Time-limiting clauses have for decades been one of the most significant and controversial aspects of civil liability insurance. Their importance is not merely a technical matter of contractual structure, but directly affects the actual scope of cover and the very distribution of risk between insurer and insured. In sectors where a claim may arise years after the event causing the damage, these clauses take on essential importance for the actuarial sustainability of the insurance contract.
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Concept and function of “claims made” clauses
“Claims made” clauses are those whereby insurance cover is linked to the moment the claim is made against the insured, regardless of when the harmful event giving rise to such liability occurred.
This model differs from the traditional “occurrence” system, based on the time the damage occurs, and responds to the need to adapt certain types of insurance to risks that manifest themselves late or over an extended period. Its use is particularly common in professional indemnity insurance, medical malpractice insurance, D&O insurance, or cover linked to technological and regulatory risks.
From the perspective of the insurance market, the “claims-made” system allows for a more precise definition of the effective period of risk exposure, facilitating the proper establishment of technical provisions and avoiding scenarios of indefinite uncertainty regarding potential claims. Precisely for this reason, this type of clause has become a fundamental tool for ensuring the technical and financial stability of certain lines of insurance business.
At the same time, their operation can give rise to disputes when the insured party is unaware of or does not fully understand the temporal implications of the cover taken out. Hence, case law has placed particular emphasis on the requirements of transparency and contractual clarity.
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Article 73 of the Insurance Contracts Act and the interpretative controversy
The main legal debate surrounding ‘claims made’ clauses has historically centred on the interpretation of Article 73 of the Insurance Contracts Act, specifically its regulation of the temporal scope of cover in civil liability insurance.
For years, divergent doctrinal and case-law interpretations coexisted. One school of thought held a restrictive view of the provision, taking the view that only those clauses combining both retroactive cover and a subsequent discovery or claim period of at least one year would be valid. In contrast, another school advocated a more flexible interpretation, considering that Article 73 provided for alternative and independent mechanisms for temporal delimitation.
The lack of interpretative uniformity generated significant legal uncertainty in the Spanish insurance market, particularly in sectors where ‘claims-made’ clauses constitute an established international standard. The doubts affected not only the validity of certain policies, but also such crucial issues as the correct definition of the claim, coordination between successive insurers, and the scope of time-limited exclusions.
In practice, this uncertainty led to a significant increase in litigation, particularly in professional liability and D&O insurance, where the temporal dimension of the risk is particularly complex.
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The case law established by the Supreme Court
The Judgment of the Plenary Session of the First Chamber of the Supreme Court No. 252/2018, of 26 April, marked a genuine turning point in this area. Through this ruling, the High Court established case law on the interpretation of Article 73 of the Insurance Act and definitively consolidated the validity of ‘claims-made’ clauses within the Spanish legal system.
The Supreme Court expressly stated that Article 73 regulates two distinct types of time-limiting clauses: retrospective or ‘past’ clauses and prospective or ‘future’ clauses, further specifying that both have independent and non-cumulative requirements.
This interpretation helped to overcome much of the previous legal uncertainty and provided a framework of greater predictability for insurance companies. The ruling clearly recognised the technical and legal legitimacy of this type of clause, bringing the Spanish system into line with international practice in the field of civil liability insurance.
However, the Supreme Court did not completely remove judicial review of these clauses. Subsequent case law has continued to require a high level of contractual transparency and strict compliance with the requirements of Article 3 of the Insurance Act (LCS) when clauses are classified as limiting the insured’s rights.
Indeed, the distinction between risk-delimiting clauses and limiting clauses remains one of the most hotly debated issues. Although some time-based limitations may be considered part of the objective definition of the insured risk itself, in many cases case law continues to regard them as limiting in nature, particularly where the clause significantly restricts the insured’s reasonable expectations of cover.
This obliges insurers to exercise extreme care both in the drafting and in the formal incorporation of this type of condition, ensuring that the policyholder is fully aware of the temporal scope of the cover taken out.
