As already analysed by the Judgment of the 1st Chamber of the Supreme Court of Spain 357/2015 of 30 June, the effects of non-payment of the premium in the insurance contract differ depending on whether the non-payment occurs on the first premium (article 15.1 LCS) or on a successive premium (article 15.2 LCS).

The Supreme Court decision of 10 September 2015 (Decision written by Justice Sebastián Sastre Papiol) has shed light on the doubts raised by two questions.

The first of these is, from when does the period of grace of one month and the subsequent 5 months of suspension start to run? The answer to this question is that the calculation starts with the non-payment of the first instalment of the successive premium.

The second answer is that the decision states that the third party injured party cannot be held liable for non-payment during the six months in which the policy is suspended.

This situation generates a right of repetition of the insurer against the insured.

All of the above results from the analysis of the aforementioned judgement, as follows.

Factual background. - The Insurance Compensation Consortium assumed the payment of a claim because initially the vehicle appeared as not insured, but later in the judicial process, during the preliminary hearing, it became known that the vehicle had an insurance policy taken out, but it was pending payment due to lack of balance in the insured's account.

The Consortium intended to take action against the insurance company, since the policy was in force due to the fact that the insurer's own negligence, by not terminating the contract, had kept the insurance valid.

The insurer opposed the claim of the Consortium, alleging that it had never collected the first premium, which is why it communicated the cancellation of the policy to the FIVA (Computer file of insured vehicles), the Consortium being responsible for this file, and proceeded to cancel the policy. Therefore, in the insurer's opinion, the reimbursement requested by the Consortium was not appropriate. The lower court upheld the claim based on the fact that, due to the non-payment, the insurer should have notified the insured person of the termination of the contract before the date of the claim.

This judgement was appealed before the Provincial Court of Pontevedra, but the appeal was rejected.

The Court in its decision argues that, in accordance with art. 15 LCS, the insurer, in the event of non-payment, is released against the insured, but in order to make it enforceable against third parties, it is necessary to demonstrate that the insurer has duly notified the insured of the termination of the contract.

The insurer, not in agreement with this judgement of the Provincial Court, lodged an appeal in cassation before the Supreme Court of Spain, based on two grounds;

- 1.-Infringement of art. 15 LCS, as the judgement of appeal was contrary to the jurisprudence and doctrine in force.

- 2.-Infringement of article 11 of the Motor Vehicle Circulation Law (LRCSCVM) on grounds of appeal, as being contrary to current case law and doctrine.

The SC rejects both motives, considering that the non-payment of the premium is not opposable to third parties who can exercise the direct action of art. 76 LCS, given that, as long as the payment of the premium is not claimed or the contract is terminated, the contract is suspended.

The consequence of this new interpretation in matters of compulsory insurance is that, as long as the insurance contract is not reliably terminated, even if there is non-payment of the premium, the contract is suspended and the non-payment of the premium cannot be opposed to the injured third party.

CONCLUSION: The claim of the Consortium of Insurance Compensation against the insurer, as an injured third party, was successful in spite of the non-payment of the premium, due to the fact that there is no proof that the insurer had given the insured person reliable notification, after the non-payment of the premium, that the insurance contract was cancelled.

The decision itself states that "the judgement does not contradict the existing jurisprudence given that, in the cases analysed of non-payment of the premium, the claimant does not have the status of an injured third party".

In the Insurance Law Department of Belzuz Lawyers we remain at your disposal for any factual or interpretative doubts that may arise in relation to the different types of insurance.

 José Garzón García 

Belzuz Abogados SLP

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