Appeal against the insurer's refusal to make insurance payments

Article 839 of the Civil Code contains a list of grounds on which the Insurer has the right to refuse insurance payment to the policyholder in whole or in part.

The Zhetisu Regional Court asks the question: why can the refusal be appealed by the policyholder, whereas such a right is not given to the beneficiary and the insured.

In this regard, it should be noted that the old wording of paragraph 8 of Article 839 of the Civil Code was as follows: "The insurer's refusal to make an insurance payment may be appealed by the policyholder to the court."

By Law No. 138-VII of July 12, 2022 (effective January 1, 2024), paragraphs 7 and 8 of Article 839 of the Civil Code were worded as follows:

"7. The decision to refuse insurance payment is made by the insurer and notified to the policyholder in writing with a reasoned justification of the reasons for the refusal and notification of the right of the policyholder (insured, beneficiary) to contact the insurance Ombudsman to resolve disputes, taking into account the specifics of the legislation of the Republic of Kazakhstan.

8. The refusal of the insurer to make an insurance payment may be appealed to the court, provided that the dispute settlement procedure is followed by the insurance ombudsman in accordance with the procedure and conditions provided for by the laws of the Republic of Kazakhstan."

In addition, the rights of the beneficiary and the insured to resolve any disputes arising from insurance contracts are provided for in article 86 of the Law on Insurance Activities and article 29-1 of Law No. 446.

Insurance is carried out on the basis of an insurance contract.

Under the insurance contract, one party (the policyholder) undertakes to pay the insurance premium, and the other party (the insurer) undertakes, upon the occurrence of an insured event, to make an insurance payment to the policyholder or another person in whose favor the contract was concluded (the beneficiary), within the amount specified in the contract (the insured amount). The forms of insurance are: by

1) according to the degree of commitment - voluntary and compulsory;

2) according to the object of insurance - personal and property;

3) the grounds for making insurance payments are accumulative and non-accumulative.

An analysis of the cases submitted for summary showed that the following types of disputes were considered by the courts of the republic:

- challenging the results of the calculation of the amount of damage caused to the vehicle;

- on the recovery of insurance payments;

- on appealing the insurer's refusal to make an insurance payment;

- recovery of insurance payment from the policyholder by way of recourse (reverse claim);

- recovery of the paid insurance sum from the harm-doer by way of subrogation;

- on the recognition of the insurance contract as invalid;

- on the collection of penalties for late payment of insurance;

- on the collection of insurance premiums, etc.

Jurisdiction

Cases of this category are considered according to the general rules of jurisdiction established by Chapter 3 of the CPC – at the location of the defendant.

A claim against an insurance company may be filed at the location of the branch or representative office that concluded the insurance contract.

At the same time, there are cases of unjustified return of a claim due to lack of jurisdiction.

Thus, by the definition of the Council of Economic Cooperation of the East Kazakhstan region dated May 17, 2023, the claim of LLP "Z" to JSC "Insurance Company "E" (hereinafter referred to as JSC "IC "E") for the recovery of insurance payments was returned.

The reason for the refund was the lack of jurisdiction of this lawsuit by the Ministry of Economic Cooperation of East Kazakhstan Region, since the defendant is an insurance company located in Almaty.

However, as indicated above, by virtue of Part 3 of Article 30 of the CPC, a claim arising from the activities of a branch or representative office of a legal entity may also be filed at the location of the branch or representative office.

According to the claim and the documents attached to it, the plaintiff's location is the city of Ust-Kamenogorsk, the traffic accident (hereinafter referred to as the accident) occurred in the city of Ust-Kamenogorsk, and the insured event statement was accepted from the victim by the branch of JSC IC "E" located in the city of U.

This ruling has not been appealed and has entered into force.

In accordance with Part 11 of Article 30 of the CPC, a claim for recovery of an insurance payment under an insurance contract may be filed at the place of residence of the plaintiff or at the location of the defendant.

Paragraph 2 of the Nominative Resolution provides the following explanation: the concept of "place of residence" means that this provision refers to the plaintiff, an individual, therefore, plaintiffs, legal entities, file lawsuits in the general manner – at the location of the defendant.

The analysis showed that there was a misinterpretation of this rule. By the ruling of the Inter-district Court for Civil Cases of the city of Shymkent dated June 13, 2023, the claim of JSC IC N to D. for recovery of the amount by way of recourse was returned with reference to subparagraph 2) of part of Article 152 of the CPC (the defendant does not reside in Shymkent) and with reference to part 11 of Article 30 of the CPC.

It is recommended that the plaintiff, the insurance company, apply to the court at its location in Almaty. The court of appeal upheld the court's ruling, also stating that the plaintiff could apply to the court at his place of residence.

