How the actual amount of insured damage is assessed

When a claim for insurance compensation is brought before a court, the court must assess compensation according to the actual value of the damage at the time of the insured event. It uses an expert opinion and, in accepting it, is not required to check whether the award exceeds the minimum amounts calculated under the methodology annexed to Financial Supervision Commission Ordinance No. 24 of 8 March 2006. The Supreme Court of Cassation has consistently taken this approach: Judgment No. 52 of 8 July 2010 in commercial case No. 652/2009, First Commercial Division; Judgment No. 109 of 14 November 2011 in commercial case No. 870/2010, Commercial Division; Judgment No. 79/2009 in commercial case No. 156/2009, Commercial Division; and Judgment No. 165 of 24 September 2013 in commercial case No. 469/2012, Commercial Division.

The actual loss is assessed at market prices because compensation is payable on the basis of the actual value of the damaged property. This is the price at which other property of the same quality could be purchased in its place, namely its market value. Compensation cannot exceed the actual value in the event of total loss or the reinstatement value in the event of partial damage. Article 400(1) of the Insurance Code defines the former as the cost of acquiring property of equivalent quality. Under Article 400(2), the latter is the cost of restoring the property to the same condition, including all associated costs of delivery, construction, installation and the like, without deduction for depreciation.

If evidence shows that the damaged property was repaired at a specialist workshop, compensation is payable for the amount spent on repairs, provided it does not exceed the agreed sum insured and corresponds to the actual reinstatement value within the meaning of Article 400 of the Insurance Code.

The question whether a depreciation factor should be applied in establishing the actual value of insured property as the basis for compensation was addressed under Article 290 of the Code of Civil Procedure in Supreme Court of Cassation Judgment No. 79 of 2 July 2009 in commercial case No. 156/2009, First Division of the Commercial Chamber, and Judgment No. 115 of 9 July 2009 in commercial case No. 627/2008, Second Division of that Chamber. In these judgments, cited as binding case law under Article 280(1), item 1, of the Code on the question admitted to cassation review, the court held that compensation is assessed within the agreed insured value and according to the proven loss caused by the insured event. It cannot exceed the actual value of the damaged property, assessed at market value. No separate depreciation factor should be applied in calculating compensation: depreciation is already reflected in the insured value. Wear does not reduce the amount required to repair the damage, since the repair requires new parts and materials. Where property is partially destroyed, compensation is measured by the average market cost of repairing the damage, without any deduction for wear.

This article does not provide a legal opinion or advice about any particular person or situation. For assistance with a matter involving insurance law, tort law or both, consult a lawyer experienced in the relevant field.