Spain: Are penalties and fines insurable?
A new topic for discussion has arisen in Spain: are fines and penalties insurable through liability insurance?
The Spanish regulator (the DGS) opened Pandora’s Box, when – in a response to a private consultation – it indicated that insurance (clauses) covering administrative fines or penalties were not acceptable as they might be against the public order rules. The DGS added that the aim of liability insurance was to cover the insured against third-party claims but not the penalties or fines arising from criminal conduct or breach of administrative regulations. The DGS considers that fines and penalties are imposed to penalise breaches and infringements, and that this purpose cannot be frustrated because of the intervention of an insurer.
The DGS’s response opened a debate in Spain, which is still running. While everybody in the sector agrees that fines arising from criminal conducts are not insurable, there is no unanimity regarding the cover of administrative fines. In fact, many insurers offer protection against, for example, fines imposed by the Spanish Data Protection Agency for data protection infringements. They argue that if the insured observes the law and acts in good faith, there is no legal reason not to cover the risk of potential administrative fines in instances of technical failure or human error. If, by contrast, the infringement provoking the fine is committed deliberately and in bad faith by the insured, the fine will be excluded from coverage.
It is worth noting that the DGS’s response is not enforceable or binding. It should be taken as a recommendation to pay special attention to this type of cover.
For further information, please contact either LITA (LITA@lloyds.com) or Juan Arsuaga (juan.arsuaga@lloyds.com) or Beatriz Ramirez (beatriz.ramirez@lloyds.com), at Lloyd’s Iberia.
Last updated on 27 Aug 2008