At the same time, the courts did not take into account that part 11 of Article 30 of the CPC gives the right to choose only to plaintiffs - individuals and only upon request for recovery of insurance payments. In this case, the plaintiff is a legal entity that claims otherwise against the policyholder.

By a ruling dated February 27, 2024, the case on the claim of JSC IC E against M. for debt collection to the military court of the Almaty garrison, the Balkhash District Court of the Almaty region did not take into account that the plaintiff's claims did not affect the interests of military service and were not directly related to military service. The ruling has not been appealed.

State duty

The rates of state duty in cases of this category are determined in accordance with Article 610 of the Tax Code.

In accordance with subparagraph 19) of Article 616 of the Tax Code, policyholders and insurers are exempt from paying state duty in courts for claims arising from compulsory insurance contracts.

Thus, the article deals only with compulsory insurance contracts, and only policyholders and insurers are exempt from paying state duty, while beneficiaries do not enjoy such benefits.

Therefore, if the beneficiary files a claim against the insurer for recovery of insurance payments under the compulsory insurance contract, he is obliged to pay the state fee in the amount provided for in Article 610 of the Tax Code (unless he is exempt from paying it for other reasons).

In this case, the distribution of court costs between the parties must be made according to the general rules provided for in Article 109 of the CPC.

That is, if the decision is made in favor of the beneficiary plaintiff, then the court costs, including the state fee paid by him, are to be recovered from the defendant, the insurance company.

Local courts have repeatedly proposed extending the benefits provided for in subparagraph 19) of Article 616 of the Tax Code to beneficiaries (victims).

Such a proposal was sent to Parliament by the Supreme Court based on the results of the generalization in 2017, but was not supported.

Pre-trial dispute resolution procedure

The Insurance Ombudsman has been operating in Kazakhstan since 2007. Thus, Law No. 244 of May 7, 2007 supplemented Law No. 446 with articles 30-1, 30-2, 303 and 30-4 regulating the activities of the Insurance Ombudsman.

Law No. 166-VI of July 2, 2018 supplemented the Law on Insurance Activities with Chapter 15 "Insurance Ombudsman".

Relevant amendments were made to Law No. 446, Law No. 444 and other laws on compulsory insurance, according to which, in the event of a dispute, the policyholder (beneficiary) had the right, at his discretion, to submit a written application to the insurer indicating the requirements and attaching supporting documents, or to send an application to the insurance ombudsman or to the court for dispute settlement. Law No. 138-VII of July 12, 2022 amended the Law on Insurance Activities and the laws on compulsory insurance, according to which contacting the insurance ombudsman became mandatory before going to court.

Paragraph 5 of Article 90 of the Law on Insurance Activity is set out in a new wording: "The persons specified in the second part of paragraph 1 of Article 86 of this Law, who are policyholders (insured, beneficiaries), as well as the insurer, have the right to apply to the court in accordance with the legislation of the Republic of Kazakhstan after receiving the decision of the insurance Ombudsman.

At the same time, the execution of the decision of the insurance ombudsman for the policyholder (insured, beneficiary) is not mandatory."

Relevant amendments have been made to the laws on compulsory insurance. Resolution No. 60 of the Board of the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (hereinafter – the ARFR) dated September 12, 2022 approved the Rules for the election and Implementation of the Activities of the Insurance Ombudsman.

Thus, starting from January 1, 2024, contacting the insurance ombudsman is a mandatory step before applying to the insurance dispute settlement court. In accordance with the second part of paragraph 1 of Article 86 of the Insurance Law, the Ombudsman regulates disputes between insurers (insured, beneficiaries) and insurance organizations arising from insurance contracts.

At the same time, courts should keep in mind that not all disagreements between policyholders (insured, beneficiaries) and insurance organizations arising from insurance contracts are subject to consideration by the insurance ombudsman.

The law distinguishes the subjects of treatment by type of insurance and limits the amount of their claims. Thus, individuals and (or) small business entities that are policyholders (insured, beneficiaries) have the right to contact the insurance ombudsman to resolve disputes on all types of insurance. Other legal entities may apply to the insurance Ombudsman only for the class (type) of compulsory insurance of civil vehicles. liability of the owners The amount of claims for disagreements of these persons should not exceed ten thousand times the amount of the MCI.

In practice, a question has arisen: should insurance companies exercising their right to claim back (article 28 of Law No. 446) or the right to claim by way of subrogation first contact the insurance ombudsman?

