent of the amount of the award. If the parties reach a settlement, they are free to negotiate how the costs and fees will be divided. If the plaintiff does not prevail in all the pecuniary pleadings, the court will apportion the costs accordingly (reciprocal adverse costs).

      Last verified on Friday 3rd March 2017

    • Brazil

      Brazilian law does not contain any provision for punitive damages, so it is not possible to offer insurance policies, and therefore reinsurance contracts, to cover punitive damages. However, the jurisprudence from the courts, supported by the doctrine from legal scholars, allows the awarding of what amount to punitive damages, under the title of moral damages (mental anguish/harm to reputation). This is based on the principle of deterrence. As a rule, an insurance contract can cover moral damages caused by the insured, and therefore punitive damages can be reinsured in the guise of moral damages.

      Finally, it is important to note that the values are infinitely lower than those in the United States of America.

      Last verified on Friday 3rd March 2017

    • Brazil

      Brazilian law (article 5º, V and X of the Federal Constitution, article 6º, VI and VIII of the Consumer Defence Code and article 186 of the Civil Code) provides for moral damages. The moral damages usually intend to compensate mental anguish or harm to reputation, and are very common in liability claims.

      The claim of moral damages is based on the principle of human dignity, provided by article 1º, III of the Federal Constitution.

      Last verified on Friday 3rd March 2017

  • Intermediaries

    • Brazil

      In accordance with article 1º, §1º Circular Susep 510/2015, the insurance broker, person or entity, is legally intermediate authorised to raise and promote insurance contracts between insurance companies and the public consumers in general and its registration shall comply with the instructions set out in this Circular.

      The article 23, II CNSP Resolution 330/2015 provides that the reinsurance broker has the purpose, solely act as an intermediary in hiring reinsurance and retrocession, except for the provision of technical services related to contracting and structuring reinsurance and risk management programmes.

      The insurance broker profession is regulated by Law No. 4.594/64.

      Last verified on Friday 3rd March 2017

    • Brazil

      In general, the insurance broker acts on behalf of the insured, representing their interests before the insurer.

      Law No. 4.594, from 29 December 1964, regulates the insurance broker profession in Brazil. Although this law is old and potentially against new and modern types of insurance sales it is still in force and willing to keep defensive measures in favour of the local insurance brokerage market. Article 18 states that insurance companies only can receive insurance contract proposals presented by insurance brokers regularly licensed or authorised by SUSEP or directly from the parties or its representatives.

      If there is a direct business between the parties and the insurance companies, the respective fees instead of being paid to the broker shall be paid to the National School of Insurance, as mentioned by article 19 of the above-mentioned law.

      In reinsurance contracts there is no requirement for the presence of the reinsurance broker.

      Last verified on Friday 3rd March 2017

    • Brazil

      In accordance with article 723 of the Civil Code and article 10, VI CNSP Resolution 173/2007, the broker must act diligently and communicate to the parties possible changes in insurance policies or reinsurance.

      The knowledge of an intermediary can be imputed to its principal.

      According with article 766 of the Civil Code if the insured himself or his representative (may be the broker) makes inaccurate statements or omits circumstances that could influence acceptance of the application or the premium rate, he shall lose the right to the guarantee, in addition to being obligated to pay the premium due.

      Last verified on Friday 3rd March 2017

  • Limitation

    • Brazil

      According to Brazilian law, the time bar starts to run when there is a violation of the insured’s right – the so-called theory of actio nata.

      With respect to insurance contracts, the time bar varies depending on the type/line of insurance. As a general rule, it starts to run when the insurer denies coverage and notifies the insured about it. Life insurance (guarantee for death, personal accident insurance etc), the time bar will start to rub as soon as the insured knows about the event that causes damage (injury). When the insured notifies the insurer about this event, the time bar, then, gests suspended until the end of loss adjustment procedures, restarting to run right after it. Casualty insurance has another applicable rule. The time bar will only start to run when the insured is called to answer to a lawsuit brought by a third party.  

      According with the article 206, §1º, II of the Civil Code, the insured has a period of one year to file a lawsuit against the insurer. The beneficiary of the policy has a period of three years to file a lawsuit against the insurer (article 206, §3º, IX of the Civil Code).

