Group Insurance in Comparative Perspective: Ensuring Fairness, Efficiency, and Beyond

The intensive development of group insurance should prompt an in-depth reflection on the legal nature of these solutions, in which the insurance coverage scheme goes beyond the classic formula of individual insurance. ¹ In spite of this, this increasingly popular and at the same time evolving form of insurance, permanently embedded in the market practice, has not lived to see its regulation in the provisions on the insurance contract in the Civil Code. There is a lack of legal regulations of substantive law of member states which, taking into account the distinctiveness of group insurance, would give it a legal framework adapted to the needs of the market and could counteract those risks that arise from the specific subjective arrangement of group insurance. There is a lack of definition at the EU level of the group insurance contract. There is only a mention in recital 49 of the Directive IDD 2016/97: “In the case of group insurance, ‘customer’ should mean the representative of a group of members who concludes an insurance contract on behalf of the group of members where the individual member cannot take an individual decision to join, such as a mandatory occupational pension arrangement. The representative of the group should, promptly after enrollment of the member in the group insurance, provide, where relevant, the insurance product information document and the distributor’s conduct of business information”. As a result, the level of protection of the interests of the group insured has not kept pace with the dynamic changes in the legal constructions on the basis of which insurance cover is offered. The legal comparative method is important in this chapter. French law was chosen as the principal subject of comparative research. It constitutes particularly fertile research material from the point of view of the purpose of this study, as group insurance in France has the broadest and most comprehensive normative regulation. Thus, French jurisprudence and science should be the starting point and basis for consideration of the normative shape of the group insurance contract. The aim of the research is to develop a “benchmark” legal regulation of the group insurance contract in order to ensure its effectiveness and to protect the weaker party in the contract.

The entirety of norms on the relations connected with conclusion and performance of insurance contracts make up economic insurance law. Because of its objective homogeneity, it is generally treated as a separate branch of law. ⁴⁷ From the dogmatic perspective, its permanent element are group insurance contracts. However, the results of a comparative law research allow to draw the conclusion that in a substantial number of legal systems the term “group insurance” is not to be found in normative acts. ⁴⁸ Even in the systems recognizing the need to specifically regulate the group insurance contract, the prevalent tendency is to regulate this subject matter rudimentarily.

One of the few exceptions to that rule is France, where group insurance attracted special attention of the legislator. French insurance law is composed of a number of legislative acts, ⁴⁹ which include multiple solutions distinctive against the background of other European legislations. Among solutions specific almost exclusively to French law, one can point also to the extensive regime of group insurance contracts. ⁵⁰ Complications following from the application of those provisions are subject to detailed doctrinal discussion.

The contemporary catalog of sources of insurance law constitutes a very extensive system of interrelated normative acts. One may speak of coherent statutory solutions only in case of one of the types of collective insurance agreements, namely the group insurance contract. Other collective insurance contracts do not form any homogenous category and are characterized by the absence of coherent systemic solutions.

The basic legislative act covering problems of insurance law is the Insurance Code (CA) ⁵¹. Its field of application ratione personae precludes recourse to the solutions envisaged in the Code in regard to contracts in which the party affording insurance protection is an entity other than joint-stock company pursuing insurance activities. ⁵² The provisions of the Code do not apply to contracts concluded by mutual insurance societies or social security institutions. The Insurance Code does not govern insurance law relationships concluded with the involvement of such entities. ⁵³ This gap, however, is filled by other codes: the Mutual Insurance Code (Code de la mutualité) ⁵⁴ and the Social Security Code (Code de la sécuritésociale). ⁵⁵

Beside the Insurance Code, the foundation of the modern legislation on collective group agreements, as a wider category covering among others group insurance contracts, is laid by two Acts of 31 December 1989, namely the Act No. 89-1009 reinforcing the safeguards of persons insured against certain types of risk, ⁵⁶ referred to as loiEvin, ⁵⁷ and the Act No. 89-1014, adjusting the Insurance Code to the opening of the European market, ⁵⁸ referred to as loiBérégovoy.

Originally, the provisions of Title IV of Book I CA were classified as default norms. Under the Regulation of 30 January 2009, ⁵⁹ the ruleof Art. L. 111-2 CA was amended so that the provisions of Book I Title IV of the Code, governing group insurance contracts, were given the status of mandatory provisions (ius cogens) ⁶⁰ Under the version currently in force of Art. L. 111-2 CA, the provisions of Book I Titles I, II, III i IV of the Code may not be modified by the intention of the parties. However, the legislator stipulates that the said principle does not relate to provisions which expressly provide for such eventuality and which were exhaustively listed in Art. L. 111-2 CA. It is significant that the norm under Art. L. 111-2 CA does not list as default norms any of the provisions of Title IV of Book I of the Code. ⁶¹ The mandatory character of the rules devoted to group insurance contracts should be of no surprise. Bearing in mind the limited possibility of members of the group of insured parties to influence the contents of the insurance contract, granting extensive contractual freedom to the parties of such contracts could infringe the interests of the collectivity covered by insurance protection.

It must be noted that the legislator introduces as well specific solutions for group insurance contracts outside Book I Title IV of the Code. Under art. L. 132-7 CA, life insurance is invalid if the insured party committed suicide in the first year of the term of such agreement. This norm, however, does not apply to group insurance contracts ⁶² mentioned in Art. L. 141-1 CA signed by the parties listed in Art. L. 141-6 CA. Pursuant to Art. L. 132-23 CA, in group insurance contracts in which the risk relates to the end of the working life, including supplemental insurance for public officers, it is inadmissible to stipulate the right to surrender a policy.

