“The Legal Battle Between Insurer and Insured: The Time Limit for Reimbursement of Undue Payments”

A seemingly banal story, which is reported to us by the Insurance Mediator in one of his practical cases. An individual declares water damage to his insurer and provides a signed repair estimate for this in order to quantify the invoice. Once the expertise has been carried out, the insurer pays the compensation due in order to honor his home insurance contract. Except that, seven months later, the professional informs the insured that he has finally forfeited his cover because he intentionally produced a false declaration.

Therefore, the insurer claims the reimbursement of the sums paid, as well as the expert’s fees and the investigation costs. Worse: it goes as far as the restitution of sums paid in previous years in compensation for other water damage. The company believes that the authenticity of the invoices presented in the past, established by the same company, are also called into question.

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Is right. The fraud is recognized by the individual. But the latter believes that the legal period for collecting debts is capped at two years, and that he is therefore entitled to keep the money. Article L.114-1 of the Insurance Code gives him a priori reason: “All actions deriving from an insurance contract are prescribed by two years from the event that gives rise to them.” And this, whether the action comes from the insurer or the insured.

The Court of Cassation ruled

However, the hope is short-lived because article 1302-1 of the Civil Code contradicts this principle. He affirms that “he who receives by mistake or knowingly what is not due to him must restore it to the one from whom he wrongfully received it”. All this within five years of the unjustified payment.

It therefore remains to be seen which legislation takes precedence between the Insurance Code and the Civil Code. The Court of Cassation ruled in a decision rendered on July 4, 2013: “The action for recovery of undue payment, whatever the source of the undue payment, is prescribed according to the applicable common law period.” In other words: the prescription is not biennial, but five-year. The insurer therefore has five years to demand reimbursement.

Useful clarification: to claim the sums paid, the professional must meet certain conditions: “The forfeiture of cover is a legitimate sanction in the event of fraud on the part of the insured, explains Arnaud Chneiweiss, the Insurance Mediator. However, to be validly opposed, it is incumbent on the insurer to demonstrate, on the one hand, the presence of an inaccurate declaration, and on the other hand, that it was committed intentionally by the insured.