By: Abg. Jorge Lince Manrique
As is public knowledge, Ecuador is going through a serious internal security crisis. It is indisputable that local mafias with the support of international drug cartels have unleashed a wave of terror that has surpassed the management of the national police. The high rate of assaults and robberies has claimed human victims and has generated enormous losses to commerce and industry.
In this order of things, it is clear that the majority of merchants and industrialists rely on private insurance as a tool to transfer their risks and mitigate any loss that they may suffer due to the current circumstances.
It is necessary to point out that acts of violence have been escalating at a dizzying rate. Criminal acts have not only been armed assaults or organized robberies, but they constitute true acts of violence against private property and civil society such as hitmen, murders, kidnappings, car bomb explosions and other execrable acts and crimes. .
Given these circumstances, the President of the Republic of Ecuador, through Executive Decree No. 110 of January 8, 2024, declared a state of emergency throughout the national territory and then, through Executive Decree No. 111, it has been declared and recognized the existence of an internal armed conflict.
The declaration of a state of exception or state of emergency grants special powers to civil authorities and undoubtedly alters or modifies in some way the application and exercise of certain rights and obligations. The insurance activity is not left out of these vicissitudes, since both the insurance coverage for the different risks assumed, as well as the applications of exclusions that are inherent to it, must be analyzed and applied in light of the events that occurred in extraordinary circumstances. .
It is important to note that the President of the Republic has declared a state of exception invoking for this purpose, among other constitutional and legal norms, article 164 of the Constitution of the Republic, which empowers him to declare a state of exception throughout the country. national territory or part of it, in the event of a serious internal commotion.
Popular unrest or civil commotions are part of those risks considered in damage insurance as “catastrophic risks.” War, terrorism, riots, strikes, popular uprisings and subversive movements in general also belong to this type of risk. These types of risks are generally not insurable and constitute grounds for exclusion of coverage in damage insurance, which is quite logical, since despite their low frequency, their harmful effects can be incalculable in economic terms. and humans. Although , in areas of greater political risk, these events have increased in number and could even be warned according to the study of the historical circumstances that characterize especially third world countries, it is clear that worldwide the frequency of These events, as well as the financial calculation of the damage they could generate, still exceed the capacity to prepare accurate statistics that allow setting an adequate premium. Provided coverage for this type of event in a risky manner, a single incident could jeopardize the financial stability of any insurer.
Notwithstanding the above, some of the catastrophic events mentioned above, which are expressly excluded in the general conditions of the damage insurance policies, could be subject to coverage through the implementation of special conditions that, due to their nature, modify, restrict or expand, the provisions contained in the general conditions of the insurance policies. Thus, there are clauses approved by the supervisory authority, which allow risks such as riots, strikes, popular riots, malicious acts, vandalism, etc. to be subscribed to. It is necessary to clarify that each special clause that provides coverage for these risks entails the payment of an additional premium and, of course, has clearly defined the risk it covers and what special exclusions apply.
It is very important to know the text of these special conditions, especially regarding their exclusions. We make special mention, given the circumstances that our country is experiencing, that the special conditions for coverage of risks of riots, strikes, popular uprisings and others, exonerate the insurance company from paying any compensation for damages caused as a consequence of the insured risks that occur during the period in which the declaration of the state of emergency is in force. For your best illustration, we allow ourselves to transcribe one of the special clauses mentioned (we transcribe the so-called coverage A, there are others):
“FIRE CLAUSE AS A RESULT OF MUTINY, POPULAR UNRESTS, STRIKES AND LABOR UNRESTS (COVERAGE A)
In consideration of the payment of the corresponding additional premium, it is agreed and declared that the insurance, subject to the provisions expressed below, also covers:
Damage and physical losses, including those caused by fire, suffered by the insured property described in the policy, caused directly by people who intervene in any type of riot and/or popular riots and/or strikes and/or labor disturbances (whether or not with relation or to a strike or a lockout), including those that occur due to the action and order of any authority in the repression of said events.
For the purposes of this clause, losses or damages that occur in the following cases are excluded:
to. War, foreign invasion , civil war and/or revolution.