French law is characterized by a tendency to enact special provisions for generic categories of group insurance. The Act No. 2003-775 of 21 August 2003 introducing a pension reform, ⁶³ referred to as loiFillon, established the normative framework for the operation of group insurance contracts serving as pension insurance. Another area which attracted the legislator’s special attention was the sector of elective insurance of employees and persons performing work on a basis other than employment contract. ⁶⁴

On the contrary, a feature characteristic of German law is the existence of only rudimentary rules on group insurance. This may surprise, bearing in mind that the currently applicable Act on the insurance contract entered into force only on 1 January 2009. ⁶⁵ The German legislator decided to introduce a new legislative act in view of the fact that adaptation to today’s challenges of the Insurance Law Act which had been in force for nearly 100 years would not be possible by implementing minor legislative corrections. ⁶⁶ The attitude of the legislator in itself to the conception of reforming insurance law augured far-reaching review of the regime of insurance relationships.

However, in the said Act, there is no comprehensive set of norms governing group insurance contracts. What is more, the German legislator did not decide to formulate a definition of group insurance although that term is used in the Act. The distinctive feature of the German legislative framework of group insurance is the legislator’s care for the insured parties being guaranteed the right to continue. Only in this context does the new Act mention group insurance contracts (§ 206 and § 207 VVG).

The few legal systems in which the legislator decided to introduce a definition of the group insurance contract include as well Scandinavian countries. In Swedish law, ⁶⁷ it is defined as insurance contract under which protection is afforded to a group of persons. ⁶⁸ The provision of § 2 item 6 of the Finnish Act ⁶⁹ defines the group insurance contract as an insurance contract in which protection is or may be afforded to members of a group specified in the insurance contract. In Norwegian law, ⁷⁰ in turn, the group insurance contract is defined as insurance in which the rights and obligations of the group members are defined by an agreement concluded by the policyholder in the name or on behalf of the group members (§ 1–2 letter d of the Norwegian Act on the insurance contract).

A controversial method of regulating group insurance contracts was used by the Turkish legislator in the new Commercial Code, ⁷¹ applicable as of 1 July 2012. It must be noted that the Turkish regime is strongly inspired by the works on the uniform insurance contract law, ⁷² carried out with the use of comparative law research. Among the provisions on the insurance contract (Arts. 1401–1520 TTK), there is only one article on group insurance (Art. 1496 TTK). Within the framework of that provision, the legislator attempted, at least partially, to regulate such issues which stir doubts of insurance law experts, starting from the definition of group insurance, and ending with the question of individual continuation of insurance protection. It should be remarked that the legislator recognizes the need to regulate insurance contracts more extensively. Under the delegation of legislative powers provided for in Art. 1496(5)TTK, questions expressly listed by the legislator (including but not limited to the surrender of policy or notification requirements in group insurance) and – which may surprise – “other questions material to the group insurance contract” will be regulated in secondary legislation. It does not seem that such legislative technique deserves to be followed.

Poland, on the contrary, is an example of a legal system in which the legislator does not pay attention to group insurance. Group insurance contracts are concluded under the principle of freedom of contract (Art. 353 ¹CC) and according to the mandatory provisions contained in Book III Title XXVII of the Civil Code. ⁷³

In Portuguese law, besides specific legislation concerning life insurance, general rules regarding group insurance laid down in the legal framework of the insurance contract (Articles 76–90 ⁷⁴) apply to group life insurance. As such, group life insurance can either be contributive or non-contributive. Group life insurance cover risk related to a group of people who are linked to the policyholder for a certain reason not related with insurance – the group may be composed, for example, of the employees of a certain company, the lawyers of a bar association, or the teachers of a certain school.

Contributive group life insurance contracts should regulate surrender in accordance with the contribution of the insured person (Article 194 ⁷⁵). In group life insurance the nomination of the beneficiary is made by the insured person – in all other aspects the rules on the nomination of the beneficiary apply also to group life insurance contracts (Article 81 ⁷⁶).

In Spanish law, according to the number of insured, personal insurance can be either individual insurance or group insurance as prescribed by Article 81 of the LCS. ⁷⁷ This provision states that contracts may be subscribed with the reference to risk related to one person or to a group of them.

Indeed, Article 81 of the LCS expressly allows the contract to be subscribed for the benefit of a group of persons and imposes the only requirement that the group be identified by a common characteristic different from the insurance’s purpose. ⁷⁸

In light of the subjective configuration, which is characteristic only of collective insurance contracts, special attention should be paid to the understanding of the term “group” in insurance law.

At this point, it is worth referring to thorough investigations on the essence of the concept of “group” in foreign literature.

In French law, the term “group” is generally not to be found in the provisions of the Insurance Code. It is not used in the definition of the group insurance contract under Art. L. 141-1 CA. However, the meaning of that term may be reconstructed on the basis of the normative content of that provision. Under Art. L. 141-1 CA, insurance contract is concluded by the policyholder for the purpose of such contract being acceded by a collectivity of people who meet the criteria specified in the contract. Moreover, each of the persons acceding to the insurance must have connections of the same type with the policyholder (Art. L. 141-1(2) CA). The requirements under items (1)and (2)of Art. L. 141-1 CA allow to determine the range of persons who, at least potentially, may accede to a group insurance. As a result, they delimitate the concept of “group” when read jointly. ⁷⁹

Specification of further requirements which must be met by persons interested in accession to the insurance (Art. L.141-1(1) CA) allows to realize the principle of freedom of contract as a part of the relationship between the policyholder and the insurer. Such requirements may be expressed positively in the agreement. Then, their fulfilment by a given person will condition the possibility to accede to the group insurance and gain the status of an insured party. On the other hand, there are no contradictions to defining such requirements negatively. Then, they specify a feature which disqualifies a given person from the possibility of applying for the insurance protection.

