July 2023 - STUDIO LEGALE

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Currently, it is quite a task for a consumer to cancel insurance. Complaints to the insurance ombudsman are on the rise.^[1]In 2021, as many as 13% of the complaints related to insurance contract cancellation.^[2]A recent bill seeks a simpler and more consumer-friendly cancellation procedure. This would allow the insured party to cancel an insurance contract at any time, once the first contract year has expired.

Current cancellation procedure

Under the current Insurance Act^[3], an insurance contract has a maximum duration of 1 year. After one year, the contract is tacitly renewed for successive 1-year periods unless the insured or insurer cancels the contract in a timely and proper manner.^[4] Notice of termination must be given to the other party by registered letter, bailiff’s writ or by issuing the termination letter against a receipt 3 months before the expiry date.^[5]

Therefore, the current formalistic termination procedure seems disadvantageous to consumers. Nevertheless, it was introduced for the purpose of continuity. Thus, the tacit renewal ensures that policyholders would not suddenly find themselves without cover. However, under the current formalistic regulations, consumers perceive this as a hindrance rather than a protection.^[6]

Termination of an insurance contract is also possible after a claim, when the risk disappears (e.g. selling of the car) or within 3 months after a rate change.^[7]

However, in addition to the notice period, the current regulations also include a reflection period. This is a short period just after the conclusion of the insurance contract, during which the insured and insurer can still cancel the contract free of charge. The reflection period is useful when, shortly after signing, it turns out that the entry fees are lower elsewhere.^[8]

For life insurance and capitalisation operations, that period is 30 days. For other insurance contracts, it is 14 days, provided the contract was concluded via a pre-signed policy or insurance application. No reflection period is provided for insurance contracts of shorter duration than 30 days and life insurance linked to an investment fund.^[9]

Consumers who want to cancel their insurance contact – because they discover, for example, that their employer offers group hospitalisation cover – face a major challenge today. The majority of consumers therefore tend to stay with their current insurance company. This does not benefit the level of competition, resulting in higher prices.

Future cancellation procedure

It is the above issues that the bill seeks to address. Thus, in principle, an insured would be able to cancel an insurance contract at any time, digitally (e.g. via itsme) and free of charge and thus change insurers more easily.

However, the continuity of insurance coverage mentioned above would still be guaranteed. In the case of compulsory insurance (e.g. civil liability insurance for motorised vehicles), policyholders will have to make the necessary arrangements through their new insurer to ensure such continuity.^[10]

Insurances still in their first current year are the exception to the rule. These will continue to be subject to a notice period, notably a period of 2 months for the insured and 3 months for the insurer.^[11]

The bill makes no adjustments to the reflection period.

Consequences?

The bill should lead to lower insurance fees and more competition. This will lower the barriers for policyholders to switch from one insurance company to another.^[12] There is already quite a lot of competition in the insurance market in Belgium today, but it will increase with the future regulation. France already implemented a similar legislative change, resulting in cheaper insurance.^[13]

The simplified cancellation procedure is currently not yet in force. In April 2023, the bill was approved in the Chamber Committee on Economy. Next, it still needs to be passed by the federal parliament. Once the law is approved and published in the Belgian Official Journal, insurers will have 1 year to align themselves.^[14]

[1] Voorstel van wet tot wijziging van de wet van 4 april 2014 betreffende de verzekeringen, teneinde het voor de consumenten mogelijk te maken een verzekeringsovereenkomst na een looptijd van één jaar zonder kosten en zonder boete op te zeggen, Parl.St. Kamer BZ 2019, nr. 55-0194/1, 1.

[2] S. VERSCHUEREN, “Verzekering opzeggen kan weldra vlotter”, De Tijd, 19 april 2023, https://www.tijd.be/ondernemen/financiele-diensten-verzekeringen/verzekering-opzeggen-kan-weldra-vlotter/10461671?fbclid=IwAR1DIwiYEYKUVKUaNbUl0ye7FpsGPW9kxtdgsaCnq_4eDM5BOrr7NRFLfYU.

[3] Wet 4 april 2014 betreffende de verzekeringen, BS 30 april 2014, 35.487.

[4] Art. 85, § 1, eerste lid wet 4 april 2014 betreffende de verzekeringen, BS 30 april 2014 (hierna: wet verzekeringen).

[5] Art. 84, § 1 en 85, § 1, vierde lid wet verzekeringen.

