Recent case law in suretyship insurance cases

On 2022 February 9 the Supreme Court of Lithuania took a ruling in civil case No e3K-3-10-611/2022 setting out the latest rules for interpretation and application of law in cases arising from suretyship insurance relationships.

In this case the Supreme Court of Lithuania analysed the question whether an insurer has the right to refuse to pay an insurance indemnity if a beneficiary submits a claim for payment of the insurance indemnity after the expiration of the term specified in the suretyship insurance bond, where such bond provides that the suretyship insurance bond expires if the insurer has not received a written claim from the beneficiary to pay the insurance indemnity by the last day of validity of the bond.

The Supreme Court of Lithuania, after the examination the case in cassation procedure, issued the following rules of interpretation and application of law:

“The Civil Code and the Law on Insurance do not, in principle, prohibit the parties to the suretyship insurance agreement to agree that upon a certain reasonable term agreed by the parties, the insurer’s obligation to pay the insurance indemnity will expire without assessing the reasons for missing such term. However, in such case, the clause, that the claim against the insurer to be made within the certain period of time, should be clearly expressed by agreement of the parties as a necessary condition for recognising the event as an insured event, i. e. that after the expiration of this term, there will be no grounds to establish the existence of the insured event. It should be noted, however, that this term should be reasonable and cannot coincide with the last day of the insurance period, as it would deny the essence of the suretyship insurance agreement and the beneficiary’s right to the insurance indemnity for the insured event that occurred during the insurance period. Otherwise, if the insured event occurs on the last day of the insurance period, the policyholder (beneficiary) would be deprived of the opportunity to file the claim with the insurer within the reasonable time”.