Within the range discussed above, the French model corresponds to the solutions developed in German doctrine. Group insurance contracts are divided by the provisions of law into partial groups (Teilgruppe) and extended groups (erweiterte Gruppe). If there is a group covered bya group insurance contract within the meaning described above, it is possible to identify its parts under the contract. This involves specification of a limited group of persons according to their general characteristics. It is possible to limit the range of entitled persons within a group by such criteria as age, period of employment with the employer, place of residence or the position held in the hierarchy of a given workplace. A group insurance contract may contain a clause excluding the possibility of the protection covering, for instance, certain employee groups which, because of the character of their work, could expose the insurer to an excessive risk of paying high benefits. Consequently, like in French law, it is possible to limit the range of persons capable of applying for insurance protection by reference to negative criteria. It should be mentioned that in case of extended groups within the framework of group insurance, apart from the insured party, there appear other persons directly enjoying the insurance protection. ⁸⁰ These are so called co-insured parties, usually close relatives of the insured party himself, covered by the protection either under the standard agreement or under additional contracts, usually providing for a higher premium. ⁸¹

In the provisions of the French Insurance Code, the meaning of the second prerequisite (Art. L. 141-1(2) CA), referring to the extra-insurance relation between the policyholder and the insured parties, has not been specified. ⁸² Analysis of the wording of the provisions of the Insurance Code does not permit any clear answer to the question if there must be a legal relationship or if a factual connection is sufficient between the person acceding to the insurance and the policyholder. ⁸³ Besides, there are no hints allowing to determine whether the existence of such relation must predate accession to the insurance.

By textual interpretation of the provision of Art. L. 141-1(2) CA, one may formulate the conclusion that such relation must subsist at the time of accession to the contract. On the other hand, the second sentence of Art. L. 141-1 CA does not require that the connection between the interested parties exist prior to accession to the insurance agreement. ⁸⁴ In consequence, a question arises if mere notification of the intention to be covered by insurance protection is sufficient for the conclusion of a group insurance contract. At this stage, one may already speak about formation of a specific relation between a group member and the policyholder.

It is essential to correctly read the intention of the French legislator since the conclusion that there must be a legal relationship between the policyholder and the insured parties would significantly restrict the scope of application of the provisions of Book I Title IV CA. For example, necessity of a legal relationship between the policyholder and the insured parties would preclude the possibility of concluding a group insurance contract for the benefit of former employees. At the time of concluding the contract, there would, in fact, be no legal relationship representing the relationship required by the second sentence of Art. L. 141-1 CA. This example is adduced by one of the authors, ⁸⁵ who draws attention to the admissibility of concluding such type of insurance contract in the context of Art. 4 loiEvinand Art. 14 of the national inter-trade agreement of 11 January 2008 r. ⁸⁶ This kind of doubt is also voiced by representatives of German legal science, for whom the reason to conduct research in this regard are group life insurance contracts for retired employees. ⁸⁷

A question that may raise doubts is whether membership in a given structure is in itself sufficient to conclude that the prerequisite under Art. L. 141-1(2) CA has been met. When answering the above question, one should note that the contract under Art. L. 141-1 CA may be concluded by a person running an enterprise. The discussed provision of Art. L. 141-1(2) CA does not require any connection between an insured party covered by group insurance and such enterprise. The French legislator attaches significance only to the relation between the specific persons participating in the relationship formed under a group insurance contract (policyholder and insured parties). There should be no doubt that under the French legislative framework it is insignificant if such connection exists between particular insured parties. ⁸⁸

Certain authors, however, are of the opinion that the insured parties may be in a certain relation either with the policyholder himself or with the initiative organized by the policyholder, as long as insurance protection is afforded in connection with such initiative. ⁸⁹ Proponents of such interpretation of the provision of Art. L. 141-1 CA use the example of participants in a sports event who need not be connected by any legal relationship with the event’s organizer for their effective coverage by the insurance protection afforded under a group insurance contract. ⁹⁰ It is sufficient if they are focused “around” the policyholder or a certain undertaking.

In German literature, ⁹¹ a typology of groups is accentuated which, from the point of view of the requirement of group durability, understood as connection between the parties insured under a group insurance and the policyholders, looks similar to the French model.

