Insurance law and requirements in Spain

1. Overview

Insurance is a contract relationship entered into by the insurer and the insured. Such a contract, more commonly called the póliza (policy), usually provides that, on payment of the premium, the insurer promises to indemnify and reimburse the insured for any loss incurred by him from certain stated causes.

The policy, as a contract, must contain all of the elements necessary for a valid contract. The mutual considerations here are the premium paid by the insured and the promise of coverage made by the insurance company.

The causes of damage as provided for in the policy are also called “risks”. The company specifically stipulates those risks which are covered under the particular policy. Any risk that is not stated shall not be included.

A policy must have a subject which is to be insured. It may be the life of a designated person, a house, etc.

The risk or peril against which the life or property is to be insured must be specified in the policy: the death of a person, liability resulting from the negligent operation of an automobile, etc.

The amount for which the policy covers the loss must be indicated.

The insurance taker is the holder of the policy. Normally the term during which the policy will be in effect is 1 year, after which it is renewed automatically unless you decide not to renew it, in which case you should previously advise the insurance company 2 months before it is due.

2. Proposal for insurance

Your application for an insurance do not oblige you to finally contract it. On the contrary, the insurance company is bound by the terms and conditions of its proposal for insurance for a term of 15 days.

3. Cancellation

An insurance company may cancel an insurance policy only under the following circumstances:

• If the insured has lied or made false statements on his/her application or in a claim he/she submitted.
• If the peril covered is increased. In these cases when there is no good faith, the insurance company shall pay the difference between the premium agreed and the premium which should have been paid for the increase of the risk.
• If the insured object is sold.
• Failure to pay premiums when they fall due, there is a 30-day grace period available to the insured to give him an opportunity to pay the premium without affecting his rights under the policy.

An insured may cancel an insurance policy in the event that the insurance company refuses to modify the policy when the new circumstances arisen can make the premium reduced. The policyholder is entitled to a refund calculated as the difference between the premium paid and the premium which should have been paid since the peril reduction was noticed.

4. In case the insured event occurs

If the insured event occurs, the policy taker or the beneficiary shall notify the insurance company within 7 working days, unless other period is stated in the insurance contract. Failure to give timely notice can result in an indemnification for the insurance company.

The assured must furnish a list of the items lost or damaged. The insurance company will investigate it and value the damages, it shall pay an indemnity or repair the insured object.

The insurance company shall pay part of the indemnity within 40 days from notice of loss, full indemnification shall be paid within 3 months from the notification date.

The insurance company may not pay the indemnity if it feels that the policyholder engaged in some type of misconduct which voided the coverage.

5. Complaining before the Spanish courts

If the insurance company won’t pay the claim or won’t pay what the insured think the claim is worth, the insured may file a lawsuit against the insurance company. The type of court procedure will depend upon the amount to be claimed: either ordinary court procedure (juicio ordinario), or oral court procedure (juicio verbal) can be taken.

The statute of limitations to file the lawsuit is as follows:

• 2 years, from the date of the report of the event, if the insurance only covered material damages (property insurance or car insurance), or
• 5 years, from the date of the report of the event, if the insurance covered personal injuries (life or medical insurance). The insured may also claim before the General Insurance Office (Dirección General de Seguros).

6. Getting legal help