Excluding causes for payment in insurance contracts

In insurance contracts, insurers are not only obligated to indemnify covered claims but also possess legal and contractual mechanisms to exempt themselves from liability under specific circumstances. These excluding causes —established under Panamanian law and policy clauses— are critical to defining coverage limits and balancing the rights of the insured with the obligations of the insurer. Below is a detailed analysis of the most relevant exclusions:

1. Legal Exclusions: Statutory Grounds for Exemption
Panama’s Commercial Code and Insurance Law outline scenarios where insurers are relieved of payment obligations, regardless of policy terms. Key examples include:

• Intentional Provocation of the Loss (Wilful Misconduct):
  Article 1003 of the Commercial Code stipulates that insurers are not liable for damages caused by fraudulent acts of the insured, beneficiaries, or individuals under their responsibility. For instance, in life insurance, suicide within the first two years of policy validity voids coverage (Art. 1060).

• Gross Negligence of the Insured:
  Recklessness or extreme negligence by the insured —such as operating industrial machinery without safety protocols— exempts the insurer from liability (Art. 1001). This principle prevents the insured from disregarding insured risks.

• Catastrophic Risks or Force Majeure:
  Events like wars, terrorism, rebellions, or exceptional natural disasters (hurricanes, earthquakes) are automatically excluded in property insurance unless additional coverage is agreed upon. Article 1060 of the Commercial Code explicitly references this exclusion in accident insurance.

• Inherent Vice of the Insured Property:
  Damage arising from inherent defects in the insured asset —such as structural corrosion due to lack of maintenance— is not compensable (Art. 1001). Insurers only cover external and unforeseen risks.

2. Contractual Exclusions: Policy-Specific Limitations
Beyond legal exclusions, insurers incorporate specific clauses into policies to limit liability. These must comply with Article 143 of the Insurance Law, which mandates that exclusions be highlighted to ensure transparency. Common examples include:

• High-Risk Activities:
  Exclusions for extreme sports (skydiving, rock climbing) or professional use of vehicles insured under personal policies.

• Failure to Disclose Material Information:
  If the insured conceals relevant details —such as medical history in health insurance— the insurer may void the contract (Art. 144 of the Insurance Law).

• Temporal Exclusions:
  Waiting periods in health insurance or exclusions for pre-existing conditions during the initial months of coverage.

3. Practical Implications and Recommendations
Exclusions, both legal and contractual, have critical impacts on claims management. Therefore, it is essential for policyholders to:

• Thoroughly review exclusion clauses before signing policies, paying attention to bolded or highlighted terms.

• Document the condition of insured assets through technical reports or photographs to avoid disputes over hidden defects.

• Seek legal counsel to negotiate endorsements that extend coverage for specific risks (e.g., geopolitical risks for multinational corporations).