The first category distinguished by German science are durable groups (Dauergruppe), which imply multiplicity of persons simultaneously connected by a legal relationship intended for a longer period of time. As a consequence, members of such group are subjected to a specific legal relationship. The persons especially predestined for the role of policyholder– group organizer – are employers in relation to employee groups or organizations (associations, political parties, trade unions, etc.) in relation to the groups of their members. ⁹²

An opposite of a durable group is a short-term group (kurzfristige Gruppe). By this category, one should understand a multiplicity of persons connected by common active or passive, depending on the organizer, participation in an undertaking delimited in time and space. Participants of such undertaking are grouped, within its framework, in a specific factual situation. An example of such group may be participants and viewers of a football match. Purchase of a ticket implies admission by the organizer to participation in the mass event which can be clearly defined in terms of time and space. The concept of short-term group will not apply to mass events open for an unlimited number of people (e.g. procession). For the emergence of a short-term group for the purpose of group insurance, it is only required that a larger number of people connected by a legal relationship with the group organized take part in a mass event which can be delimited in time and space. ⁹³

An interesting solution has been provided for in the Finnish Act of 1994. ⁹⁴ The Act defines group insurance as insurance under which insurance protection covers or may cover a group specified in the contract (§ 2 item 6). The insurance protection subsists independently of the extra-insurance relations between the policyholder and the insured parties. This does not mean, however, that this feature is irrelevant. Under the Finnish Act, there are two separate normative regimes for group insurance contracts: the former, which is basic in nature, and the latter, which applies when the group insurance relates only to a short-term stay at an agreed location or participation in an event lasting no longer than a month (§ 4).

Comparison of the normative content of the abovementioned legal systems allows to formulate the conclusion that the extra-insurance relation between the insured party and the policyholder required for the subsistence of a group is, in principle, a legal relationship. A factual relationship is a sufficient ground to afford insurance protection if it can be contained within a specific temporal and spatial framework.

In such legal systems in which no connection between the policyholder and the insured parties is required, the requirement of specificity of the group of parties insured within the framework of group insurance is expressed only in that such group should be designated by pointing to a common characteristic feature. Such solution was adopted by the Spanish legislator in Art. 81 of the Act 50/1980 of 8 October 1980 on the insurance contract, ⁹⁵ stating that a group within the framework of group insurance should be designated by reference to a common characteristic distinguishing such group for the purposes of insurance.

Article 2(3) and (5) of Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation, as amended by Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014, and of Article 2(1)(1), (3) and (8) of Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016, on the distribution of insurance, as amended by Directive (EU) 2018/411 of the European Parliament and of the Council of 14 March 2018, must be interpreted as meaning that the concept of ‘insurance intermediary’ and, therefore, that of ‘insurance distributor’, within the meaning of those provisions, covers a legal person whose activity consists in offering its customers membership on a voluntary basis, in return for payment which it receives from them, of a group insurance policy to which it has subscribed previously with an insurance company, where that membership entitles those customers to insurance benefits in the event, in particular, of sickness or accident abroad.

Group organizer as a distributor by terms of IDD. This is the main idea of Judgement of the Court (First Chamber) of 29 September 2022 in case C-633/20, Bundesverband der Verbraucherzentralen und Verbraucherverbände – VerbraucherzentraleBundesverband eV v. TC Medical Air Ambulance Agency GmbH. ⁹⁶

In the justification of this judgment, the CJEU draws attention to the fact that the positive answer to the referred preliminary question is a consequence of interpretation of Directive 2002/92 and Directive 2016/97, taking into account not only the text of the provisions but also their context and purposes of the legislative instruments. In this regard, the CJEU shared the view that consumers should enjoy insurance coverage at the same level regardless of differences between the channels of insurance distribution. However, the qualification of the policyholder in the group insurance contract as insurance intermediary raises legitimate doubts of academic authors and may have major significance in the insurance practice.

Analysis of the commented judgment leads to the conclusion that the CJEU offered broad interpretation of the terms “insurance distribution” and “insurance intermediary,” including the prerequisite “for consideration.” In effect, the CJEU explained in very general terms in what situations and under what conditions a policyholder in a group insurance contract can qualify as insurance intermediary. In the first place, by giving expression to a broad understanding of the term “consideration,” used by the EU legislator in Recital 11 of Directive 2002/92 and in Art. 2(1) item 9 of Directive 2016/97, CJEU admits that “the condition relating to the existence of remuneration must be regarded as satisfied where every membership of a customer of the legal person which subscribed to the group insurance policy with the insurance company and which pays, on that basis, the insurance premiums to that company, gives rise to a payment to that legal person”. One can only agree with the opinion of the CJEU that the defendant in the main proceedings actually acted in the defendant’s own economic interest and, as a consequence, the benefits obtained by the defendant fell within the scope of the term “consideration.” However, it is still dubious to put an equation mark between the activities of a group’s organizer, who is a party to the insurance contract, and remunerated activities of an insurance intermediary or insurance distributor. ⁹⁷ A further part of the justification of the commented judgment reveals that, in the opinion of the CJEU, it is irrelevant that a legal person conducting such activities as examined in the main proceedings is in itself a party to the group insurance contract in respect of which the legal person intends to encourage its customers to make a declaration of accession (46). One should approach with criticism the lack of in-depth considerations in this respect.

In the same way, the CJEU points to two prerequisites permitting qualification of a policyholder in a group insurance contract as insurance intermediary. First of all, this is voluntary accession to the group insurance scheme, that is the possibility to make an individual decision, and the economic interest of the policyholder as organizer of the group. However, in the commented judgment, the Court did not address the difference between acquisition of membership in a particular group and the accession to the group insurance contract as such.

