MANDATORY HOME INSURANCE
Teaching assistant Andreia DOBRESCU
Romanian-American University
Abstract
This article is divided into four chapters we treated a topical and controversial issue that is mandatory home insurance. The first chapter explains the terminology mandatory home insurance law, regulation and the scope and risks covered. In the second chapter we analyzed the contents of the home insurance contract and the contract form. In chapter three we present the effects of mandatory home insurance contract, namely the rights and obligations of the insured and the insurer. In chapter four we talked about termination of mandatory home insurance.
Keywords: mandatory home insurance, hedged risk, P.A.D, P.A.I.D 1. Providing home: definition, regulation and scope of risks
►Terminology law on mandatory home insurance
The mandatory home insurance law defined some notions as: risks covered, housing and ways its insurance policy and the insurance and the amount insured.
According to Law no. 260/2008, will be covered by compulsory insurance on all buildings for housing purposes such as social housing, housing services, housing intervention requirement screened dwelling, home entertainment and holiday home.
Regulatory and scope. Usually compulsory insurance are regulated by special laws as provided in the current Civil Code art. 2213. Thus securing homes against earthquakes, landslides or flooding is regulated by Law no. 260/2008 amended on 15.02.2011 by the entry into force of the Civil Code. Insurance contract terms are set by Order no. 5/2009 and the rules concerning the examination, evaluation and settlement of claims are covered by the Order no. 7/2009.
In terms of scope, provided that all natural and legal persons are obliged to ensure buildings used for housing in urban or rural areas that are owned by them and registered in the Financial administratively.
On state-owned housing, insurance agreement will be conducted by persons or authorities designated to manage.
There are bound to be secured outbuildings, annexes which are separate property and property secured inside the home.
Legislator regulates two categories of housing after building material: A – type building structure of reinforced concrete, metal, wood or stone exterior walls, burnt bricks or any material resulting from thermal or chemical treatment, type B – construction with exterior walls of unburnt brick or any other material or chemically untreated finish1.
1
Irina Sferdian, Special focus on insurance contract in terms of the Civil Code, Ed. C.H. Beck,
►The risks covered
It is understood from this law that the risks covered are only those related to natural disasters such as earthquakes, landslides and floods. The risks covered by the PAD are damage housing three types of natural disasters, as a direct or indirect mitigation.
Compulsory insurance contract does not cover all the risks surrounding the housing2. According to art. 6 of Law no. 260/2008, the risks can be covered by the insurance policy against disaster are: damage to buildings used for housing any of the forms of disaster as a direct or indirect effect of the natural disaster occurred. By natural disaster, according to Law. 260/2008, means: earthquakes, landslides or flooding as a natural phenomenon.
The old regulation to housing, the risks covered and all risks were3:
- fire, flood, explosion, although no explosion was followed by fire, liability and produced by smoking, smudging or cracking walls, windows or various other damage caused by heat or as a result of the fire;
- earthquake, flood storm, hail, strikes, disturbances malevolent groups, vandalism, terrorism, collapse, landslide, heavy rain, hurricane, heavy snow, ice, avalanches, consequences of breaking pipes, hitting vehicles (other than the insured);
- breakage or damage during the theft or attempted burglary of walls, roof, doors, windows and floor coverings;
- destruction or damage caused by the rescue of the insured event.
According to art. 2 of Law no. 260/2008, that the landslides and floods are compensated only when the result of natural phenomenon and not the default of mechanical action or otherwise.
In case of any damage caused by other risks of a home, the owner may enter an optional insurance of housing and property. The insurance policy against disaster can coexist with non-binding insurance housing; they cover different risks and harms.
When producing some of the risks insured, the claim for compensation may be made only by beneficiaries PAD.
Beneficiaries have the capacity PAD following categories:
a) state-owned housing or administrative units, individuals or authorities designated to administer;
b) legal successors or testamentary said persons if they have died; c) buildings used as dwelling owners;
d) those expressly designated PAD as beneficiaries by the owners.
If beneficiaries are minors, claims can be made on their behalf by their legal representatives.
Risks that ensure required by PAD, the amounts paid as compensation shall be constituted as follows:
- Calculation of compensation for the amount secured by PAD will be based on first risk insurance;
- Compulsory insured value or, as part of the corresponding value of the damage, are collected by the insurer from PAID.
2
V. Ciurel, Insurance and reinsurance, theoretical and practical approaches, All Beck Publishing House, Bucharest, 2000.
3 Ibidem.
2. Contents home insurance contract
According to art. 7 paragraph. (1) of Law no. 260/2008, compulsory property insurance contract shall be concluded in written form. Under the new changes and added par. 4, which provides that "Pad will be printed and the Paid or issued electronically by authorized insurers".