[6] Voorstel van wet tot wijziging van de wet van 4 april 2014 betreffende de verzekeringen, teneinde het voor de consumenten mogelijk te maken een verzekeringsovereenkomst na een looptijd van één jaar zonder kosten en zonder boete op te zeggen, Parl.St. Kamer BZ 2019, nr. 55-0194/1, 4; X, “Assuralia: klachten over verzekeringen verdienen meer nuance!”, Assuralia, 26 april 2018, https://press.assuralia.be/assuralia-klachten-over-verzekeringen-verdienen-meer-nuance.

[7] Art. 86 wet verzekeringen; X, “Opzegging”, FOD Economie, 23 augustus 2022, https://economie.fgov.be/nl/themas/financiele-diensten/verzekeringen/verzekeringsovereenkomst/opzegging.

[8] F. DECEUNYNCK, “Tijdig een verzekering opzeggen“, De Standaard, 13 mei 2023, https://www.standaard.be/cnt/dmf20230511_95944957.

[9] Art. 57, § 3 en § 5 wet verzekeringen.

[10] Voorstel van wet tot wijziging van de wet van 4 april 2014 betreffende de verzekeringen, teneinde het voor de consumenten mogelijk te maken een verzekeringsovereenkomst na een looptijd van één jaar zonder kosten en zonder boete op te zeggen, Parl.St. Kamer BZ 2019, nr. 55-0194/1, 5.

[11] Voorstel van wet tot wijziging van de wet van 4 april 2014 betreffende de verzekeringen, teneinde de opzeggingsregels voor verzekeringsovereenkomsten te vereenvoudigen, Parl.St. Kamer BZ 2019, nr. 55-0194/6, 4.

[12] S. VERSCHUEREN, “Verzekering opzeggen kan weldra vlotter”, De Tijd, 19 april 2023, https://www.tijd.be/ondernemen/financiele-diensten-verzekeringen/verzekering-opzeggen-kan-weldra-vlotter/10461671?fbclid=IwAR1DIwiYEYKUVKUaNbUl0ye7FpsGPW9kxtdgsaCnq_4eDM5BOrr7NRFLfYU.

[13] C. MICHIELS, “Contract opzeggen wanneer je wil: van verzekeraar wisselen wordt veel eenvoudiger”, VRT NWS, 19 april 2023, https://www.vrt.be/vrtnws/nl/2023/04/18/parlement-stemt-nieuwe-wet-van-verzekeraar-wisselen-wordt-veel/.

[14] S. VERSCHUEREN, “Verzekering opzeggen kan weldra vlotter”, De Tijd, 19 april 2023, https://www.tijd.be/ondernemen/financiele-diensten-verzekeringen/verzekering-opzeggen-kan-weldra-vlotter/10461671?fbclid=IwAR1DIwiYEYKUVKUaNbUl0ye7FpsGPW9kxtdgsaCnq_4eDM5BOrr7NRFLfYU.

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When one makes a promise, one has to keep it. But what can a contracting party do if circumstances change and his obligations suddenly become excessively onerous? With the introduction of article 5.74 of the Civil Code (hereinafter: CC), the legislator grants the concept of ‘change of circumstances’ or the so-called unforeseeability theory a general legal basis for the first time.

Traditional view: rejection of the unforeseeability theory in Belgium

In several European countries (including the Netherlands, Italy, Greece, Portugal, Germany and Switzerland), the unforeseeability theory has been accepted for some time, and this on the basis of the obligation to execute contracts in good faith.

Belgium was therefore somewhat isolated – along with France – in rejecting the unforeseeability theory.

In Belgium, the unforeseeability theory was initially not accepted in the old Civil Code (hereinafter: old CC), case law and legal doctrine. This under the argument that the binding force of the contract creates the legitimate expectation for the party that once a contract has been concluded, its contracting party will fulfil the agreed obligations (art. 1134, paragraph 1 old CC).

New contract law: general basis in article 5.74 CC

With the introduction of article 5.74 CC, the legislator grants a general legal basis for the unforeseeability theory for the first time.

The aforementioned article first and foremost emphasizes that agreements create binding obligations between parties and that the unforeseeability theory only applies in exceptional situations. Thus, in principle, the parties must honor their obligations even when performance has become more onerous because of an increased cost of performance or a reduced value of the consideration.

Exceptionally, however, a party may ask its contracting party to renegotiate the contract, with a view to modification or termination. To this end, five conditions listed in article 5.74, second paragraph CC must be met. However, in the course of the renegotiation and during any subsequent judicial phase, the parties must continue to fulfil their obligations.

