Legal requirement of a contractual breach of an automobile insurance contract

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On July 30, 2021, the Court of Appeal (Superior Court) (the “Court”), chaired by Chief Justice Mark Chetcuti, Justice Joseph R. Micallef and Justice Tonio Mallia considered the applicable limitation period of a contract violation of an insurance policy as a result of a traffic accident. The facts of the case on behalf of GasanMamo Insurance Limited against Mario Seguna, Carmel Seguna and Kevin Debono, were as follows.

In October 2001, a vehicle belonging to Mr. Mario Seguna was involved in an accident, and on March 26, 2010, the Court, in a case brought by the injured party against Mr. Carmel Seguna and Mr. Kevin Debono, declared that Mr. Carmel Seguna and Mr. Kevin Debono were responsible for the said accident and jointly ordered them to pay damages of more than € 7,000 to the injured party. Under section 10 of the Motor Vehicle Insurance (Third Party Risks) Ordinance (Cap 104 of the Laws of Malta) (the “Motor Vehicle Insurance Ordinance”), GasanMamo Insurance Limited (the “appellant”) paid the injured party over € 12,000 in damages. The Appellant then brought an action against MM. Mario Seguna, Carmel Seguna and Kevin Debono (the “Respondents”) to claim reimbursement of damages paid by the Appellant to the injured party. According to the appellant, at the time of the accident, the respondents violated the terms and conditions of the automobile insurance policy relating to the vehicle in question.

In March 2016, the Civil Court of First Room declared Mr. Mario Seguna solely responsible for reimbursing the appellant for the damages paid, since the automobile insurance policy was taken out by him alone. The Civil Court of First Chamber declared that the case did not concern the responsibility for the accident but concerned the contractual relationship between Mr. Mario Seguna and the appellant, and the failure by Mr. Mario Seguna to fulfill his obligations to the auto insurance title. Politics. At the time of the accident, the vehicle was driven by Mr. Carmel Seguna and was mounted with cage bars used in horse racing, which were driven by Mr. Kevin Debono. This violated the terms and conditions of the automobile insurance policy issued by the appellant in respect of the vehicle in question. The list of exceptions to the insurance policy included “any liability resulting from the [motor vehicle] used for racing, gait, reliability or speed testing, or for any purpose relating to the automobile trade ”. Mr. Mario Seguna appealed against the decision of the Civil Court of First Room, arguing that the case was time-barred and that the exception to the insurance policy referred to by the Civil Court of First Room did not preclude changes of the car (which in this case was the mounting of the cage bars) and furthermore, the wording of the exception seemed to refer to motor racing and not horse racing.

The Court disagreed that the action was time barred under Article 2153 of the Civil Code (Cap. 16 of the Laws of Malta) (the “Civil Code”) which states that “the actions in damages not resulting from a criminal offense are prescribed by the two-year time limit ”. The Court established that the case concerned the contractual relationship between Mr. Mario Seguna and the appellant (although it had also been brought against Mr. Carmel Seguna and Mr. Kevin Debono). The Court referred to a case in the names of Hugh P Zammit noe et noe v. John Mifsud and (April 1, 2005) who clarified the three types of relationships that arise as a result of a car accident, namely the relationship between the people involved in the tort accident, the relationship between the injured party and the insurer which results from the application of the law within the meaning of the Ordinance on the insurance of motor vehicles and thirdly, the contractual relationship between the insurer and the insured. In this case, it was a question of examining the third type of relationship based on the contractual failure of Mr. Mario Seguna.

The Court explained that the applicable limitation period was that of five years under Article 2156 (f) of the Civil Code which refers to “actions for payment of any other debt resulting from business transactions or other causes “. Mr. Mario Seguna alleged that in such a case, the limitation period must start to run from the moment of the breach of the contract, although the precise moment is not clear if it refers to the moment when the vehicle has been modified and fitted with cage bars, when the vehicle was used for horse racing or when the accident occurred. The Court declared that the present case concerned the alleged breach of contract in connection with the accident and with the action brought by the injured party against Messrs. Carmel Seguna and Kevin Debono, and not because of the breach of contract as such. . The Court therefore concluded that the limitation period began to run from the moment when the Appellant, in his capacity as insurer, became aware of the action brought by the injured party against MM. Carmel Seguna and Kevin Debono. The Appellant had been served with a judicial letter concerning the said case, which was dated March 7, 2003. At that time, the Appellant could have brought an action against the insured, however, the Appellant officially sued only the Respondents. Mr. Mario Seguna and Mr. Carmel Seguna by serving them a legal letter dated November 24, 2011 asking them to reimburse the damages paid by the Appellant to the injured party. Accordingly, the Court determined that in view of the fact that more than five years had elapsed between 2003 and 2011, the action was time barred within the meaning of Article 2156 (f) of the Civil Code.

Consequently, the Court did not proceed to examine the facts of the case and quashed the decision of the first chamber of the civil court dated March 9, 2016.

This article first appeared in the Malta Independent.


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