Written form of contract is not required probationem ad ad validitatem.
People from ending contract mandatory home insurance and home owners insurance are associated PAID (Natural Disaster Insurance Pool) that are authorized to enter into such contracts.
Insurance contract insurance policy is tested or certificate issued and signed by the insurer or notice issued and signed by the insurance broker.
Insurance Supervisory Commission has developed rules regarding the form and contents insurance policy against disaster (PAD). Rules from the beginning „could not be applied because the mandatory home insurance policy is made between the Pool of Insurance Against Disasters (PAID) and landlord, management company of such insurance is not established"4.
Under the rules are taken much of the proposals made by insurance companies and regulate many aspects such as form and content insurance policy (PAD), the sum insured, the insurance premium payment, the validity of PAD, the risks included in insurance risks excluded a building owner obligations for housing.
The rules do not limit the right of any interested person to contract an optional insurance of housing, but stated that it would be terminated only for amounts in excess of the insured compulsorily insured for risks not covered by compulsory insurance contract housing. Where besides "compulsory insurance and insurance are optional for the same accommodation, compensation will be paid first from compulsory up to the sum insured required".
According to art. 7 paragraphs. (3) of Law no. 260/2008, the insurance policy against natural disasters should include at least the following:
a) name of the beneficiary of the insurance;
b) name, address and the name and address of the Contracting Parties; c) type of dwelling and address;
d) sum insured required;
e) period of validity of the insurance contract; f) the first compulsory and payment thereof;
g) the number and title of the legislation under which it was made and the policy number and the date of its publication in the Official Gazette of Romania, Part I.
According to contractual mandatory home insurance ends on a calendar starting at 0.00 pm of the day following that on which the premium was paid.
A person who owns a house optional insurance risks must set as its expiry, enter into a compulsory insurance, but not later than 31 December of the first year of application of the law5.
4
Drăghici M., Insurer, guarantor of payment, Publisher C.H. Beck, Bucharest, 2009, p. 116.
5
If a person buys a home, it will be required to determine if the former owner had a valid PAD. Where it is not over compulsory insurance, the new owner will have to complete this insurance within 5 working days of the closing date of the act of sale.
3. Effects of compulsory property insurance
The main effects of compulsory property insurance contract are the rights and obligations of the Parties set out in art. 14 to 16 of Law no. 260/2008.
The rights and obligations of the insured
Thus the insured has the following obligations such as:
- To pay the mandatory premium – payment will be made at least 24 hours in advance before expiry of the policy.
- Notify the shortest time at the latest within 60 days from the date of the insured risk, the circumstances in which the insured event and over findings concerning the event, to act in accordance with instructions received from the insurer. In the event of the insured risk in the PAD, the beneficiaries will submit a written claim to the insurer. If the owners benefit from subsidizing insurance premiums, claim addressed through local authorities directly to PAID6;
- Take on the insurer and under the circumstances, measures to limit the damage; - To maintain the dwelling in good condition ensured in order to prevent risks insured.
Also, the insured has some rights such as:
- To collect compensation resulting PAID where compulsory insured risk;
- To collect damages in cases where there is an imminent danger of flood, landslide causing housing demolition.
When the insured does not fulfill its duties under the contract or has made false statements or omissions, or does not provide sufficient evidence to justify its right to compensation, the insurer may deny payment.
Policyholders and beneficiaries to ensure that, after the entry into force of Law no. 260/2008, shall proceed to the construction, enlargement or alteration of dwellings without building permit issued under the law or that authorization failure affecting the resistance of the housing and promoting exposure to one of the risks insured shall not be compensated under compulsory insurance where the insured risk7.
If insured, natural or legal persons for failure to ensure the housing are sanctioned with a fine of between 100 and 500 lei. Thus, those who do not receive housing ensure its place, in case one of natural disasters defined by law, by any compensation from the state or local budget for damages to housing.
►Rights and obligations of the insurer
Authorized insurers obligation to ensure the housing end to their main or secondary, or insurance agencies at the headquarters or secondary insurance brokers, corporate
6
Law no. 260/2008, art. 12 alin. (3).
7
premises insured or insured legal domicile or residence or domicile or residence of the insured person or the domicile or residence of the insured person or the domicile or residence insurance agents or brokerage assistants, individuals"8.
Also, insurers authorized to conduct housing provision, shall be liable for all policies of insurance against natural disasters, distributed insurance intermediaries, including countries or omissions errors wording of policies.
To establish and assess the damage, insurers should have trained personnel (own or representative) to act on their behalf and insurers have contracts of employment or office. Insurers must respond on behalf PAID for the beneficiaries of the insurance policy against natural disasters, even if finding work and housing damage assessment is made through authorized persons.
