2.1. Which types of rights or claims of the insured can the insurer pursue using its rights of recovery?

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1 FRANCE Bouckaert Ormen Passemard Sportes Alexis Valencon 1. Does your jurisdiction grant insurers rights to pursue recoveries in respect of losses suffered by the insured which the insurer has indemnified ( rights of recovery )? 1.1. If the answer is yes, do such rights arise pursuant to statute or case law? This right arises from Article L Section 1 of the French Insurance Code (FIC), which provides: The insurer who paid the insurance compensation shall be subrogated within the limit of such compensation in the insured s rights and actions against the third parties who, by their acts, caused the damage that gave rise to the insurer s liability. Besides this general provision, the FIC mentions this right for specific types of non-life insurance such as: marine (Article L of the FIC), aviation (Article L of the FIC) and motor (Article L211-3 of the FIC). French law also allows subrogation outside the scope of insurance, either by operation of law or based on an agreement. Indeed, Article of the French Civil Code (FCC) provides that subrogation takes place by operation of law [ ] for the benefit of the person who, being bound with others or for others to the payment of the debt, had an interest in discharging it. Article 1250 of the FCC provides that subrogation is conventional [ ] When the obligee-creditor receiving his payment from a third person subrogates him to his rights, actions, privileges or hypothecs against the debtor: such subrogation must be express and made at the same time as the payment. 2. What is the nature and scope of the rights of recovery? In particular: 2.1. Which types of rights or claims of the insured can the insurer pursue using its rights of recovery? By using its right of recovery, the insurer pursues the right to compensation of the insured against the third parties liable for the damage. This right to compensation may arise from any type of liability, as well contractual and non-contractual Are there any types of rights or claims of the insured which the insurer may not pursue using its rights of recovery, if so, what are they (in general terms)? The insurer s right of recovery is limited to the insurance indemnity they paid to the insured. In other words, the insurer has no recourse beyond the insurance indemnity they paid and the insured retains his rights to compensation for the portion of the damage which has not been indemnified by the insurer. 6 The insurer that has indemnified the victim of a criminal offence is not entitled to pursue his right of recovery before Criminal Courts. Courts consider that the indemnity paid to the insured (the victim) derives from the insurance contract and is not a loss caused by the offence. Therefore, the insurer is not allowed to act as a plaintiff before a Criminal Court. 7 The insurer is only allowed to do so before a Civil Court Is there a prescribed time period (for example, a limitation period) within which the insurer must pursue its rights of recovery? 5 J Kullman (under supervision of), Lamy assurances 2016, No 1017; B Beigner, Droit des assurances, 2nd edition, No 585 and No Art L of the FIC; L Grynbaum (under supervision of), Assurances, ed , No Cass Criminal Div 9 February 1994, No

