Abstract
Ideally, the discussion about the Georgian concept of transparency has to be started directly by observing duties and liabilities of insurer. Such an approach would have been more precise for the contemporary meaning of transparency context. However, there are practically no regulations in Insurance Section of the Civil Code of Georgia regarding primary duties of insurer with regard to transparency. Therefore, it is reasonable if the discussion about the Georgian non-existing concept of transparency will be launched by analyzing the duties of policyholder and possibilities of interpreting, inducting, and deducting the context of transparency from other existing provisions.
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Notes
- 1.
Merkin and Rodger (1997), p. 29.
- 2.
Ibid.
- 3.
Jerry and Richmond (2007), p. 180.
- 4.
Vashakidze (2007-1), p. 52.
- 5.
Article 830: Duty to fulfil the insurer’s instructions—“1. If the event covered by insurance occurs, the policyholder shall be obligated to avoid or reduce the damage as far as possible and fulfil the insurer’s instructions in that respect.
2. The insurer shall reimburse the expenses that have been incurred by its instructions.”
- 6.
Iremashvili K., “The Criteria of Equality in Insurance Relationships,” 70, available at http://press.tsu.ge/ge/net_editions/xj-niq8km-r9euks3/xqgxxvs79x5lrl_8d/Ketevan Iremashvili.
- 7.
Sovern (2006).
- 8.
Fiduciary relationship is a relationship based upon utmost trust, binding one party to exercise the utmost duty of care towards the interests of another party. See, Garner (2004), p. 1315. Traditionally within the list of fiduciary relationships there fall relationships between attorney and a client, doctor and patient, and so forth. In such relationships, one party is considerably in a superior position compared to another party. Such superiority is preconditioned by the possession of specific information and qualification related to the fulfilment of the contract. This is why exercising utmost duty of care towards the interests of the weaker party is expected in fiduciary relationships. See, id. It is worth mentioning how US courts interpret the fiduciary nature of liability insurance contracts. When interpreting such contracts in favor of policyholder, US courts refer to violation of fiduciary duties by the insurer. According to their judgments, insurer shall consider the interest of the policyholder when protecting one’s interest. During the negotiation procedure, insurer shall agree only on those offers that fit within the best interest of policyholder. The cases when insurer is guided by its own interest at the expense of suppressing the interests of policyholder are qualified as violation of fiduciary duties by the courts. See, Jerry and Richmond (2007), p. 180.
- 9.
Supreme Court of Georgia, the Section of Civil Law Disputes, October 10, 2014, case # as-657-624-2014.
- 10.
Baker (1996).
- 11.
Supreme Court of Georgia, the Section of Civil Law Disputes, October 9, 2013, case # as-1708-1602-2012.
- 12.
Supreme Court of Georgia, the Section of Civil Law Disputes, October 20, 2014, case # as-698-668-2014.
- 13.
Ibid.
- 14.
Lowry and Rawlings (2003), p. 74. With further references to the cases of Appellate Court of England and Decision of House of Lords—Banque Financière de la Cite S.A. v Westgate Insurance Co Ltd [1991] 2 AC 249, affirming the Court of Appeal, [1990] 1Q B 665.
- 15.
Schwartz and Appel (2009), p. 11.
- 16.
Vashakidze (2007-1), p. 52.
- 17.
Motsonelidze (2013), p. 120.
- 18.
Gray (1921), p. 287.
- 19.
Supreme Court of Georgia, the Section of Civil, Company and Bankruptcy Law Disputes, June 6, 2001, case # 3k/450-01.
- 20.
Tbilisi Appellate Court, the Section of Civil Law Disputes, March 29, 2012, case # 2b/78-12.
- 21.
Baker (1994)
- 22.
Ibid.
- 23.
Baker (1996).
- 24.
Tsiskadze, Chanturia/Zoidze/Ninidze/Shengelia/Khetsuriani (Editors), Commentaries to the Civil Code of Georgia, Book 4, Part II, 2001, 150.
- 25.
Zweigert and Kotz (1996), p. 134.
- 26.
- 27.
Sovern (2006).
- 28.
Vaughan and Vaughan (1995), pp. 168–169.
- 29.
Supreme Court of Georgia, the Section of Civil Law Disputes, October 20, 2014, case # as-698-668-2014.
- 30.