      Last verified on Friday 3rd March 2017

    • Brazil

      With respect to reinsurance, the Superior Court of Justice (STJ), in a recent controversial decision (Special Appeal 1.170.057/MG, Reporting Judge Ricardo Villas Bôas Cueva, 3rd Panel, published on 13 February 2014), held that the time-bar is one year, under the interpretation that the reinsurance contract is a type of insurance contract and hence is subject to the same limitation period.

      The time bar will start to run when the reinsurer denies the coverage asked by the reinsured. 

      Last verified on Friday 3rd March 2017

    • Brazil

      The chances of suspension and interruption of limitation period are specified between Articles 197 and 204 of the Civil Code. The limitation period may also be interrupted by the Judicial Protest, provided in article 726, §2º of the Civil Procedure Code.

      Article 197. Prescription does not run: I - between spouses, while conjugal society exists; II - between ascendants and descendents, while parental authority exists; III - between pupils or wards and their tutors or curators, during the tutorship or curatorship.

      Article 198. Prescription also does not run: I - against the incapable persons referred in the art. 3; II - against persons absent from Brazil in the public service of the Union, the states or the Municipalities; III - against those who find themselves serving in the Armed Forces, in time of war.

      Article 199. Likewise, prescription does not run: I – while a suspensive condition is pending; II – before the relevant period of time has expired; III – while an action for eviction is pending.

      Article 200. When an action originates in an event that should be determined in the criminal courts, prescription does not run before final judgment by the criminal courts.

      Article 201. If prescription is suspended in favour of one solidary creditor, the others benefit from the suspension only if the obligation is indivisible.

      Article 202. Prescription is interrupted once, only: I - by a judge’s order for citation, even if the judge does not have jurisdiction, if the interested party caused citation to occur within the time period and in the form required under procedural law; II - by protest, in the circumstances described in the preceding item; III - by protest on a bill of exchange; IV – by presentment of a debt instrument in judicial inventory proceedings or in a concourse of creditors; V - by any judicial act that puts the debtor into default; VI - by any unequivocal act, even if extrajudicial, that implies acknowledgement of the right by the debtor.

      Sole paragraph. When interrupted, prescription begins to run anew from the date of the act that interrupted it, or from the last act of the proceeding brought to interrupt it.

      Article 203. Prescription may be interrupted by any interested party.

      Article 204. Interruption of prescription by a creditor does not benefit the others; likewise, interruption effected against a co-debtor, or his heir, does not operate against the other co-obligees.

      §1º Interruption by one solidary creditor benefits the others; and interruption effected against one solidary debtor extends to the other debtors and their heirs.

      §2º Interruption effected against one of the heirs of a solidary debtor does not operate against the other heirs or debtors, except with respect to indivisible rights and obligations.

      § 3º Interruption effected against the principal debtor operates against the guarantor.

      Last verified on Friday 3rd March 2017

  • Other requirements

    • Brazil

      In the case of insurance contracts, there are several classes of insurance that have clauses standardised by SUSEP (example: surety insurance, liability insurance, marine insurance, etc). In relation to reinsurance contracts, there is not a mandatory wording; instead, there are mandatory clauses determined by CNSP Resolution 168: (i) insolvency clause (article 33); (ii) Intermediation clause if a broker is involved (article 35 and article 16 of Complementary Law 126/2007); (iii) The contractual formalisation must occur within 270 days of the start of the coverage, and must state the date of the proposal and acceptance, starting date and place for use as a time zone reference of the starting and ending times (article 37); (iv) Reinsurance of risks in Brazilian territory are subject to Brazilian legislation and judicial resolution of disputes, unless the parties expressly stipulate otherwise, such as arbitration (article 38); and (v) Starting and ending date of the rights and obligations of each party, precise stipulation of the risks covered and excluded and criteria and procedures for cancellation.

      Last verified on Friday 3rd March 2017

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    Logo cgvf advogados cmyk 319116 1154
  • Ilan goldberg 319116 1153
    Ilan Goldberg

    Chalfin, Goldberg, Vainboim & Fichtner Advogados Associados (Rio de Janeiro)

  • Rodrigo souza cec 319116 126
    Rodrigo Gomes de Sousa

    Chalfin, Goldberg, Vainboim & Fichtner Advogados Associados (Rio de Janeiro)