Insurance law in Poland

Updated: 27.12.2024

What is an insurance contract?

An insurance contract establishes the legal framework governing the rights and obligations of the insurer and the policyholder. Under this agreement, the insurer commits to providing a specified benefit- often a payment of indemnity – if a particular insured event occurs, while the policyholder undertakes to pay a premium.

The insurer’s performance typically involves paying a predetermined amount, known as the sum insured or indemnity sum, upon the occurrence of the contractually defined event.

Essential elements of an insurance contract in Poland

For an insurance contract to be valid, the parties must agree on and specify the following core elements:

1. Identification of the Insured Event: The contract must clearly describe the event or contingency covered by the policy.
2. Definition of the Insurer’s Benefit: The scope and nature of the insurer’s obligations—such as the amount and conditions of indemnity payments—must be set forth.
3. Premium Payment: The policyholder’s duty to pay the agreed-upon premium must be clearly stated.

An insurance agent plays a crucial role in ensuring that these essential elements are met and in assisting policyholders with compliance.

If these essential terms are not established, the contract is deemed not to have been concluded.

Beyond these core components, an insurance contract may impose supplementary obligations on either party. For example, the policyholder may be required to comply with certain safety measures or follow specified fire prevention rules. If the policyholder fails to meet these conditions, the insurer may refuse to pay the full benefit or reduce the payment accordingly.

What are the General Insurance Conditions (GICs)?

General Insurance Conditions (GICs) are standardized terms published by insurers—often made available on their websites—that detail the specific provisions and scope of a given type of insurance coverage.

Although not individually negotiated or directly included in the insurance contract, GICs are binding on both parties. As such, it is essential to review these conditions carefully before entering into an insurance agreement.

Parties to the insurance contract:

• Insurer: The insurance entity, which can include private companies, that in exchange for a premium, assumes the risk and provides a benefit (such as indemnity payment) when a defined insured event occurs.
• Insured: The individual or legal entity whose legally protected interests (e.g., property, life, health) are covered by the policy.
• Policyholder: The party who enters into the insurance contract and is responsible for paying the premium. The policyholder may also be the insured, but is not required to be.
• Beneficiary: The entity entitled to receive the insurance payout if the insured event occurs. While the beneficiary can be the insured party, it can also be a different individual or entity.

Performance of insurance activities

The conduct of insurance business involves a wide range of activities necessary for offering coverage and fulfilling contractual obligations. These may include:

• Determining the value of the insured subject matter.
• Implementing measures to mitigate or prevent the consequences of potential insured events.
• Entering into and managing active reinsurance contracts.

It is crucial for both the insurer and the policyholder that the policy’s scope of coverage, as well as any exclusions of the insurer’s liability, be clearly defined. This clarity helps prevent misunderstandings and disputes during the performance and enforcement of the insurance contract.

What are the types of insurance contracts?

The law distinguishes two primary categories of insurance:

1. Property Insurance:
   This type of coverage protects any property interest that is legally permissible and capable of monetary valuation.
2. Personal Insurance:
   This category may cover, in particular:

• Life Insurance: Triggered by the insured person’s death or survival to a specified age.
• Personal Accident Insurance: Involving coverage for bodily injury, health impairment, or death resulting from an accident.

Despite these basic divisions, the parties to an insurance contract enjoy substantial freedom to define the scope of coverage and the subject matter of the insurance, making the range and variety of insurance contracts virtually unlimited. In the business context, adherence to safety rules and contractual obligations regarding covered items is also crucial.

Examples of insurance types and events in insurance industry:

• Life Insurance: Death or serious illness of the insured.
• Health Insurance: Diagnosis of a serious illness or the need for surgery.
• Personal Accident Insurance: Injury or loss of earning capacity resulting from an accident.
• Third-Party Liability Insurance: Damage caused to a third party, for example, through inadequate service provision or a road accident.
• Product Liability Insurance: Damage caused by a defective product sold or manufactured by the insured.

Cargo Insurance is a specialized form of coverage developed in the transportation sector to safeguard goods against damage (e.g., fire, flood, accident) and theft. Although not explicitly regulated by statute, it is widely recognized and relied upon in commercial practice.

A key advantage of cargo insurance is that it pays out even in the absence of third-party fault. By contrast, a carrier’s third-party liability insurance only provides compensation if the carrier is found responsible for the damage—for instance, due to negligence.

What is compulsory insurance?

Compulsory insurance refers to insurance that certain parties are legally required to purchase when specific statutory conditions are met. The law defines minimum coverage requirements for these policies. While the parties involved may agree to broaden the coverage beyond the statutory minimum, they cannot provide less than what is mandated by law.