The Company and the Insured agree and represent to determine the effects and scope of such exclusions that:
1. The expression Civil War will mean only the armed struggle between two or more groups, each of which dominates one or more areas of the national territory, the respective activities being framed within the uses of war and having been recognized implicitly or explicitly the belligerence of the rebel side either by the established Government or by a foreign state.
2. The expression Revolution will be understood as the clash of armed opposition forces, made up of civilian elements and/or military force, against the military and/or civil elements that defend the regime that governs the country, whether de jure or de facto. . To apply this exclusion, the following are considered essential elements:
As a motive: That one side seeks the overthrow of the Government de jure or de facto.
As component elements: On the one hand, the existence of armed elements, made up of civilians and/or military personnel who seek such overthrow and, on the other hand, armed elements made up of civilians and/or military personnel who support the Government, whether de jure or de facto.
As an action: Armed struggle producing bloody events.
As a place or places in which coverage is excluded: The Province or Provinces in which the “revolution” occurred or developed, that is, where the armed conflict takes place. If a Province is partially affected by the conflict, the property insured in the entire Province is excluded from insurance protection. In the Province or Provinces where armed conflict does not occur, the exclusion will not apply and the insurance coverage will take effect, with the exclusion of the territorial jurisdictions in which martial law prevails and for the duration of martial law t/or touch of stay and/or state of siege decreed by competent authority, whether de jure or de facto.
b. State of emergency
As such, only cases will be considered in which , for any reason, the de jure or de facto Government or the competent authority establishes the rule of martial law and/or curfew and/or state of siege. This exclusion will only cover the insured property that is located in the areas included in any of the aforementioned provisions and only for the period that the corresponding order or orders are in force;
c. Loss or damage resulting from the total or partial suspension of work or the interruption or suspension of any procedure or operation;
d. Loss or damage caused by confiscation, seizure, requisition or destruction of the insured property by order of the de jure or de facto Government or by any competent authority; and,
and. Losses or damages arising from loss of profits, delay, loss of market, loss of profits and other benefits or advantages that could be interrupted or terminated, regardless of the cause that originates them.
However , as established in the General Conditions of the Policy, if the insurance agreed through this clause is terminated before its expiration at the request of the insured, maintaining the validity of the basic fire protection, the Company will not return any part of the premium that has been collected for the entire period originally contracted.
All other terms and conditions of the policy, with the exception of what is established in this clause, remain in full force and without any modification”.
In summary, it is clear that under the declared state of emergency, the special coverages granted in the fire insurance policy would be excluded under the state of emergency. However, it must be emphatically noted that for these exclusions to apply, the insurance company must demonstrate that the claims and damages have been produced or caused , for example, by acts of vandalism, riots or popular disturbances and that these have occurred during the state of emergency. Policy coverage is NOT automatically suspended due to the fact that a state of emergency has been declared. That is to say, for an insurance company to claim any exclusion, there must be a causal link between the damage and the event that produces it.
It is very important to note that Executive Decree 111 has declared several armed criminal groups as terrorists, which is why any act or damage caused by these gangs will be considered acts of terrorism. Terrorism, like other so-called catastrophic events, is regularly excluded from general coverage, unless it is expressly compensable through the inclusion of the corresponding special clause. Terrorism clauses are regularly subject to compensation sublimits.
As for other insurance lines, such as vehicles and transportation, we can apply the same thing that we have analyzed for fire policies. Vehicles can be insured to cover the risks of riots, strikes, malicious acts, etc., provided that special coverage is contracted and subject to the exclusions stated in the corresponding endorsements or special conditions. It is also important to note that for an insurance company to claim exclusions for the reasons analyzed, it must prove that the damage inferred to the insured property was caused by the acts or circumstances invoked.
Finally, remember that in insurance matters, the insured have the obligation to avoid the aggravation of the risk, the non-compliance of which may be alleged by the insurance company as a circumstance exonerating its obligation to compensate the incident, therefore, during the declaration of the state of emergency (especially with respect to your vehicle), avoid traveling through risk areas and outside the decreed curfew hours.
