LIMITATION PERIOD INSURANCE AND REINSURANCE Report no. 8 – Reinsurance Working Party Peggy Sharon, Adv. Levitan, Sharon & Co. Israel Presentation at AIDA Budapest 26 th November 2008

2 Limitation Period – Why? Balance between conflicting interests: Claimant: to enforce right through legal proceedings

3 Defendant: to be discharged of being subject to a potential court claim

4 Limitation Period – General (Contractual Claims) 3 years 5 years 7 years

5 10 years 20 years

6 Limitation – Procedural or Substantive? Most jurisdictions - substantive. Expiration of the limitation period – extinguishes the right

7 Limitation – Procedural or Substantive? Israel, UK and USA -procedural. Expiration of the period – bars the remedy

8 Commencement The limitation period commences on the day on which the cause of action accrued; the date of the violation of the right, or When the obligation becomes due.

9 Circumstances affecting the Period Fraud Fraud - the limitation period does not commence until the fraud is discovered

10 Admission of Liability – Stay of the Running The limitation period is suspended and begins to run anew by the debtor’s express admission of the debt

11 Special (Personal) Circumstances Minors, mentally disturbed persons, or matrimonial relationships – stay of limitation period or delayed commencement.

12 Stipulation regarding the limitation period - Possible? No: The length of the limitation period is regulated by the law and the parties are not at liberty to change it.

13 Yes: In the majority of legal systems, the parties are free to stipulate regarding the limitation period by agreement.

14 Reinsurance Claims Are there specific laws regarding these claims? In most countries - no specific rules apply to reinsurance claims. NO YES

15 Specific rules concerning limitation period for reinsurance claims – two years. Specific Rules in Marine and Aviation – five years.

16 Commencement of Limitation Period in Reinsurance Reinsurance Contract - Contract of Indemnity. On what date the cause of action of the reinsured accrues? Different answers. ?

17 Commencement - Reinsurance Possible Dates: The day on which the cedent paid the original insured In the USA: reinsurer's obligations under the reinsurance contract are not triggered until at least when the ceding company paid a claim.

18 The date of judgement/settlement against the cedent – establishment of liability:

19 The date of the occurrence – the insured event

20 Cut-Through Clause Undeveloped Areas

21 Does it change the relationship of the Original Insured vs Reinsurer to be identical to direct insurance, including for purposes of the Limitation Period?

22 Cut-Through Clause Assignment of right – including the period to enforce it – as in contracts?

23 Cut-Through Clause Direct privity towards Reinsurer – direct insurance claim – shorter period

Thank You תודה Köszönöm

LIMITATION PERIOD INSURANCE AND REINSURANCE Report no. 8 – Reinsurance Working Party Peggy Sharon, Adv. Levitan, Sharon & Co. Israel Presentation at AIDA Budapest 26 th November 2008