It seems that the decisive factor in the assessment of the prerequisite of voluntariness, as invoked by the CJEU, should be intention and purpose for which potential members of the group join the scheme. Therefore, it should be sufficient to resolve if, when joining a particular group, its members have a real possibility to withdraw from the insurance coverage offered within the framework of the group insurance contract. ⁹⁸

One should accept the opinion that the judgment of the CJEU should not be interpreted so that the policyholder in the group insurance contract must always be treated as insurance intermediary if the policyholder encourages to become members of the group organized by the policyholder, which involves the need to pay a membership fee, as a part of which members of the group obtain at the same time insurance cover under the group insurance contract concluded by the organizer of the group. ⁹⁹ As an example, M. Wandt points so a sports club whose members pay a fixed membership fee, in consideration of which they obtain insurance coverage under the group insurance contract concluded by the sports club.

In the case-law of the CJEU, a tendency can be noticed to treat a policyholder in a group insurance contract as insurance intermediary. In the commented judgment, the CJEU refers to an earlier judgment of 24 February 2022, ¹⁰⁰ in which the Court held that an entrepreneur being a policyholder in a group insurance contract has a disclosure obligation to the insured party. It was explained in the cited judgment that the status of insurance distributor is not incompatible in that context with the status of a policyholder. This view was consequently upheld also in the latest judgment of the CJEU of 2 February 2023. ¹⁰¹

Expiry of the legal relationships arising in the context of group insurance can be a consequence of many legal events, which means that their exhaustive discussion reaches beyond the scope of this study. Bearing in mind the specific subjective configuration within the framework of in group insurance, it does not seem that the legal relationships between particular parties are to terminate at the same time. ¹⁴⁴ This does not seem, however, that such legal relationships are independent from one another, which will be discussed below in more detail.

When analyzing the causes of expiration of an insurance contract, one should follow the division adopted in the literature of the subject into insurance contracts with compulsory accession and insurance contracts with voluntary accession. Those insurance types show far-reaching differences in terms of their structure. In insurance with compulsory accession, the insurance contract sensu stricto is concluded between the group organizer (policyholder) and the insurer. The grounds for its termination are specified in those provisions of insurance law ¹⁴⁵ that apply to individual insurance contracts. On the other hand, as far as contracts with voluntary accession are concerned, the group organizer and the insurer are bound by a framework agreement that only creates the technical and organizational conditions for concluding individual insurance contracts with particular members of the group. The organizing agreement is not an insurance contract in the strict sense of the word. This is because the organizing agreement does not contain the material elements of the insurance contract. The grounds for its termination are laid down, in principle, in the general provisions of the law of obligations. The provisions of insurance law will apply in this context only exceptionally, where the legislator has provided for specific rules on the contracts organizing group insurance. The insurance regime governs, however, to a full degree the relationships between the insurer and individual group members (policyholders).

The above assumptions can be analyzed considering several examples discussed in the context of French law. The insurance contract between a group member and the insurer within the framework of voluntary insurance expires after a certain term for which the contract was concluded. As a rule, the provisions pf insurance law do not provide for any specific restrictions in this regard. For example, among the provisions of Book I Title IV of the French CA, there are no rules arbitrarily determining a term for which a group insurance contract may be concluded. Therefore, the Relevant legal regime should be sought among the general provisions situated outside Book I Title IV CA. Under the provision of Art. L. 113-12 (1) CA, the insurance contract is concluded for a term specified in the policy. This means that the parties may freely specify the duration of the insurance relationship. Importantly enough, in group forms of insurance, this will be determined already in the framework agreement. This arrangement will translate into the substance of individual insurance contracts, concluded subsequently by the group members who decide to accede to the insurance. These remarks should be referred also to the contract between the group organizer (policyholder) and the insurer within the framework of insurance with compulsory accession. This observation remains valid also with regard to framework agreements between the group organizer and the insurer in insurance schemes with voluntary accession, with the proviso that the relevant legal regime will be the general provisions of the law of obligations, and not the provisions on the insurance contract.

Subject to certain restrictions, an insurance relationship may terminate upon notice given by one of the parties. Remaining within the realm of the French legislation, it should be noted that according to Art. L. 113-12 (1) CA, the terms of terminating the contract, just as the duration of insurance, are laid down in the policy. Paragraph (2) of that provision stipulates for the insured person a right to terminate the contract at the end of every subsequent year of the insurance period. The insured person’s declaration must be addressed to the insurer at the latest two months ahead of the end of the yearly term of insurance coverage. This right is also vested in the insurer, who must also comply with the deadlines set out in Art. L. 113-12 (2) CA. The provision discussed above applies to a contract between the group organizer (policyholder) and the insurer within the framework of insurance with compulsory accession as well as insurance contracts concluded between members of the group and the insurer within the framework of insurance with voluntary accession. ¹⁴⁶

An insurance relationship may expire as a result of secession by an insured party from the insurance when the insured party does not agree to an amendment of the insurance terms (Art. L. 141-4 (3) CA).

For example in Turkish law, under Art. 1496 (4) TTK, loss of the status of a group member is considered an event leading, as a rule, to the expiry of the insurance coverage. ¹⁴⁷

The relationship between membership in the group and existence of insurance protection was also recognized by the French legislator. One of the few provisions of Book I Title IV of the Insurance Code that relates to the question of expiry of insurance coverage under the group insurance contract is Art. L. 141-3 (1) CA. According to that provision, the organizer may not deprive a group member of the benefits under the group insurance unless the member of the group failed to pay the premium or the tie was broken between the member of the group and the group’s organizer. This provision distinguishes two situations in which the insured party may be deprived of insurance coverage.