2 The right of recovery shall be pursued within the same time limitation as the insured s right for compensation against the third party. 8 The starting point is the day the time limitation has started to run against the insured. 9 Therefore, if the right of action of the insured against the third party liable for the damage is timebarred before the indemnification, then the right of recovery of the insurer will be judged inadmissible What, if any, criteria must be fulfilled in order for the insurer to be entitled to exercise its rights of recovery? The insurer shall have indemnified the insured 11 and the person liable for the damage must be a third party to the insurance contract (Article L of the FIC). 4. To which types of insurance do the rights of recovery apply? The right of recovery applies to all non-life insurance: marine (Article L of the FIC), non-marine liability and property (Article L of the FIC), aviation (Article L of the FIC) and motor (Article L211-3 of the FIC). The right of recovery does not apply to life insurance (Article L131-2 of the FIC) as well as accident and health insurance, 12 because the amount of the insurance indemnity depends, here, on predetermined elements agreed between the parties and not on the amount of the damage. 5. Against whom can the rights of recovery be exercised? The right of recovery may be exercised either against the third party liable for the damage or against his liability insurer. 13 However, the insurer has no recourse against the insured. 14 In addition, the insurer has no recourse against the children, descendants, ascendants, relations in direct line, officials, employees, workers or servants and in general any person normally living in the insured s home (Article L of the FIC). Nevertheless, this restriction does not extend to the liability insurer of the victim s relative Where an insurer pursues a claim or right against a third party using its rights of recovery, does this alter the rights or defences of the third party? If so how? In particular: 6.1. Are there any additional defences that the third party can raise against a claim brought by an insurer using its rights of recovery, which could not have been raised if the claim had been brought by the insured directly? Within the framework of its right of recovery, the third party liable for the damage is entitled to raise the same defences against the insurer involved as those which could have been raised against the insured. 16 In addition to the above, the third party may challenge the reality of the subrogation and, therefore, question the right of the insurer to act. In this regard, to benefit from the right of recovery, the insurer shall indemnify the insured according to the provision of the insurance contract. Therefore, the insurer 8 Cass 2nd Civil Div 13 May 2004, No ; Cass 1st Civil Div 20 March 1979, No H Groutel (under supervision of), Traité du contrat d assurance terrestre, No P Delebecque, Subrogation de l assureur et prescriptions, Revue de droit des transports No 4, April 2010, comment No 91; Court of Appeal of Paris, 12 June 2007, No 04/ Cass 1st Civil Div 14 March 1992, No Cass 1st Civil Div 17 March 1993, No ; Cass 1st Civil Div 16 May 1995, No J Kullman (under supervision of), Lamy assurances 2016, No Ibid, No Cass 1st Civil Div 8 December 1993 No Cass 1st Civil Div 4 April 1984, No ; B Beigner, Droit des assurances, 2nd edition, No 609; L Grynbaum (under supervision of), Assurances, ed , No

3 will have no right of recovery if it has indemnified the insured although it was not obligated to (that is, because the insurance contract is void or because of the existence of an exclusion). 17 When the insurer has indemnified the victim although it did not have to, courts decide that the recourse for the indemnity may not be exercised against the victim but against the insured Are there any defences that the third party cannot raise against a claim brought by an insurer using its rights of recovery, which could have been raised if the claim had been brought by the insured directly? No. 7. Does the insurer pursue the rights of recovery in its own name, in the name of the insured, or both? The right of recovery is exercised by the insurer in its own name but in the shoes of the insured. The insurer does not have an independent right of action against the third party liable for the damage. The insurer exercises the right of action of the insured it has indemnified Where an insurer pursues rights of recovery in the insured s name: 8.1. Who has control of the claim; and As indicated above, the right of recovery is exercised by the insurer in its own name but the insurer is in the shoes of the insured. Thus, the insurer leads the procedure. As soon as the insurer has indemnified the insured, the latter lost its right for compensation against the third party. 20 The insurer is entitled to initiate and lead the procedure without summoning the insured to the hearing Are there any procedural requirements (for example, court filings or execution of specific documents) that the insurer and/or insured must comply with if so what are they? There are no specific procedural requirements. However, the insurer must be able to justify the damage covered and to produce the evidence of the payment to the insured. 22 In this regard, it is strongly advised to obtain a receipt from the insured or from the indemnified victim. The insurer shall also demonstrate that it has indemnified the insured according to the provision of the insurance contract. Therefore, the insurer shall produce the contract in Court When exercising rights of recovery, does an insurer owe any obligations to the insured? If so, what are they? The insurer does not owe any specific duty to the insured within the framework of its right of recovery Does an insured have any duties towards its insurer requiring it to preserve or not prejudice the insurer s rights of recovery. If so, what are they? Article L Section 2 of the FIC provides: The insurer may be released in whole or in part from its liability to the insured when the subrogation is no longer able, by the insured s act, to work in the insurer s favour. The insurer does not have to indemnify the insured if the latter, by negligence or 17 J Kullman (under supervision of), Lamy assurances 2016, No Cass 3rd Civil Div 29 February 2012, No J Kullman (under supervision of), Lamy assurances 2016, No 1017; B Beigner, Droit des assurances, 2nd edition, No 585; L Grynbaum (under supervision of), Assurances, ed , No Cass 1st Civil Div 29 April 1975, No ; Cass Commercial Div 1 December 2009, No Cass 2nd Civil Div 10 April 1962; Cass 3rd Civil Div 11 July 1990, No Cass 2nd Civil Div 13 June 2013, No Cass 1st Civil Div 23 September 2003, No J Bigot (under supervision of), Traité de droit des assurances, tome 3: le contrat d assurance, 2nd edition, No

