Insurance in France: Liability of a foreign Insurance company acting in FOS for the acts of their locally appointed claim handlers and representatives

January 15, 2020

Insurance acting in FOS (Freedom of Service) under the (Directive 2016/97 of 20 January 2016 on insurance distribution)are subject to the control of the authorities of their country of origin, according to the same Directive. This principle was recently discussed in a case concerning an insurance company registered in Gibraltar. Insured parties had filed a claim before the authorities in France,  where this company had covered local risks, complaining about the way claims were handled by the local claim handler appointed by the company, in particular the fact that the claims were not paid on time. In a decision dated 25 November 2019 (n°2019-01), French authorities (ACPR) issued sanctions against the insurance company, based on article L363-4 of the French Insurance Code, which enables French authorities to sanction foreign insurance companies acting in FOS in case of emergency. This action by local control authorities are normally to be considered on a subsidiary basis, since the authorities of the country of origin of the company have precedence to issue sanctions on their national insurance companies. However, local authorities can act in case of emergency, based on their national laws, under the control of the European Court of Justice (CJUE, as defined in its judgment n° C-559/15, Onix Asigurari c/ IVASS). As a matter of fact, the company went bankrupt a few weeks after the ACPR had issued the sanction. Therefore, this decision of the ACPR illustrates the power French control authority has over foreign companies acting in FOS.

It also illustrates that foreign companies acting in FOS can be held liable for the acts or omissions of their local appointed representatives (in this case a claim handler). This decision of the ACPR can be analysed along the same lines as a decision rendered in July 2019 by the CNIL (Commission Informatique et Libertés), the French authority in charge of controlling regulation on personal data. In a recent article in Legalmondo, we spotted the case of a local agent sanctioned by the CNIL for violations of the GDPR. We mentioned that foreign insurance companies acting in FOS can be held liable for their locally appointed representatives, stressing on the importance for them to control them and make sure that they apply accurately local regulation on insurance services, protection of consumers, GDPR, money laundering regulation, which have increased their liabilities and duties over the last years.

This recent decision rendered by the ACPR confirms this very strict approach of the control of foreign insurance companies by French local authorities, in a renewed approach of the control aimed at better monitoring the risks posed by some companies registered in (effectively or supposed to be such by the market) “exotic” EU countries.