The first of the two correlates the expiry of insurance protection to violation of the obligation to pay the premium. The contract may be terminated only after exhausting of the procedure under Art. L. 141-3 (2)and (3) CA. The provision of Art. L. 141-3 CA is mandatory insofar as it sets out the deadlines that must be complied with to effectively exercise the right. It is inadmissible to shorten those periods under a legal act. ¹⁴⁸ It must be emphasized that the right to refuse the benefits under the insurance contract was reserved to the group organizer and not the insurer.

As far as the second situation covered by Art. L. 141-3 CA is concerned, the French legislator refers to the question of cessation of the tie between the group organizer and the group’s members. In this case, it is not necessary to exhaust the procedure laid down under Art. L. 141-3 (2)and (3) CA. ¹⁴⁹ However, the provision of Art. L. 141-3 (1) CA was rather unfortunately worded as far as it specifies the consequences of cessation of the non-insurance relationship between the group organizer and the insured party. Literal interpretation of that rule suggests that in case of cessation of the tie between the interested parties, the group organizer may decide about discontinuing the insurance coverage in the same way as in the event of untimely payment of the insurance premium. However, such interpretation does not reflect the normative contents of Art. L. 141-1 (2) CA, under which a precondition to accession to the insurance is an existing tie between the group organizer and the group’s members. Undoubtedly, the tie must hold at the time of accession to the insurance although its existence does not have to precede such accession in time. ¹⁵⁰ More doubts are raised, however, by the question if the cessation of the tie already after an effective accession to the insurance gives rise to a situation in which the person so far covered by the insurance, by operation of law, may no longer take advantage of the rights under the insurance contract, or if that consequence arises only as a result of certain acts performed by the group’s organizer. Adoption of the latter proposal would be undoubtedly more favorable to the group’s members, who would not be exposed to unexpected expiry of the insurance coverage in case of abrupt discontinuation of the tie with the insurance operator. Nevertheless, uncritical acceptance of that opinion does not seem reconcilable with the nature of group insurance. A prerequisite for acceding to a group insurance contract is the existence of a non-insurance relationship between the person acceding to the insurance and the group organizer (art. L. 141-1 (2) CA). This means that there is no justification for further persistence of the insurance coverage in a situation when the underlying relationship ceases to exist. In reference to the conception of “initial incapacity to be the insured party,” proposed in the context of situations of non-compliance with the criteria of membership in the group, at this point, the discussed condition should be defined as posterior loss of the capacity to be insured.

If the non-insurance relation between the group organizer and the group’s member arises from a legal relationship, its existence will be decided by the provisions governing the conclusion, duration and termination of that relationship. If the group of the insured parties comprises persons employed by the group organizer under an employment contract, expiry of the employment contract will lead, at the same time, to the cessation of the insurance coverage. However, the employee benefits from the insurance protection during the period of notice. This observation leads to the conclusion that a member of the insured persons’ group may withdraw from the insurance not only as a part of the procedure laid down in the Insurance Code but also as a consequence of termination of the underlying legal relationship that allowed him or her to accede to the insurance. ¹⁵¹

The impact of the non-insurance relation between the insured person and the group organizer on the relationship arising under the group insurance contract can be additionally considered from the point of view of their mutual interrelation.

The belief about the need to respect the relation between legal relationships is well-established in French case-law. This conception is based on a conviction that the existence of a legal relationship may depend on another contractual obligation if there is a strict connection between the two. This belief is related, among others, to loan agreements concluded for the purpose of financing a specific business venture. In French literature, it was proposed to use the term ‘bundle of contracts’ (groupe des contrats) ¹⁵² or ‘interdependent contracts’ (contratsinterdépendants) ¹⁵³ in reference to the principal contract and the loan agreement concluded for the purpose of implementing a certain business venture (subsidiary contract). If the loan obligation is incurred with the intention to finance a purchase of an immovable property under a contract affected by invalidity or terminated subsequently by one of the parties, the loan agreement shares the fate of the contract for sale. ¹⁵⁴ The subsidiary contract will expire or will be invalid ex tunc. This consequence, however, does not depend on a prior agreement between the seller or the buyer (borrower) with the lender. In more recent decisions, the judicial practice supports the contract’s ineffectiveness ¹⁵⁵ regardless of whether the principal contract has been terminated by one of the parties or affected by the sanction of invalidity. ¹⁵⁶ The above concept was referred to by the Cassation Court in the judgment of 4 April 2006. ¹⁵⁷ This decision was delivered in the following factual situation. A company managing a military hospital concluded a contract for servicing the heating installation with another company incorporated under the laws of France, and a contract with a transmission company under which gas power was supplied to the hospital. The parties agreed that the company managing the hospital may not obtain supply from another enterprise. As a result of gaining access to the urban heating network, the managing company terminated the contract for the servicing of the hospital’s installation. At the same time, the company requested termination of the contract for the supply of energy, to which the transmission company did not agree. The Cassation Court concluded that termination of the contract for the servicing of heating installation led to ineffectiveness of the supply agreement. In justification of this opinion, it was argued that both contracts referred to the same commercial transaction and constituted an indivisible whole (ensemble contractuel indivisible). The Cassation Court clearly pointed out that the contract for servicing the installation was an exclusive cause (seule cause) of the supply agreement.

Analysis of the case-law presented above leads to the conclusion that a legally relevant correlation between two legal relationships is decided by the fact that the two relationships serve the same economic purpose, which cannot be achieved in the event of termination of the principal agreement. In such case, there is no justification for further subsistence of the subsidiary contract.

