The Process Followed by the Insurer relating to Resolution of the Conflicted Claims

1. The Process Followed by the Insurer relating to Resolution of the Conflicted Claims Turkish Commercial Code’s Viewpoint Dr.Ecehan Yesilova Aras Yasar University / Izmir

2. The aims of the Exposition-1 The steps of the insurer; its behaving During the process of fulfilling the victim’s claim (compensation) According to Turkish New insurance law

3. Turkish Insurance Law • (new) Commercial Code • in force since 1/7/2012 • Liability insurance –for the first time- regulated under a separate division • 13 special provisions, regulated consecutively • Basic idea of legislator: Create the position of 3rd party victim powerful, not only for compulsory but also for non-compulsory liability insurances

4. The aims of the Exposition-2 • Written Law • The intent of the legislator otoh • How will insurance companies read the written law? The way of insurer’s understanding, will direct/create the practice • New insurance law in force for 22 months • Whether the sector exercises the written law parallel to legislator’s intent will be Seen in every single dispute in forthcoming days, as far as disputes arise, will be understood what there are inside the mind of insurers and whether Written law meets the needs of sector) • Academic interpretation, insurance sector may develop parallel or not.

5. Outside the Scope • What or how do the insurers understand ; their strategy about • What kind of claims are suitable for settlement outside the court? • What kind of claims need to be judged (court/arbitration) • are not known properly yet by academics • How does court read the new provisions (will be seen in forthcoming years)

6. Main Sourceof Renovation • VVG: Gesetz über den Versicherungsvertrag (the text updated by 2001) Liability Insurance: VVG § 149 – 158c • Why German Law as a main structure? • Since 1950s commercial law built up on basis of HGB, no reason to edge out the academic and judgemental collection of past years, continuing over this (german commercial law) inheritance • Why not 2008 text-VVG? Germany put it in force after Turkish legislative preparations has ended. When 2008-VVG text in force, the draft Turk.Com.Code queue at Parliament, no time to adopt, missed the train.

7. To whom does the insurer pay?:defines the legislator’s viewpoint to the position of 3rd person in liability insurance Art. 1473: Under a liability insurance contract, the insurer shall pay indemnityto the victim[VVG: insured] up to the amount stipulated in the contract, for the liabilty of the insured due to an event defined under the contract, unless otherwise agreed, occured during the time period of the contract, even if the damage arises after the termination of the contract. Underlined sentences belong to VVG § 149

8. Third Party Victim’s New Position • Art. 1473: “insurer pays to victim”: • basic improvement, mandatory, accepting creditor= victim + • Art.1478 gives victim the chance of “Direct Action”against insurer • Is it necessary to regulate direct action, even it has regulated that the victim is the creditor of the contract? • Yes, institute of direct action is different from establishing the victim as creditor. • Due to these 2 articles, together, victim becomes more powerful against insurer

9. Logics of Direct Action • Chance for victim to sue the insurer (even if there is no relation between them) • To argue the liability of the insured • Basically, against the contract law ! • Getting decision against a person (insured) who is not involved the judgement • Victim, rather than 2 steps-judgement • gets 2 results just by 1 step-judgement: • Insured is liable • Insurer will pay up to the amount of the policy limit

10. (if) The victim’s claim is against a) Insurer (via direct action): The whole judgement is executed on name and behalf of insurer, the insurer takes all procedural steps by himself * direct action can also be directed outside the court, then insurer decides alone either settlement or jurisdiction within court • Insured: How will stand the insurer? *As a secret hero behind the insured? or *At first line, in front of the insured, by taking all control of the procedure ? Art. 1476 (Assistance of the Insurer)

11. Insurer-Insured • Contractual liability • a) compensate rightful claim of the victim b) protect the insured against unjust claim • Insurer will take a step • Whenever be informed about the claim • Claim: outside/within the court • Not necessary to establish the liability of insured • By court decision • Or arbitration • Due to Direct Action, liability of the insured can be established within trial against insurer, even without existance of the insured

12. Duty of Notification • Art. 1475 • The insured shall notify insurer about claim of victim........immediatly • Breach of this duty reduces compensation (unless there is actual knowledge of insurer: via media) • The insurer takes into consideration the degree of negligence for late notification Question: May insurer reduce the indemnity due to late notification even against the 3rd party victim? Not regulated

13. Upon notification of claim • Is indemnity to be paid to victim automatically due? • If the insurer evaluates the claim as rightful If unjust, till definite court decision, not due. Then, until decision, interest will charge. Ouestion: Till the end of appeal judgement, more than 2 years along interest runs, if the claim was at the begining within the policy limit, But by addition of those years’ interest, exceeds policy limit, how much will pay the insurer to the victim? -insurer’s wrong decision –to be judged- rather than settlement -insurer has to bear its result -even if the total sum in decision exceeds the policy limit, -providing that at the begining the policy can cover the whole claim

14. Upon notice of the victim’s claim, within 5 days: The insurer may choose (a) to take the control of legal process against victim. Standing at first line within the court * responsibility of all legal transactions and costs belong to insurer. (b) Waits outside the play, Pays the compensation held by High Court. *Costs belong to insured. Question: legislative reasoning of this article says: “pays without need of any other judgement” What if the insurer assumes that the related risk is excepted from the policy, can not he argue this now? Within 5 days,unless and untill the choice of insurer, the costs of essential transactions (objection, evidence determination) belong to insured.

15. Legal Protection Art. 1474 When a demand is claimed against insured, Reasonable expenses regarding this claim, covered by insurer. For payment beyond the policy limit, agreement under policy is necessary. If insured requests, insurer shall advance money.

16. (Claim-rightful) Settlement outside the court • By insurer with victim no problem Under which conditions wishes to agree, decides itself, protects its own interest • By insured with victim • Art. 1476(4) • Even if agreement exceeds the policy limit, Insurer is liable only within policy limit • For validity against insurer, agreement must be approved • 15 days from its notification • insurer shall not refrain from approval for unjust causes; insurer must have rightful causes to refuse • EXPENSIVE SETTLEMENT ? • reject all settlement? • No, should approve reasonable amount (according to its evaluation) • For the rest, insured will be liable itself.

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18. Calculation of Compensation Upon notice of claim or direct demand of victim, Collection of documents relating to risk, when the investigation of insurer terminates, however under any circumstances,after 45 days, the insurer has to honour its due payment. Upon termination of 3 months, %50 of damage : shall be advance payment. Calculation of the total amount of damage? conformity of parties, where no conformity; report of expert appointed by court De lege feranda: %50 of policy limit