Condition 1: Change of circumstances makes performance of contract excessively onerous

Firstly, circumstances must change after the contract is concluded to such an extent that the performance of the contract becomes excessively onerous. The change must create such an distortion of the contractual balance between the contracting parties that performance of the contract can no longer be reasonably demanded.

A war, financial crisis or pandemic that disrupts the normal economic relations can certainly qualify as excessively aggravating circumstances in this respect.

This condition also shows the difference with force majeure. For a debtor to free himself from his contractual obligations on the basis of force majeure, he must prove that the performance of the contract has actually become absolutely impossible. If the debtor can perform his obligations in an alternative (tougher) way, he cannot invoke force majeure. After all, then the performance has not become impossible. However, the debtor may be able to invoke the unforeseeability theory.

Condition 2: Change was unforeseeable when the contract was concluded

Secondly, the change of circumstances must have been unforeseeable at the time the contract was concluded. In B2C (Business to Consumer) relationships, case law is likely to be slightly more lenient towards consumers, as the terms of a contract are regularly imposed on consumers. For companies, the bar of this second condition will probably be higher, as they are deemed to know or at least be able to assess the risks associated with their activity better than their (weaker) contracting party.

Condition 3: Change is not imputable to contracting party

Thirdly, the change of circumstances must not be imputable to the contracting party invoking the unforeseeability theory.

Condition 4: Contracting party has not accepted the risk

Fourth, the contracting party may not have accepted the risk of the change at hand. They could accept the risk either explicitly (e.g. waiver) or implicitly (e.g. arising from the nature of the contract).

Condition 5: Recourse to the unforeseeability theory is not excluded by law or contract

Article 5.74 CC is of non-peremptory law, both in terms of principle and modalities of application (art. 5.74, second paragraph, 5° CC).

Thus, on the one hand, special statutory provisions may deviate from it, for example the equitable rectification from article 1474/1 CC. On the other hand, parties can also contractually adjust or even exclude an appeal to the unforeseeability theory. Parties can decide among themselves whether they wish to use it more easily or not at all.

The parties can also apply to the judge in summary proceedings. The judge can then reform the contract or terminate it in whole or in part. If the court reforms the contract, the judge will bring the contract in line with what the parties would reasonably have agreed at the time of contract conclusion if they had taken the change of circumstances into account (art. 5.74, fourth paragraph CC).

Thus, unlike force majeure, the unforeseeability theory focuses primarily on the continuation of the contract.

Entry into force new contract law

Article 5.74 CC entered into force on 1 January 2023, six months after its publication. The regime applies to contracts concluded after this entry into force.

Sources

Parl.St. Kamer, 2021-22, nr. 55-1806/001.

Cass. (1^e k.) 19 juni 2009, RW 2009-10, nr. 18, 744-745.

Cass. (1^e k.) 12 april 2013, RW 2013-14, nr. 41, 1.

K. COX, “Gewijzigde omstandigheden in internationale koopcontracten: het Hof van Cassatie als pionier”, RW 2009-10, nr. 18, 730-737.

M. DE POTTER DE TEN BROECK, “De imprevisieleer: de rechter met de pen in de hand”, RW 2017-18, nr. 40, 1563-1575.

A. HOET, “Overmacht door corona in contractuele relaties”, RW 2020-21, nr. 6, 203-214.

D. PHILIPPE, “Coronavirus: Force majeure? Hardship? Deferral of obligations? Some practical elements advice for the analysis and redaction of clauses”, DAOR 2020, nr. 2, 12-20.

D. ROOSES, “Enkele praktische bedenkingen bij artikel 5.74 BW aangaande “wijziging van omstandigheden” in het nieuwe verbintenissenrecht”, RW 2022-23, nr. 5, 163-174.

R. TIMMERMANS, “De impact van de uitbraak van Covid-19 op private huurrelaties en mogelijk passende remedies”, Huur 2020, nr. 2, 75-87.

A. VAN OEVELEN, “Overmacht en imprevisie in het Belgische contractenrecht”, TPR 2008, nr. 2, 603-641.

Media links

E. DIRIX, “Contracten in tijden van corona”, Jubel, 31 maart 2020, https://www.jubel.be/contracten-in-tijden-van-corona/.

L. VANACKER, “Aannemer en bouwpromotoren armworstelen over hogere prijzen”, De Tijd, 7 mei 2022, https://www.tijd.be/ondernemen/bouw/aannemers-en-bouwpromotoren-armworstelen-over-hogere-prijzen/10386591.html.