Lithium and Insurance

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Publié le 20/03/2024 par Jérôme Goy

INSURANCE LAW

The proliferation of lithium batteries has led to an increase in fire incidents caused by this metal and its storage.

It has been (1) observed that insurers, like regulations, have not yet fully integrated this new risk into prevention plans and other storage regulations.

Faced with some of these sometimes substantial losses, insurers may be tempted to use one of the contractual tools at their disposal: the forfeiture clause. For reference, this is defined as “a private penalty that the parties may freely foresee in case of breach of one of them’s obligations, provided it is not prohibited by law.” (2)

A forfeiture clause can be inserted into the insurance policy. Its objective is to penalize the behavior of the insured, including:

• Loss of the right to compensation by the insurer;
• Reimbursement of the compensation paid to victims.

If the insurer has included a contractual obligation to declare the storage of products such as lithium, the insured’s failure to declare may sometimes be sanctioned by contractual forfeiture.

The validity of the forfeiture clause is subject to a number of obligations. We will only recall one here: a formal obligation, identical to that required for exclusion clauses, namely:

Article L112-4 of the Insurance Code: “Clauses in policies setting out nullities, forfeitures or exclusions are valid only if they are mentioned in very apparent characters.”

Case law is consistent on this point: the exclusion or forfeiture clause is not in very apparent characters if it does not stand out from the rest of the insurance policy (3).

For an example of the requirement of apparent character + uppercase + bold + typography, see (4) [example]; the purpose of this mandatory form being, for reference, to “draw the attention” (5) of the insured.

This requirement of form is all the more important as the forfeiture clause does not have the same editorial sharpness (“are excluded“!) as an exclusion clause. Forfeiture, appearing more benign, can sometimes have equally severe consequences for the insured as the exclusion clause.

The substantive conditions of forfeiture will be examined in a following article.