Common examples of compulsory insurance:

• Motor Vehicle Liability Insurance: Vehicle owners must carry this insurance so that any third party harmed or injured due to the use of the insured vehicle can receive compensation without resorting to lengthy litigation.
• Farmer’s Liability Insurance: Often required of agricultural operators to protect those who may be affected by farming activities.
• Professional Liability Insurance: Applicable to certain professions—such as lawyers and attorneys—to ensure that clients and third parties have a source of compensation for damages arising from professional services.
• Agricultural Buildings Insurance: Protects buildings used for farming against fire and other unforeseen events.

By mandating these forms of coverage, compulsory insurance primarily aims to safeguard the interests of individuals who might otherwise struggle to receive prompt compensation for injuries or property damage, particularly in situations where the potential for harm is high, such as on the roads.

Claim adjustment proceedings and insurance regulation

What are claim adjustment proceedings and when do they begin?

Claim adjustment proceedings are initiated by the insurer as soon as the insured event is reported. Their purpose is to verify the occurrence of the loss, determine the insured amount, and calculate and pay the benefit owed under the policy. In other words, these proceedings are meant to finalize (“liquidate”) the loss, ensuring that all relevant details are confirmed and properly settled.

The insured party must promptly report the incident to the insurer. Any intentional delay or grossly negligent failure to report may lead to a reduction in the amount payable, particularly if the delay contributed to an increased loss or hindered the insurer’s ability to assess the event and its consequences.

Key information for reporting the loss:

• Provide all relevant details: The insured must supply complete information and documentation regarding the damage and its value.
• Cooperate with the insurer: Close cooperation with the insurer’s representatives during this phase ensures that the correct amount of compensation is accurately determined.

What are the insurer’s obligations and deadlines for payment?

Insurers are generally required to:

1. Payment within 30 Days: The insurer must pay the benefit within 30 days after the loss is reported, and must issue a decision granting or denying the claim along with an explanation of its reasoning.
2. Extended investigation period: If additional time is needed to verify the circumstances, the benefit should be paid within 14 days after it becomes possible, through the exercise of due diligence, to clarify these circumstances. However, this extended period cannot exceed 90 days from the date the claim was submitted.
3. Reasoning for denial: If the benefit is denied, the insurer is obligated to provide reasons for the refusal, clearly explaining why there is no legal or factual basis for payment.

What to do if the insurer’s decision is unsatisfactory?

If the insured disagrees with the insurer’s decision, they have the right to file a complaint, explaining why the decision should be changed. This complaint can be submitted in writing, orally (by phone or in person at the insurer’s office), or electronically.

The insurer must respond within 30 days, though it may extend this period by up to another 30 days if necessary. If the insurer fails to meet this deadline, the complaint is considered resolved in the client’s favor.

If the complaint is rejected, the insured may:

• Refer the case to the Financial Ombudsman for a review and possible advocacy.
• Pursue legal action in court to challenge the insurer’s decision.

The Financial Ombudsman works to protect clients’ interests in the financial market. When reviewing a case, the Ombudsman may:

• Request that the insurer reconsider the case.
• Refer the case to supervisory or regulatory authorities (e.g., the Financial Supervision Commission, the President of the Office of Competition and Consumer Protection, the public prosecutor’s office, or other state, professional, or social oversight bodies).

It is important to note that the Ombudsman cannot compel the insurer to issue a specific decision, but can facilitate a fair review process and encourage thorough consideration of the client’s concerns.

Who can notify an insurance event?

An insurance event can be reported not only by the insured party, but also by the injured person who has suffered harm as a result of a covered incident. For example, in the case of a traffic accident, the injured party may notify the insurer of the at-fault driver directly.

In such instances, the rights and obligations normally attributed to the insured – such as providing documentation and evidence – also apply to the injured party.

How do I notify a claim caused by a foreigner?

If a road accident is caused by a foreign driver who is not insured with a Polish insurer, there is no need to contact the foreign insurer directly. Under European Union regulations, every insurer based in an EU Member State is required to have a representative (correspondent) in other EU countries.

How to find the correspondent of the insurer?

• Use the Poland Motor Insurers’ Bureau (PBUK) Search Engine:
• If the insurer does not have a representative in Poland, the claim should be reported to PZU S.A. or TUiR Warta S.A., which act as PBUK agents and will carry out the loss liquidation proceedings on behalf of the foreign insurer.

When is the statute of limitations for claims under an insurance contract?

As a general rule, property claims under an insurance contract become time-barred 3 years after the loss is reported to the insurer, with the deadline expiring at the end of the calendar year. For example, a loss notified on June 26, 2020, becomes time-barred on December 31, 2023.

