Where is the limit for claiming interests by the insured while invoking Article 20 of the LCS?

1.- Introduction

Recently, the First Civil Chamber of the Spanish Supreme Court ruled by ruling no. 473/2020 of September 17th, on the feasibility of exercising the direct action of Article 76 of the Insurance Contract Law (“LCS”) against an insurance company, not being a claim of the principal amount that is already fixed and satisfied, but exclusively about the interests foreseen under Article 20 LCS.

The factual basis that served to file the mentioned claim, derived from medical malpractice for which the Health Administration was declared responsible by the ruling no. 1280/2013, of December 4th, issued by the Contentious-Administrative Chamber of the High Court of Justice of Cataluña (Section 4).

In this judicial resolution, the Administration was condemned to pay the sum of 250,000.00 EURO, due to the personal injury suffered by the claimant as a result of defective health care, as well as the payment of the legal interests from the date of the administrative claim.

2.- Solidarity between the insured party (who caused the damage) and the insurer

In order to understand the legal problem that was raised in this case, we must take into account that article 76 LCS recognizes the existence of a right of the injured party to bring direct action against the insurance company of the person that caused the injury, with the purpose of obtaining faster a compensation, by avoiding unnecessary litigations between the injured party, the responsible for the damage and his  insurer.

In this way, the injured party can file its claim against two obligated parties: the insured – the one who caused the injury- and the insurer.

In cases of non-contractual liability, we speak of improper solidarity between the authors of the illicit act and their insurers, being the main purpose of this improper solidarity compensating the injured party, even without the need to sue the insured, as per the mentioned direct action against the insurer (article 76 LCS).

Therefore, in the event of compensation by either of the two jointly and severally liable parties, the obligation is extinguished, in accordance with the provisions of Article 1145.1 of the Spanish Civil Code (“CC”), and this despite the fact that the debtors do not maintain the same legal – obligatory relationship with the injured party (Article 1.140 CC).

3.- Wind up of the action under Article 76 LCS after payment of the principal claimed amount and interests

In the present case, the ruling that was the subject of an extraordinary appeal based on procedural violation -a ruling that supported the appeal filed by the insurer-, established that there was no obligation to compensate, since the payment made by the joint debtor extinguished the obligation for all joint debtors.

The judgment recognises that the insurer had not only made the deposit of the compensation “but also the claimant had received the corresponding amount on February 21st, 2014, before filing the claim, and not only of the principal, but also of the ordinary legal interests”.

These facts, which have been considered proven by the Court of Appeal of Barcelona (Section 4), have served as a basis for dismissing the extraordinary appeal for procedural infringement, that was filed by the injured third party.

In this sense, the Supreme Court has determined the inexistence of a clear error in the evaluation of the evidence and the consequent violation of Article 24 of the Spanish Constitution, because “the payment was made by the convicted joint debtor, even if it was carried out by his insurer“.

The same happened with the appeal in cassation, since the Spanish Supreme Court considered that the injured third party had three jurisdictional ways through which he was able to file the action for compensation of damages. On the one hand, he could opt for the administrative procedure, in which the Administration only would take part in, as he did, but then renouncing to claim the interests foreseen under Article 20 LCS, since the insurance company did not participate in this procedure. The latter could have claimed both concepts (principal amount and punitive interests under article 20 LCS) jointly through the same procedure, by filing a lawsuit against both, the Administration and the insurer. Finally, the injured third party could have avoided the administrative procedure by filing a civil claim against the insurance company, by way of the direct action provided under article 76 of the Spanish Insurance Contract Law.

4.- Conclusion

In concluding, the Supreme Court determines that under the provisions of article 76 LCS, the injured third party does not have an autonomous and independent right to claim the difference between the legal interest already paid and received and those interests calculated under Article 20 LCS, when the economic liability has been previously compensated.

José Arauz

T: +34 91 523 72 10
M: +34 652 906 262

Jaime Mascarella

Senior Associate
T: +34 91 523 72 10