However, this criterion is insufficient. In literature of the subject, the dominant view is that the mutual correlation is predestined by the will of the parties, which cannot be presumed. ¹⁵⁸ In the light of the above, the parties may decide to disconnect the contractual obligations even if they pursue the same economic purpose. ¹⁵⁹

As late as in the judgment of 18 January 2000, following well-established case-law, the Cassation Court clearly held in favor of independence of the loan agreement and the insurance (bancassurance) contract, pointing out that the insured party may take advantage of the insurance coverage even despite accelerated maturity of the loan obligation. ¹⁶⁰ On the other hand, already in the judgment of 26 April 2000, the Cassation Court expressed an opinion that an insurance contract shares the fate of the loan agreement if the borrower and the lender provided so in the concluded agreement. ¹⁶¹ Insurance coverage is discontinued without the need to terminate the contract or take any other steps by the interested parties. An analogous position was taken by the Cassation Court in the judgment of 10 July 2008. ¹⁶²

Although the question was not subject to broader discussion in Polish literature, much attention was paid to it in French literature of the subject. Among the few provisions on the consequences of terminating an insurance contract, attention should be drawn to the norm under Art. L. 141-3 (4) CA. Under that provision, exclusion of the insured party from the group of persons covered by the group insurance contract does not deprive the insured party of the rights he or she acquired in consideration of the previously paid premiums. On the linguistic level, this provision does not correlate the end of the insurer’s liability with the moment of depriving the insured party of insurance protection by the policyholder’s acts. On the other hand, the norm under Art. L. 141-3 (4) CA points to a close connection between the duration of insurance coverage and the payment of premium. Nonetheless, most opinions expressed in judicial practice and literature disregard such nuances. By way of interpretation of Art. L. 141-3 (4) CA, a principle was formulated allowing to resolve conflicts in relation to the right to receive the benefit from the insurer depending on whether the risk materialized before or after the expiry of the insurance relationship. Bearing in mind that most group insurance schemes sensu stricto involve risks of personal nature, it is quite widespread that the event giving rise to the insurer’s liability takes place already in the insurance period, however, its consequences affect the insured party also after the end of that period. Termination of the insurance contract after the materialization of the agreed risk does not release the insurer from the obligation to render the benefit to the entitled party. ¹⁶³ It is inadmissible to include in the insurance contract a clause departing from that rule. Such contractual provisions are considered by the courts to be “non-stipulated.” ¹⁶⁴ On the other hand, the insured party may not hope to obtain a benefit provided for in the contract if the risk materialized already after the expiry of the insurance relationship, ¹⁶⁵ unless an exception to that rule is provided under the insurance contract.

Considering the similarities between the expiry of a contract and amendment to its provisions in the period of insurance protection, a proposal might seem intellectually tempting to apply by analogy the provision of Art. L. 141-4 CA, regarding the procedure of amending the terms of coverage in group insurance, to assess the consequences of expiry of the insurance contract. However, this view was categorically rejected by the French Cassation Court. ¹⁶⁶ The silence of the legislator and the impossibility to adopt a universal principle according to which the assessment of the consequences of termination of an insurance contract is made by analogy to Art. L. 141-4 CA inclined the courts and academic authors to formulate several rules deriving from the very nature of group insurance, and, as such, those rules may also apply in the Polish jurisdiction.

According to a well-established opinion in French case-law, expiry of a contract between the group organizer and the insurer entails termination of the legal relationships between the members of the insured persons’ group and the insurance company. ¹⁶⁷ This principle applies to all group insurance contracts, irrespective of whether the accession to the insurance is compulsory or voluntary. ¹⁶⁸ However, in literature of the subject, attention was drawn to the fact that uncritical acceptance of that view with regard to the insurance with compulsory accession may give rise to doubts, considering the restrictions relating to the construction of rendering performance to a third party. According to the principle expressed under Art. 1121 CC, a party reserving a benefit to a third party loses the possibility to cancel the reservation made for account of a third party when the third party declares an intention to take advantage of the reservation. ¹⁶⁹ Taking the view that the expiry of the contract between the group organizer and the insurer leads to the expiry of the relationship between the insured party and the insurer, one should accept, at the same time, that the policyholder may indirectly cancel the reservation made for account of the insured person. However, the opinion dominant in literature is that in the light of the categorical wording of Art. 1121 of the French Civil Code, any attempts at indirect cancellation of the reservation made for account of a third party must always be approached as attempts to circumvent the law. ¹⁷⁰ Seeking to remove this contradiction, certain authors assume that in the insurance with compulsory accession, the insured party consents to being covered by insurance protection only during the term of the insurance contract. ¹⁷¹ In other words, the duration of insurance coverage is made dependent on the existence of the contract between the policyholder and the insurance company.