Baker T., Tort Remedies for Breach of Insurance Agreements, 11. Compare with Hinchliffe (2011), p. 68.
- 31.
Ibid, 15.
- 32.
Schwartz and Appel (2009), p. 15.
- 33.
Author refers to Court Decision according to which party cannot be sanctioned by measure inconsistent with ordinary principles of property liability, Supreme Court of Georgia, 2001/1, 3p/629-01, 1214; Supreme Court of Georgia, 2002, 3k/1184-01. Consequently, penalty sanctions are regarded to be incompatible with philosophy of Georgian Private Law. See, Vashakidze G., The System of Complex Obligations of Civil Code of Georgia, 2010, 194.
- 34.
Supreme Court of Georgia, 2001/1, 3p/629-01, 1214; Supreme Court of Georgia, 2002/1, 3k/1184-01; Supreme Court of Georgia, 2002/1, 3k/287-02. Compare with Vashakidze G., The System of Complex Obligations of Civil Code of Georgia, 2010, 201.
- 35.
- 36.
In most decisions, judges use a general concept of imbalance in insurance contract stressing the superiority of insurer and weakness of policyholder. For example, such argumentations may be found in several decisions: Supreme Court of Georgia, the Section of Civil Law Disputes, January 28, 2013, case #as-1643-1540-2012; Appellate Court of Tbilisi, the Section of Civil Law Disputes, November 21, 2012, case # 2b/3080-12; Supreme Court of Georgia, the Section of Civil Law Disputes, October 9, 2013, case # as-1708-1602-2012.
- 37.
The system of Insurance Section of the Civil Code is constructed in the following way: I. General Provisions; II. Insurance Premium; III. Loss Insurance: a. the Essence of the Contract, b. Third Party Insurance, c. Civil Liability Insurance; IV. Life Insurance; V. Accident Insurance.
- 38.
In the spring of 2017, new amendments to the Civil Code of Georgia were reviewed within the Insurance State Supervision Service of Georgia (ISSSG) and presented to the Parliament of Georgia. These amendments introduce new articles on Health Insurance. From a systemic standpoint, these articles will be incorporated in a separate part (VI) of the Insurance Section of the Civil Code.
- 39.
Article 830: Duty to fulfil the insurer’s instructions—“1. If the event covered by insurance occurs, the policyholder shall be obligated to avoid or reduce the damage as far as possible and fulfil the insurer’s instructions in that respect.
2. The insurer shall reimburse the expenses that have been incurred by its instructions.”
- 40.
Iremashvili K., “The Criteria of Equality in Insurance Relationships,” available at http://press.tsu.ge/ge/net_editions/xj-niq8km-r9euks3/xqgxxvs79x5lrl_8d/KetevanIremashvili, 70.
- 41.
These are the following: Article 808: The Duty to Inform the Insurer; Article 809: The Consequences of Delivering False Information to the Insurer; Article 810: Cancelation of Contract in Cases when not Providing Information to the Insurer; Article 811: The timeframe for Cancelation of Contract in Cases when not Providing Information to the Insurer; Article 812: Cancelation of Contract as a Result of Occurring of Insured Event; Article 813: The Duty to Inform the Insurer about the Increase of Insured Risk; Article 814: The Duty to Inform the Insurer about the Occurrence of Insured Event. There is no article included in GP that would impose the same duties on insurer. Additionally, there is no direct indication of such duty with respect to none of the parties in the definition of insurance.
- 42.
Article 808: The Duty to Inform the Insurer—“1. At the stage of contract formation policyholder shall inform insurer about all circumstances that s/he is aware of, which have essential importance for insured risk or for the occurrence of insured event. Essential circumstances are those which can affect insurer’s decision to deviate from the contract or agree on it with modified substance. 2. Essential circumstances are also those about which insurer asks in a written and a precise way. 3. If according to the 1stsection of this article insurer is not informed about the essential circumstances, then insurer is entitled to deviate from the contract. Same consequences apply if policyholder intentionally avoids to inform insurer about essential circumstances. 4. The termination of insurance is forbidden if insurer had known about the hidden circumstances or policyholder is not liable for not informing about such circumstances.”
- 43.