Here it is necessary to pay attention to the content of paragraph 1 of Article 29-1 of the Law No. 446 in the new edition.:

"If there is a dispute arising from the contract of compulsory liability insurance of vehicle owners, the policyholder (victim, beneficiary) has the right in writing:

send an application to the insurer (including through a branch, representative office, other separate structural unit, or the insurer's online resource) indicating the requirements and attaching documents confirming its requirements, or send an application to the insurance Ombudsman (directly to the insurance ombudsman, including through his online resource, or through the insurer, including through its branch, representative office, other separate structural unit, Internet resource) or to the court for dispute settlement, arising from the contract of compulsory liability insurance of vehicle owners, taking into account the specifics provided for by the Law on Insurance Activities.

Thus, this rule deals with the consistency of the dispute resolution procedure for the policyholder, the victim and the beneficiary, but not for the insurer making a claim by way of recourse.

JSC IC J filed a lawsuit against K. to recover the amount of the insurance payment by way of recourse.

By the ruling of the Altai District Court of East Kazakhstan region dated June 7, 2024, the claim was returned. The reason for the refund was the absence of a decision by the insurance Ombudsman, that is, the plaintiff did not comply with the pre-trial dispute settlement procedure established by law, provided for in subparagraph 1) paragraph 1 of Article 152 of the CPC.

Having disagreed with this court ruling, the plaintiff filed a private complaint. In the case of a private complaint, the plaintiff asks to cancel the court ruling, since this law does not provide for a pre-trial dispute settlement procedure involving the insurance ombudsman.

By the ruling of the Judicial Board for Civil Cases of the East Kazakhstan Regional Court dated July 25, 2024, the private complaint of JSC IC J was returned in connection with its withdrawal. The position of the courts of the Abai region on this issue seems to be correct.

While upholding the decision of the Semeysky City Court, which satisfied the claim of JSC IC N to P. for the recovery of the amount by way of recourse, the court of appeal found the defendant's arguments about the need to dismiss the claim without consideration unfounded, since there is no pre-trial dispute settlement procedure for this category of cases.

With regard to subrogation, Subrogation (Latin subrogatio — replacement) is the transfer to the insurer who paid the insurance indemnity of the right to claim compensation from the person responsible for the damage caused to the insured in the reimbursed. within the limits specified in subparagraph 2) According to paragraph 1 of Article 86 of the Law on Insurance Activity, the Ombudsman regulates insurance disputes between policyholders (insured, beneficiaries) and insurance organizations arising from insurance contracts.

In this case (with subrogation) There is no dispute between the policyholder and the insurer arising from the insurance contract.

The harm-doer, who is being claimed by the insurance company that made the insurance payment, is not a party to the property insurance contract.

The right of claim transferred to the insurer is exercised by him in compliance with the rules governing the relationship between the policyholder (insured) and the person responsible for losses.

Consequently, the requirement for the insurance company to comply with the pre-trial dispute resolution procedure by contacting the insurance ombudsman cannot be considered justified.

Other examples of unjustified return and abandonment of claims without consideration due to non-compliance with the procedure for pre-trial dispute settlement By the ruling of the Zhetysu District Court of Almaty dated May 3, 2024, the claim of G. to LLP "A" for recovery of material damage caused as a result of an accident was unlawfully left without consideration.

The court stated that the plaintiff did not comply with the pre-trial dispute settlement procedure, and the decision of the insurance ombudsman was not submitted.

The appellate instance reasonably, with reference to article 86 of the Law on Insurance Activity, disagreed with this conclusion of the court, pointing out that the subject of the claim is the recovery of material damage caused as a result of an accident, namely, the recovery of the amount of damage uncovered by the insurance payment.

The legal basis of the claim is the norms of Articles 917 and 924 of the Civil Code. In this case, the parties to the case are the victim of the accident and the owner of the vehicle.

On a similar basis, M.'s claim against N. for recovery of material damage caused as a result of an accident was unlawfully dismissed (Zhetysu District Court of Almaty case No. 7515-24-00-2/11).

By a ruling dated February 21, 2024, the Council of Economic and Social Council of Almaty unreasonably returned the claim of JSC IC N to LLP A for the recovery of the amount by way of recourse, indicating the need to comply with the pre-trial dispute resolution procedure by filing a claim.

The court of Appeal corrected the error made by the court, pointing out that the stated subject of the dispute does not imply a pre-trial settlement of the dispute, since it is not established by law and there are no contractual relations between the parties.

Analyzing the judicial practice on this topic, the Pavlodar Regional Court asked the question: is the policyholder (insured, beneficiary) entitled, after the ombudsman's decision, to file a claim against the insurance company directly to the court, without appealing the Ombudsman's decision? When applying the above-mentioned norms of insurance legislation in terms of compliance with the pre-trial dispute resolution procedure, the courts must take into account that if the insurance ombudsman has considered a dispute between the policyholder (insured, beneficiary) and the insurance company, then its decision is mandatory for the insurance company if accepted by the policyholder (insured, beneficiary) and optional for the policyholder (insured, beneficiary), who, if they disagree with the decision of the insurance Ombudsman, have the right to apply to the court.