4 wilful omission, did not preserve its right to compensation against the third party and thus, did not preserve the right of recovery of the insurer. 25 As an example, the insured who allowed its action for compensation to lapse is no longer entitled to an indemnification from the insurer because, due to this negligence, the insurer lost his right of recovery Where an insured has suffered a loss that is only partially insured: Does the insurer still have a right of recovery and if so to what extent; and Yes, according to article L Section 1 of the FIC, the insurer has a right of recovery for the indemnification they paid to the insured even if this payment did not repair the entire loss suffered by the insured If the proceeds of any recovery action brought on behalf of both the insurer and insured are insufficient to reimburse both the insurer and the insured in full, how are the proceeds distributed? Article 1525 of the FCC provides that subrogation cannot be detrimental to the creditor when he has only been paid in part; in such a case, he may enforce his rights for what remains due to him in preference to the person from whom he received only partial payment. According to this provision, priority will be given to the insured over the insurer for the portion of the loss which has not been covered by the insurer. 27 The insurer will be reimbursed (when appropriate) only if and when the insured is completely indemnified Can insurers and insureds agree that the insurer will have no rights of recovery? If so: In what circumstances might they do this; and The insurer may waive its right of recovery either before or after the loss. 29 However, the waiver of such right for the benefit of the third person liable for the damage does not extend to the liability insurer of the latter. 30 Therefore, even if the subrogated insurer waived its right of recovery for the benefit of the third party liable for the damage, it retains its remedy against the liability insurer of the third party. Naturally, the insurer of the victim may stipulate the extension of the benefit of the waiver to the liability insurer of the third party Where would evidence of such agreement be found (for example, in the insurance policy or in separate contracts)? The evidence of this waiver may be found in the insurance policy. 32 Since the right of recovery belongs to the insurer, we are in the opinion that the latter may also waive it in a separate document, either at the time of the underwriting or later in the course of their contractual relationship, even after the loss. 25 M Asselain, Assurances terrestres Assurances de dommages Règles générales Indemnité d assurance, JurisClasseur Responsabilité civile et assurances, No Cass 3rd Civil Div 21 May 2014, No Cass 1st Civil Div 4 June 2002, No and ; Cass 1st Civil Div 27 February 2007 No ; Cass 3rd Civil Div 11 March 2009, Nos , and L Grynbaum (under supervision of), Assurances, ed , No See n25 above, No Cass 1st Civil Div 26 May 1993, No and ; Cass 1st Civil Div 17 March 1998, No ; Cass 1st Civil Div 12 February 2002, No ; Court of Appeal of Versailles, 9 March 2007, No 06/ See n25 above, No L Grynbaum (under supervision of), Assurances, ed , No 2813; for example: Cass 2nd Civil Div 7 July 2011, No

5 13. Can an insurer s rights of recovery be invalidated or restricted in any other way? If so, please describe how. The right of recovery may not be invalidated or restricted in any other way than those exposed above in questions 5 and Please specify any important issues regarding rights of recovery in your jurisdiction, which are not covered by these questions. As mentioned in question 8.1, after being indemnified by the insurer, the insured has lost its right for compensation against the third party. Therefore, only the insurer is allowed to exercise a remedy against the third party liable for the damage for the portion of the loss it has indemnified. However, courts acknowledge that the parties to the insurance contract may agree that the right of recovery will be exercised by the insured in the name of the insurer. 33 Such agreement may take the form of an agency agreement or of a nominee agreement between the insurer and the insured Cass 1st Civil Div 4 February 2003, Nos and H Groutel, Subrogation de l assureur Action de l assuré contre le responsable, Responsabilité civile et assurances No 5, May 2003, comment No 154; Reconnaissance d une convention de prête-nom entre subrogé et subrogeant, collective book, Recueil Dalloz 2003,