Introduction

The claims made clause is one of the most popular contract forms in the field of professional liability. This format, while in the common law system has been well received and generally accepted, in Italy it has been the subject of much debate by judges (at all levels both in the ordinary Courts and in the Supreme Court of Cassation).

The claims made clause has been contrasted (from a theoretical point of view) with the loss occurrence principle.

In essence, this type of contract overcomes problems which used to arise when applying art. 1917 c.c. which linked the operability of policies solely to the occurrence of an actionable event during the insurance period.

Indeed, the insured party did not always realise that they were responsible for having committed a professional error since the claim could be made by the injured party many years after the occurrence of such event.

Instead, nowadays, with the introduction of the claims made contract model the insurance cover applies not to when the event occurred but when the insured party receives a formal request for payment of damages.

Objections to the validity of contracts negotiated on a claims made basis

Contracts concluded using the claims made formula have not been without criticism. This is due to the fact that these clauses are considerate by many as the result of unequal bargaining power between the parties and disadvantageous to the consumer (insured party).

This is especially so when the contract of insurance does not provide for retroactive insurance cover, whether unlimited or for at least a ten-year period.

For settling the multiple objections raised concerning the validity of claims made clauses, the Supreme Court of Cassation (joint session) with sentence n. 9140 of 6 May 2016 declared the validity of claims made clauses, excluding the possibility that such clauses considered unfair.

However, despite this sentence, discussions concerning the legitimacy or otherwise of these clauses have not yet been concluded.

Indeed, the judges of the Court of Cassation with sentence n. 10506 of 28 April 2017 again declared the invalidity of these clauses if they had excluded insurance cover subsequent to the validity of the (insurance) contract. According to the judges such clauses were an agreement, which pursuant to art. 1322, paragraph 2 c.c., could not be deemed worthy of protection since resulted in an unfair and disproportionate advantage for the insurer, placing the insured party in a state of uncertainty.

Current status of claims made clauses

After a period of great uncertainty regarding the merit or otherwise of claims-made clauses, the Supreme Court of Cassation has issued further sentences.

With sentence n. 22437 of 24 September 2017 (joint session), the Supreme Court established that contracts concluded on the claims made basis should no longer be subject to an evaluation of merit since they fall within contracts governed by art. 1917 c.c.

In any case, despite this significant innovation, problems regarding the use of such clauses have not yet been resolved.

Recently, with sentence n. 9616 of 11 April 2023 the claims made clause was held by the Supreme Court to be partially invalid not on the merits, but because the insurance contract included limited retroactive application (insurance cover for past event) for just two years.

In this case, the judges deemed that the insurance contract was not appropriate as a proper guarantee for the insured party.

Therefore nowadays, the issue is focused on the real function of the insurance contract and, on the fact that to be valid the contract has to provide for the needs which have been signed by the insured.

Conclusions

The claims made clause have by now become part of the Italian legal system and are no longer considered “an exception”. However, in order to operate they must be formulated in such a way as not to limit the guarantee function of the insurance contract or generate insurance gaps to the damage of the insured party.