Notifying the insurer of the loss interrupts the limitation period, effectively stopping the clock during the liquidation proceedings. Once these proceedings are completed and a decision is issued, the limitation period resumes. It is important to note that complaint proceedings or referrals to the Financial Ombudsman do not interrupt the limitation period.

Recourse claims by the insurer

If the insurer pays a benefit, it gains the right of recourse against the party responsible for the loss. In other words, the insurer may seek reimbursement from the individual or entity that caused the damage. Recourse proceedings generally follow the same three-year limitation period as the insured’s original claim.

Reason for extension of the limitation period

Certain circumstances can extend the statute of limitations beyond the standard three-year period, as shown in the table below.

An interesting scenario can arise with recourse claims involving multiple insurers, as seen in the context of cargo insurance. Suppose goods are damaged in transit due to the carrier’s fault. After the cargo insurer pays compensation to the owner, it gains the right to seek reimbursement from the carrier, who likely has carrier liability insurance.

In such situations, the cargo insurer can pursue its claim directly against the carrier’s third-party liability insurer, including through legal proceedings if necessary.

Lawsuit against the insurer

Who can sue the insurer?

A lawsuit against a mutual insurance company may be filed by:

• The Insured: If the insurer refuses to pay all or part of a benefit owed under the insurance contract.
• The Injured Party: If they have suffered damage or harm covered by the insurer’s policy (e.g., through the policyholder’s negligent act).

When the insured sues, the dispute centers on whether the insurer must fulfill its contractual obligation to pay the agreed-upon benefit. Legally, this is an ordinary breach-of-contract claim, in which the insured seeks payment under the insurance contract.

When the injured party sues, the situation is more complex. Typically, a victim of wrongdoing would pursue damages directly from the perpetrator of the harm. However, if the perpetrator’s liability is covered by insurance (e.g., professional malpractice insurance), the injured party may choose to sue the perpetrator, the perpetrator’s insurer, or both. In this scenario, the insurer may bear vicarious liability, effectively standing in the shoes of the insured to cover the damage.

Only the insurer that provided coverage at the time the damage occurred can be sued. If the injured party does not know whether the perpetrator had insurance, they should first sue the perpetrator. The perpetrator, seeking to minimize personal liability, will likely identify their insurer. It is also possible to add the insurer as a defendant during the proceedings, a useful option in cross-border cases where information about the insurance policy may be limited.

Both the insurer and the insured have the option to intervene in the proceeding as collateral interveners, thereby protecting their interests. This intervention does not change the burden on the plaintiff, who must still prove the extent of the damage and justify the amount of the claim.

Pursuing a claim against the insurer directly can greatly simplify and expedite recovery, since insurance companies generally have the financial resources to pay awarded compensation. In contrast, pursuing a claim solely against an individual or business could result in limited or no recovery if that party lacks sufficient funds.

What is the situation in cross-border cases?

In cross-border disputes, the issues of applicable law and court jurisdiction must be considered. For parties from the European Union, the law generally applied is that of the country where the insurer has its habitual residence, unless the circumstances indicate that the contract is more closely connected to another country, in which case that country’s law will apply.

The plaintiff can choose to sue the insurer either in the insurer’s home state or in the plaintiff’s own state, granting the injured party flexibility in pursuing their claim. If one of the parties is not from the European Union, the question of the applicable law and jurisdiction may arise from international treaties or international legal acts.

As with domestic cases, only the insurer who provided coverage at the time the damage occurred can be sued. If the injured party is unaware of the perpetrator’s insurance details, it may be strategic to sue the perpetrator first, who will likely disclose their insurer to limit personal liability. The option to add the insurer as a defendant during the proceedings is particularly valuable in cross-border matters, where the victim may lack information about the insurer’s identity.

In addition, the applicable law and the competent court can be agreed upon by the parties within the insurance contract. If the contract designates a particular law or forum, these contract terms will generally take precedence over default rules.

It is also important to remember that the limitation period for claims against the insurer derives from the legal relationship between the claimant and the insured, rather than from the insurance-specific rules outlined previously. This point can be critical in business-to-business transactions, where claims often time-bar more quickly than the general norms might suggest.

For instance, when dealing with cargo insurance, limitation periods may vary substantially depending on whether the claim involves domestic carriage, international road carriage, or a forwarding contract.

The start of the limitation period depends on the type of claim and the nature of the loss. For claims relating to damage (total or partial) to goods or delayed delivery, the limitation period begins on the date the goods are delivered.

When a consignment is lost, the limitation period depends on the mode of transport:

• Domestic carriage of goods: From the date on which the consignment could be deemed lost.
• International road transport: Starting 30 days after the agreed delivery date.
• Forwarding contract: From the date on which the consignment should have been delivered.

FAQ – Insurance law in Poland