Insurers must submit to the database managed by PAID, computer system, all information concerning the conclusion of mandatory household insurance and the date of cessation of validity or cancellation of insurance documents and information concerning damage recorded in the PAD.
Insurer, that’s PAID II following obligations: a) to pay;
b) to ascertain and assess the damage;
c) to determine the amount of compensation and complete claim files in the terms and conditions established by the Insurance Supervisory Commission and meet other obligations and comply with the conditions of this law;
d) to decrease after each compensation payment of the sum insured as of the date of the insured risk, for the remaining period of insurance, the amount due as compensation;
Issue a new PAD’s identification data of the buyer which is valid until the expiry date of issued of former insurance owner, where it announced the change of ownership of housing is secured binding.
Finding and assessing damage and determining the amount of compensation shall be made by the insurer that issued the PAD. If you are receiving grant owners insurance premium, payment will be made to the account PAID, local budgets. Payment of compensation will be made by the company that made finding and evaluation9.
If the damages are not paid on time, penalties will be calculated, which will pay the insured person.
Amounts can be recorded as compensation, the bank accounts of beneficiaries of insurance10.
In situations where compensation is payable if there is an imminent danger of flood or landslide which requires objective need to demolish buildings used for housing and whether following the insured risk has become impossible to use that construction is done county Committee for emergencies.
8
Ibidem, p. 116.
9
T. Negru, Commercial insurance practice, Wolters Kluwer Publishing House, Bucharest, 2010, p. 69.
10 Ibidem.
After each compensation payment, the sum insured is reduced with effect from the date of the insured risk, for the remaining period of insurance, the amount due as compensation for the insured amount remaining to ensure continuing11.
Also authorized insurers will only pay the insured amount of the costs of repair/replacement of the damage caused by the insured risk producing, within the total amount secured by PAD12.
Instead, PAID will pay compensation to the insured on the list received from the insurer that issued the PAD, within 5 working days of receipt.
For people receiving social assistance, mandatory premium paid from local budgets, on account of amounts deducted from the income of the state budget13.
Policies will be submitted by SC 'Pool of Natural Disaster Insurance. That administrative units is required to make their distribution.
Mayors by specialist departments are required to provide PAID electronically, list of buildings used for housing, including social housing to and placed in administrative-territorial unit concerned, specifying the name or the name of the owner and as appropriate, fiscal residence address, identification number or tax identification code of its register number of unique nominal role and farm register.
Updating is done within 72 hours of the change data landlord or his identity14. An exception to the requirement to submit electronic lists of buildings for housing, par. (1) and (2) administrative units that do not have the necessary equipment for transmitting data electronically.
Failure to comply with this rule shall be sanctioned by the Insurance Supervisory Commission under the conditions and according to Art. 39 of Law no. 32/2000 on insurance undertakings and insurance supervision, as amended and supplemented.
Also, the insurer shall set out certain duties such as:
- Retain a commission of the premium Paid at the rate specified in the order of the President of ASF.
4. Cessation of compulsory home insurance
The only cause for finish of the contract of mandatory insurance is the change of use of dwelling construction insured or other causes included in the compulsory insurance.
If the building is no longer used as home, it does not oblige the insurer that issued the reimbursement PAD, equivalent amount of premium required15.
However, compulsory insurance termination compliant insurance matters, subject to its rules and general rules laid down in the matter of civil obligations.
11
T. Negru, Commercial insurance practice, Wolters Kluwer Publishing House, Bucharest, 2010, p. 69.
12
M. Drăghici, Insurer, guarantor of payment, Publisher CH Beck, Bucharest, 2009, p. 120.
13
Law no. 260/2008, publish in M. Of. nr. 635/15.10.2013.
14
Art.17 of Law no. 260/2008 publish în M. Of. nr. 635/15.10.2013.
15
REFERENCES
1. Sferidan I., Property insurance contract, Lumina Lex Publishing House, Bucharest, 2004;
2. De Meuse Pierre Droit pratique de l’assurance, Panorama du Droit, Studyrama, 2010;
3. Ciurel V., Insurance and reinsurance, theoretical and practical approaches, All Beck Publishing House, Bucharest, 2000;
4. Lambert-Faivre Y., Droit des Assurances, 12e ed., Dalloz, Paris, 2005;
5. T. Negru, Commercial insurance practice, Wolters Kluwer Publishing House, Bucharest, 2010;
6. Draghici M., Insurer, guarantor of payment, Publisher CH Beck, Bucharest, 2009; 7. Nemes V., Insurance Law, Hamangiu Publishing, Bucharest, 2009;
8. Sferdian I, Special focus on insurance contract in terms of the Civil Code, Ed. C.H. Beck, Bucharest, 2013.