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Impact on professional indemnity and D&O insurance
The consolidation of ‘claims-made’ clauses in case law has had a particularly significant impact on professional indemnity insurance and D&O policies, where this model of cover is practically the market standard.
In the field of professional liability, the time lag between the professional act and any subsequent claim is often a structural feature of the risk. Professions such as law, architecture, auditing or medicine frequently involve delayed claims, making an appropriate temporal delimitation of the cover technically essential.
In this context, ‘claims-made’ clauses help insurers avoid indefinite exposure and facilitate accurate risk pricing. However, they also require particular attention to issues such as retroactive periods, extended reporting periods, continuity clauses and coordination between successive policies.
Many of the most significant legal disputes arise precisely in situations involving a change of insurer, policy cancellation or the cessation of the insured’s professional activity, where gaps in cover not initially foreseen may emerge.
In the case of D&O insurance, the “claims-made” system also reflects the very nature of the insured risk. Claims arising from corporate liability, regulatory breaches or insolvency proceedings are often brought years after the contested business decisions were taken. From this perspective, the time limit is an essential element for the technical viability of the insurance product.
The established case law of the Supreme Court has contributed decisively to strengthening legal certainty in the Spanish D&O market, whilst also promoting its alignment with international standards of corporate insurance.
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Recent trends: towards greater contractual balance
The development of case law in recent years reflects a clear trend towards seeking a reasonable balance between the protection of the insured and the technical needs of the insurance market.
The courts now appear to accept without dispute the structural legitimacy of ‘claims-made’ clauses. The focus of the legal debate has thus shifted from the abstract validity of these clauses to issues relating to their transparency, proportionality and contractual consistency.
In this regard, the assessment of substantive transparency has taken on increasing importance. Case law requires not only formal acceptance of the clause, but also that the insured party be able to reasonably understand the temporal consequences of the cover taken out and the actual functioning of the time-limitation mechanism.
Similarly, the courts have been paying increasing attention to the systematic coherence of the policy as a whole, analysing the general, specific and special conditions in an integrated manner to avoid contradictions or ambiguous interpretations.
Although the Supreme Court has largely consolidated the validity of these clauses, a line of case law persists that aims to prevent situations where the insured is unexpectedly left unprotected, particularly where there are time limits that are particularly restrictive or insufficiently transparent.
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Future prospects
The legal principle established by Supreme Court Ruling 252/2018 has significantly stabilised the legal treatment of ‘claims made’ clauses in Spain. However, various interpretative issues remain unresolved and are likely to continue to give rise to litigation in the coming years.
These include the exact scope of the transparency test, the distinction between limiting and delimiting clauses, the validity of certain particularly onerous time-based exclusions, and the coordination between successive policies in scenarios involving a change of insurer.
Furthermore, the emergence of new risks associated with cybersecurity, artificial intelligence, regulatory compliance or ESG liability is likely to increase the practical relevance of this type of clause, given the temporal complexity inherent in many of these emerging risks.
All of this suggests that the future development of case law will not be directed towards a structural challenge to ‘claims made’ clauses, but rather towards an increasingly sophisticated analysis of their contractual balance and the transparency mechanisms required in each specific case.
Conclusion
Recent case law from the Supreme Court has definitively consolidated the validity of “claims made” clauses in Spanish civil liability insurance, providing a framework of greater legal certainty and predictability for the insurance market. The legal doctrine established by Supreme Court Ruling 252/2018 has made it possible to adequately reconcile the technical and actuarial needs of insurance companies with the requirements of transparency and protection for the insured.
At Belzuz Abogados S.L.P., as specialists in insurance law and civil liability, we consider that this development in case law constitutes a key element for the stability of the insurance sector, particularly in complex lines of business such as professional liability and D&O. The correct formulation of time-limitation clauses will continue to be, in the coming years, one of the central aspects in the design and litigation of civil liability programmes, particularly in an environment marked by the emergence of new risks and by increasing regulatory and jurisprudential sophistication.