New Chilean Regulation of Liability Insurance Insurance Contract Act Statute Law Nr – May 9th, 2013 Under a Project written by Prof. Osvaldo Contreras-Strauch Vice President of AIDA Chairman of Civil Liability WP Sydney, September 18, 2013 Free translation by the author

Legal definition For the civil liability insurance contract, the insurer is obliged to compensate the dammages caused to third parties, of which insured is liable, for an event and in the terms stipulated in the policy clauses. In the civil liability insurance, the insurer shall pay the compensation to the third party dammaged, as a result of a final judgement, or an in or out of court settlement agreed with the third party with the consent of the insurer.

The third party is considered by law as a beneficiary Law defines beneficiary as “a person who, even whithout being assured, has the right to the compensation in case of ocurrance of an insured event”. Chilean legislation does not have any reference to “Direct action”, but in fact it exists. Is something simmilar to what happens in the French “Code des Assurances”

Notice of loss “The insured shall give notice in reasonable time to the insurer, of all notices he receives, about the third party dammaged or his successors entitled for claiming compensation, or the threat of an action against him; from judicial notices or summons that he recieves, and of occurrence of any event or circumstance that may give raise to a claim against him.

Coverage extension Unless exists a special coverage by another policy, the sum insured covers both the dammages caused to third parties and the expenses, such as fees and legal costs of defense in the lawsuit that they or their successors file against the insured. Unless otherwise agreed, the policy does not cover the amount of bails, fines or monetary penalties.

Legal defense of the insured The insurer has the right to assume the legal defense of the insured against claims of the third party. If he does it, he will have the right to appoint the attorney in charge to exercise it, and the insured shall be obliged to entrust his defense to whom the insurer appoints. The insured shall provide the insurer and to whom he entrust his defense, all the information and necessary cooperation.

Defense and conflict of interests When the third party who claims is insured with the same insurer, or there is another conflict of interest, the insurer shall immediately inform that to the insured, without prejudice to performs those actions that for its urgency are necessary for the defense. In such cases, and also when it is a case related with criminal justice, the insured may always choose between maintaining the legal defense to the insurer´s expense or to entrust it to another person. In this last case, the insurer will be liable for the costs of legal defense up to the ammount agreed in the policy.

Settlements ¨It is prohibbited to the insured to accept the third party’s claim, or to settle the case, in or out of courts, with the dammaged third party, without previous consent of the insurer. The breach of this obligation, release the insurer from the obligation to cover the loss. It does not mean infringement of this obligation, that the insured, in the statements made to the authority, recognize true facts of which his liability could arise.

Penalties in case of wrong opposition to reasonable settlements The law project included a rule for the cases in which one of the parties, insurer or insured, denies to agree a reasonable settlement that the other party accepts, and after the trial or arbitration ends in a worse award. If the opposition was not founded in good grounds, the party that denied the settlement had to bear the higher ammount of the award. The Chilean Senate excluded this rule.