Article 809: The Consequences of Delivering False Information to the Insurer—“1. Insurer is entitled to deviate from the contract also if notification about essential circumstances contains false information. 2. Deviation from the contract is forbidden if insurer had known about false circumstances or policyholder is not liable for sending notification containing false information. Insurer is entitled to terminate the contract during one month after receiving the notification containing false information.”
- 44.
Article 812: Cancelation of Contract as a Result of Occurring of Insured Event—“If insurer terminates the contract after occurring of insured event, insurer is not released from its liability to reimburse the loss, if the circumstance about which the duty to inform was breached did not have effect on the occurrence of insured event or on the fulfilment of insurer’s obligation.”
- 45.
Article 810: Cancelation of Contract in Cases when not Providing Information to the Insurer—“If policyholder was supposed to answer questions regarding the insured risk in writing, then insurer is entitled to terminate the contract for breach of information duty regarding those circumstances about which policyholder was not asked directly, but policyholder intentionally kept silent.”
- 46.
Article 811: The timeframe for Cancelation of Contract in Cases when not providing Information to the Insurer—“1. Insurer is entitled to terminate the contract during one month after breaching the duty to inform (included in the General Provisions of Insurance Section). This term starts from the moment when insurer becomes aware about the breach of the duty to inform. 2. Policyholder shall be notified about the termination of contract.”
- 47.
Article 813: The Duty to Inform the Insurer about the Increase of Insured Risk—“1. Policyholder is obliged to immediately inform insurer about the increase of insured risk which arouse after contract formation, if this could have had an essential impact on insurer’s decision to agree on contract. 2. In the case described in the 1stsection of this article, insurer is entitled to terminate the contract within the one month termination period or claim for corresponding increase of insurance premium. If policyholder caused the increase of insured risk intentionally, insurer is entitled to terminate the contract without consideration of termination period.”
- 48.
Article 827: Underinsurance or partial insurance; double insurance—“1. If the insured amount is less than the insured value at the moment when the insured event occurs (underinsurance or partial insurance), the insurer shall pay the damages according to the ratio of the insured amount to the insured value. 2. The person who has insured the same interest concurrently with several insurers shall immediately notify each insurer about it. The notice shall indicate the identity of all the insurers and the amount of insurance. 3. If the given interest is insured against the same risk with several insurers and the combined amounts of insurance exceed the insured value or if because of other reasons the combined amount of the compensations that would have been paid by the insurer if there had been no other contract, exceeds the total damage (double insurance), then the insurers shall be liable before the policyholder as joint and several debtors to the extent of the sum that they have agreed under the contract of insurance, but the policyholder may not receive in total the sum exceeding the real damage.”
- 49.
Article 834: Obligation to notify of the alienation of the insured property—“The insurer shall immediately be notified of alienation of the insured property. If the acquirer or the alienator does not notify the insurer immediately, the insurer shall be released from liability if the insured event occurs after two weeks from the moment when the insurer ought to have received the notice.”
- 50.
Article 814: The Duty to Inform the Insurer about the Occurrence of Insured Event—“1. Policyholder is obliged to inform insurer regarding the occurrence of insured event immediately after becoming aware about this. 2. After the occurrence of insured event insurer is entitled to claim for receiving any type of documents from policyholder, which is necessary for defining the dimension of insurance event or the obligation of insurer. 3. Insurer shall not rely on an agreement by which it becomes released from its obligation to reimburse the loss if policyholder breaches the duty to inform but the interests of the insurer will not be significantly affected by such a breach. 4. Insurer shall fulfill its liability of reimbursing the loss after defining of insurance event and the amount of insurance reimbursement.”
- 51.
Article 799. The Definition of Insurance
-
1.
According to insurance contract, insurer is obliged to reimburse the loss resulted from the insurance event in favor of policyholder. In case of agreement on fixed sum, insurer is obliged to pay insurance reimbursement or fulfil any other promised action.
-
2.
Policyholder is obliged to pay the insurance premium.
-
1.
- 52.
Iremashvili K., Commentaries to the Article 799. The Definition of Insurance, available at http://www.gccc.ge/.
- 53.
Article 817. Late payment of insurance premium
-
1.
If an insurance premium is not paid on time, the insurer may specify a two-week payment term in writing, and shall indicate the consequences of the failure to pay within the specified term.
-
2.
If the insured event occurs after the expiry of such term and that time the policyholder has delayed the payment of the premium or interests, the insurer shall be released from liability.
