Insurance Law

Under-insurance refers to the situation where the insured sum is lower than the insurable value. In that case, the indemnity is paid taking into account the ratio between the insured sum and the insurable value.

Over-insurance, by contrast, is where the insured sum is higher than the insurable value. The excess portion is void, so paying an excessive premium should be avoided.

This distinction directly affects the amount paid, particularly in home and business premises policies. When a policy is renewed, updating the value should not be neglected.

The policyholder is under a duty to disclose, when the contract is being formed, the matters material to the assessment of the risk. This duty is not limited to the questions on the proposal form.

If the duty is breached, the insurer may acquire the right to withdraw from the contract or to demand a premium adjustment. If the breach is discovered after the risk event has occurred, a reduction in the indemnity may arise instead.

Whether the breach was intentional changes the outcome. For this reason, it is advisable to complete the declarations on the application form carefully and to keep a copy.

If the first premium is not paid, the insurer's liability does not, as a rule, commence. For this reason, even where a policy has been issued, proof of payment should be kept.

If instalments are not paid, a warning notice and an additional period are envisaged. At the end of that period, the contract may be suspended or terminated.

A dispute over cover arises for a risk event occurring during the suspension period. For this reason, following the payment schedule is important.

Compulsory motor third-party liability insurance covers, within the policy limits, the damage the vehicle causes to third parties. It does not cover damage to the insured's own vehicle.

Comprehensive motor insurance (kasko), on the other hand, is optional and covers damage to the insured's own vehicle. The scope of cover varies according to the additional cover selected in the policy.

Both policies may apply to the same incident at the same time. In that case, it must be determined which loss is covered by which policy.

Notice must be given to the insurer without delay once the occurrence of the risk event becomes known. The policy and the general conditions further regulate the method of notification.

Delay in notification may result in a reduction of the amount the insurer pays. The reduction is assessed in connection with the effect of the delay on the increase of the loss.

Submitting, together with the notification, documents such as photographs, official reports and invoices showing the extent of the loss speeds up the process. Copies of the documents should be kept.

Under Article 1427 of the Turkish Commercial Code No. 6102, the insurance indemnity falls due once the risk event has occurred, the documents relating to the risk event have been submitted to the insurer, and the insurer's investigations have been completed; in any case, it falls due after forty-five days.

The same article provides that for life insurance this period is fifteen days. Since the period begins to run only once the documents have been submitted in full, sending the complete file matters.

If payment is not made once the period has passed, default interest starts to run. For this reason, the date and content of document delivery should be recorded.

Protecting and photographing the site after the loss is the first step. In cases of fire, flooding or burglary, official reports should be obtained.

A list of the damaged goods and stock, together with purchase documents, should be prepared. Having stock records makes calculating the indemnity easier for commercial enterprises.

The loss adjuster's report may be objected to, and a second assessment may be requested. Whether the objection is upheld depends on it being properly reasoned.

The policy, the special and general conditions, proof of premium payment, the notification of loss, and all correspondence with the insurer form the core of the file.

The loss adjuster's report, repair invoices, medical records and official reports make up the part relating to the amount of the loss. Arranging the documents in chronological order makes review easier.

The refusal letter and its reasons matter for calculating the periods involved. The date this document was served must be clearly stated in the file.

The first step is to request the reasons for the refusal in writing. It is then examined whether the reasons are based on the policy terms and the general conditions.

As a means of objection, an application may be made to the Insurance Arbitration Commission. The Commission issues decisions that bind member institutions, and the process can be shorter than litigation.

A lawsuit may also be filed directly instead of arbitration. In choosing between the two, the amount in dispute, the nature of the evidence and whether the other party is a member of the Commission are considered together.

The insurer may exercise recourse, for the indemnity it has paid, against the person responsible for the loss. This right is exercised to the extent of the payment made and within the scope of the insured's rights.

In situations such as drunk driving, driving without a licence, or breach of obligations set out in the policy, the insurer may also bring a recourse claim against the insured.

In defending against a recourse claim, it may be argued that there is no causal link between the incident and the breach. This defence is supported by technical reports.

Under Article 1420 of the Turkish Commercial Code, all claims arising from an insurance contract become time-barred upon the lapse of two years from the date the claim falls due.

The same article provides that, for claims relating to the insurance indemnity and the insured sum, the limitation period is completed upon the lapse of six years from the date the risk event occurred.

For claims arising from traffic accidents, special periods apply, and where the act also constitutes a criminal offence, the extended criminal limitation period may come into play. For this reason, the period must be calculated specifically for each file.

Limitation period calculator →

If a beneficiary has been designated in the policy, payment is made to the beneficiary. If no beneficiary has been designated, payment is made to the heirs, and the rules of inheritance law then apply.

The designation of a beneficiary may be changed unilaterally. Whether the change has been notified to the insurer matters for ensuring payment is made to the correct person.

In life insurance linked to a loan, the payment is generally applied first to set off the loan debt. Any remaining amount is then paid to those entitled.

Exclusions are listed in the policy and the special conditions. Exceptions relating to conditions that existed before the contract are the heading that most frequently gives rise to disputes.

For an exception to apply, it must be shown that the condition existed before the policy. Medical records are taken as the basis in this assessment.

Whether vested rights are preserved on renewal of the policy is separately examined. In policies carrying a renewal guarantee, the application of exceptions is narrower.

Disputes arising from an insurance contract are, as a rule, heard by the commercial court of first instance. This is because insurance transactions are regarded as commercial in nature.

In insurance transactions carried out in the capacity of a consumer, however, the consumer court may have jurisdiction. The question of jurisdiction is resolved according to the capacity of the insured.

As to venue, the courts of the place where the insurer's head office or branch is located, and of the place where the risk event occurred, may have jurisdiction. For incidents occurring in İzmir, the İzmir courts may have jurisdiction.

Before applying, a written application must first have been made to the insurance company without a result being obtained. If this precondition is not met, the application is rejected.

Upon application, an arbitrator is appointed and the file is examined on the papers. In disputes below a certain amount, the decision is final.

Decisions are enforceable. For this reason, arbitration may be preferred for small and mid-sized loss disputes, in terms of time.