In this case, the subject of the claim will not be the decision of the Ombudsman, but the decision of the insurance company. In this case, an analogy can be drawn with the resolution of labor disputes, when contacting the conciliation commission is mandatory for the party to the dispute, but in case of disagreement with such a decision, the party applies to the court for dispute resolution without appealing the decision of the conciliation commission.

As a result of the accident, K. caused damage to T.'s car, which contacted the insurance company of the perpetrator.

The insurance company determined the amount of damage in the amount of 212,869 tenge. Due to the disagreement with the calculation, the plaintiff applied to the insurance ombudsman with an application for an increase in the amount of the insurance payment.

By the decision of the Insurance Ombudsman, the amount of insurance payment was increased by 97,463 tenge.

Disagreeing with the Ombudsman's decision, T. appealed to the Taraz City Court to JSC IC J with a claim for invalidation of the calculation results and recovery of the difference in the insurance payment.

Based on the results of the analysis, the courts of the republic propose to create representative offices of the Ombudsman in the regions, since the resolution of all disputes in the republic by one person creates a large influx of appeals and delays in their resolution.

The Mangystau Regional Court and the Shymkent City Court consider it necessary to propose the creation of regional insurance ombudsmen, and the Abai Regional Court suggests providing a representative insurance ombudsman in each region.

However, it should be noted that in accordance with the norms contained in chapter 15 of the Law on Insurance Activities, only one insurance ombudsman can act in the republic.

According to paragraph 5 of Article 91 of the Law on Insurance Activities, the office of the Insurance Ombudsman must contain services and specialists in information technology, law, accounting and financial reporting, in the field of assessment, handling applicants' complaints and other (other) services (specialists) based on the decision of the Insurance Ombudsman, approved by the Council of representatives of the Insurance Ombudsman.

The courts of the West Kazakhstan region and Aktobe region propose to consider amendments to Article 92-1 of the Law "On Notaries", to introduce mandatory out-of-court settlement of disputes on claims for recovery of insurance payments by way of a reverse claim (Article 28 of Law No. 446), that is, an appeal to notaries on the issue of obtaining an executive inscription.

However, the generalization showed that such requirements cannot be considered indisputable.

Simplified (written) proceedings may be recommended.

Regulatory framework

The main regulatory legal acts to be applied in the consideration of cases of the generalized category are:

The Constitution of the Republic of Kazakhstan,

The Civil Code (hereinafter referred to as the Civil Code);

The Civil Procedure Code (hereinafter referred to as the CPC);

The Labor Code (hereinafter referred to as the Labor Code);

The Code of the Republic of Kazakhstan "On Taxes and Other Mandatory Payments to the Budget (Tax Code) dated December 25, 2017 No. 120-VI SAM (hereinafter referred to as the Tax Code);

The Code of the Republic of Kazakhstan "On Administrative Offenses" dated July 5, 2014 No. 235-V SAM (hereinafter CAO);

Laws of the Republic of Kazakhstan:

"On Insurance Activities" dated December 18, 2000 No. 126 (hereinafter referred to as the Law on Insurance Activities);

"On compulsory insurance of civil liability of private notaries" dated June 11, 2003 No. 435;

"On compulsory insurance of civil liability of audit organizations" dated June 13, 2003 No. 440;

"On Compulsory Insurance of the carrier's Civil Liability to Passengers" dated July 01, 2003 No. 444 (hereinafter referred to as Law No. 444);

"On Compulsory Insurance of civil Liability of Vehicle Owners" dated July 01, 2003 No. 446 (hereinafter referred to as Law No. 446);

"On compulsory tourist insurance" dated December 31, 2003 No. 513;

"On compulsory insurance of civil liability of owners of facilities whose activities are associated with the risk of harm to third parties" dated July 7, 2004 No. 580;

"On compulsory insurance of an employee against accidents in the performance of his labor (official) duties" dated February 7, 2005 No. 30; "On compulsory social health insurance" dated November 16, 2015 No. 405-V;

"On the Insurance Benefit Guarantee Fund" dated June 3, 2003 No. 423;

Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated October 6, 2017 No. 8 "On Judicial Practice in Disputes arising from Insurance Contracts" (hereinafter referred to as the Regulatory Resolution);

Rules for determining the amount of damage caused to a vehicle, approved by Resolution No. 14 of the Board of the National Bank of the Republic of Kazakhstan dated January 28, 2016 (hereinafter referred to as the Rules) and other regulatory legal acts.

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