-
1.
- 54.
Article 818. Contract termination by reason of late payment of insurance premiums
If the policyholder does not pay the insurance premium on time, the insurer can give the policyholder a one month’s prior notice of termination of the contract and terminate the contract if the term expires without payment.
- 55.
Supreme Court of Georgia, the Section of Civil Law Disputes, October 9, 2013, case # as-1708-1602-2012.
- 56.
Appellate Court of Tbilisi, the Section of Civil Law Disputes, November 21, 2012, case # 2b/3080-12, compare with Supreme Court of Georgia, the Section of Civil Law Disputes, February 21, 2013, case # as-85-81-2013.
- 57.
Because of their superior power, insurers tend to misuse their rights. An academic review was done about the insurer’s malpractice with regard to duty of good faith in the US. It turns out, some insurance companies used to be silent about the insurable interest at the stage of contract formation and only then after the passing of considerable time during insurance period and after receiving corresponding premiums they claimed absence of insurable interest and insisted on cancellation of contract. The cancellation of contract in its own turn led to preservation of paid premiums for insurers, as according to uniform insurance practice it is harder to argue the revocation of paid premiums than reasonability of factual conditions that premiums are being earned. As assessed by the scholars, such a reality led not only to the breach and depredation of the value of insurable interest (my opinion is that the author indirectly refers to the concept of good faith in general), but also to the economic inefficiency of such insurance contracts. Jerry and Richmond (2007), p. 311 compare with Loshin (2007), December, 3, also compare with Iremashvili (2013), pp. 62–64.
- 58.
Iremashvili K., “The Criteria of Equality in Insurance Relationships,” available at http://press.tsu.ge/ge/net_editions/xj-niq8km-r9euks3/xqgxxvs79x5lrl_8d/KetevanIremashvili, 77–79.
- 59.
Article 819. Discontinuing the payment of insurance premiums
The policyholder may discontinue the payment of insurance premiums if it turns out after concluding the contract that the insurer’s financial condition has worsened to the extent that there is a real risk that the insurer may default on its contractual obligations if the insured event occurs.
- 60.
Article 8: The Subjects of Civil Law
-
1.
Participants of legal relationships are obliged to fulfill their rights and obligations in a good faith manner.
-
1.
- 61.
Article 318: The duty to Inform
Some obligations may imply the right to receive information. The duty to inform has to be fulfilled when it is important for defining the essence of obligation and party can give such an information without humiliating its own right. The costs shall be covered by the recipient of information.
- 62.
Article 325: Defining the provisions of obligation on a principle of fairness
If the provisions of fulfilment of obligations have to be defined unilaterally by one party of the contract or by the third party, then in cases of vagueness it shall be assumed that such definition has to be made on the principle of fairness.
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Court Decisions
Supreme Court of Georgia, the Section of Civil Law Disputes, October 10, 2014, case # as-657-624-2014
Supreme Court of Georgia, the Section of Civil Law Disputes, October 20, 2014, case # as-698-668-2014
Supreme Court of Georgia, the Section of Civil Law Disputes, January 28, 2013, case #as-1643-1540-2012
Supreme Court of Georgia, the Section of Civil Law Disputes, October 9, 2013, case # as-1708-1602-2012
Supreme Court of Georgia, the Section of Civil Law Disputes, February 21, 2013, case # as-85-81-2013
Supreme Court of Georgia, 2002/1, 3k/1184-01
Supreme Court of Georgia, 2002/1, 3k/287-02
Supreme Court of Georgia, 2001/1, 3p/629-01
Supreme Court of Georgia, the Section of Civil, Company and Bankruptcy Law Disputes, June 6, 2001, case # 3k/450-01
Appellate Court of Tbilisi, the Section of Civil Law Disputes, November 21, 2012, case # 2b/3080-12
Appellate Court of Tbilisi, the Section of Civil Law Disputes, March 29, 2012, case # 2b/78-12
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Iremashvili, K. (2019). Transparency in the Insurance Contract Law of Georgia. In: Marano, P., Noussia, K. (eds) Transparency in Insurance Contract Law. AIDA Europe Research Series on Insurance Law and Regulation, vol 2. Springer, Cham. https://doi.org/10.1007/978-3-030-31198-8_15
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