In Polish literature, it is indicated that the standard within the framework of group life insurance is so called individual continuation of insurance coverage. ¹⁷² This refers to a possibility of further use of the insurance coverage after losing the status of member of the insured persons’ group. This right is exercised by concluding an individual insurance contract in which the role of policyholder is assumed by a person being so far an insured party. ¹⁷³

Under Polish law, such right may arise only under the provisions of the group insurance contract. Stipulation of an option to continue insurance coverage should be accompanied bya contractual obligation to notify the insured parties about the option and provisions governing the method of its exercise. ¹⁷⁴

This observation reveals essential drawbacks of the solely contractual status of the right to individually continue insurance coverage. The group organizer together with the insurer have full discretion in defining the discussed right. A consequence of the merely contractual nature of that right and the correlated obligations of the group organizer are doubts relating to the existence of liability for damages for the breach of the obligations, not to mention the practical difficulties with effective enforcement of such claims in court. ¹⁷⁵

An answer to the shortcomings of the solely contractual right to individually continue insurance protection would be to grant the same right within a normative framework. Such mechanism must, on the one hand, ensure the desired protection level to the insured parties and, on the other hand, prevent a practice of acceding to the insurance for the sole purpose of obtaining coverage on preferential terms, which is then continued as a part of individual insurance. In this context, questions arise about the method of implementing the risk assessment at the time of establishing individual insurance and about the terms of calculating the insurance premium.

The intention to regulate the continuation of insurance under the draft prepared by the Civil Law Codification Commission attached to the Minister of Justice is demonstrated by the wording of Art. 834 ¹² § 2 of the Draft CC. (“In the event of leaving the group by the insured party, the insured party’s obligations shall be extinguished.”) The cited provision refers only to the obligations of the insured person, and not to his or her rights. It seems, however, that such formulation was unintentional. At the same time, this general rule is anything but sufficient.

In foreign literature and case-law, the discussed legal construction is subject to much interest. For example, in the context of French law, the concept of so called individual continuation of insurance was developed despite only fragmentary legal regime of the question. The possibility of further insurance coverage despite termination of the contract between the insurer and the policyholder was mentioned by the French legislator in Art. L. 141-6 (1), second sentence, CA. Under that provision, in case of termination of the legal existence of the group organizer or the group organizer’s liquidation, the group insurance contract is transformed into individual insurance contracts between particular members of the group and the insurer.

In French literature, attention is drawn to a relatively narrow scope of application of that provision. A part of authors assumes that Art. L. 141-6 (1), second sentence, CA relates only to group insurance contracts with voluntary accession. ¹⁷⁶ This is an insurance formula under which, beside the framework agreement between the group organizer and the insurer, there are as many insurance contracts as insured parties. The provision of Art. L. 141-6 (1), second sentence, CA allows for further persistence of such insurance contracts despite termination of the framework agreement. On the other hand, this construction does not match the theoretical model of the insurance contract with compulsory accession, which can be accounted for by the unitary conception.

Irrespective of the discussed doubts, it must be emphasized that the provision of Art. L. 141-6 (1), second sentence, CA may apply only when the cause of expiry of the framework agreement is the termination of legal existence of the group organizer. Such situations, however, are rare. Much more often, expiration of the group insurance contract, effective for all insured parties, is a consequence of the contract’s termination by the organizer or the insurer.

In literature, much attention has been paid to the pursuit of a legal construction that would allow to secure the insured parties against being deprived of the benefits under the insurance in the event of expiry of the contract between the group organizer and the insurer. One of the proposals was based on the belief that in such situations, one can resort to the construction of assignment of rights and obligations. ¹⁷⁷ Another opinion presented in the literature is that the change of the insurer is possible due to a transfer of the insurance portfolio to another insurer. ¹⁷⁸ Proponents of those conceptions, however, seem not to notice that the need to secure the interests of the acceding persons becomes apparent already after the termination of the insurance contract. At that time, there are no longer any rights and obligations that could be transferred to another insurance company.

Seeking to eliminate this contradiction, certain French academic authors support an opinion that continuation of group insurance under an individual insurance contract is an example of modification of rights and obligations during the insurance period, ¹⁷⁹ referred to in Art. L. 141-4 CA. ¹⁸⁰ The last of the discussed concepts has been accepted in judicial practice. In the judgment of 18 June 2002, ¹⁸¹ attention was drawn to the fact that such modification does not require consent from persons who already acceded to the insurance as long as the policyholder was granted the right to conclude a contract with another insurer. ¹⁸² Even in the lack of such agreement, the case-law points to a possibility of expressing such consent by the parties covered by the insurance, even implicitly. ¹⁸³ It seems that, on each such occasion, all circumstances of the case should be taken into account as well as legitimate interest of the members of the insured persons’ group, who should not be exposed to unexpected loss of insurance coverage.

Also, the case-law takes a similar approach, pointing to a possibility of individual continuation of insurance coverage after losing the status of group member by a particular insured party.

In the decision of the Cassation Court of 5 January 1977, ¹⁸⁴ the Court presented an opinion that an ex-employee who, in the term of employment, acceded to group insurance, may take advantage of the insurance protection after the termination of the employment relationship if he or she was paying the premium up to the date when the risk materialized. An analysis of the justification of this ruling leads to the conclusion that further persistence of the insurance coverage depends on the behavior of the group organizer, the insured party and the insurer already after the expiry of the non-insurance relation (employment relationship) between the insured person and the group organizer. If the insurer accepts the premium paid, and the organizer does not take steps that would point to the organizer’s intention to terminate the insurance, the member of the group still takes advantage of the insurance coverage. However, one can but agree with the authors indicating that in such situation the insurance coverage arises under an individual insurance contract concluded implicitly after the termination of the group insurance. ¹⁸⁵

In the judgment of 31 March 1981, the Cassation Court expressed an opinion that an employee who, as a result of the employer’s omission, lost the status of an insured person should be treated as though being subject to insurance coverage if the premium due under the concluded insurance contract was paid. ¹⁸⁶ In the justification of the judgment, attention was drawn to the fact that an omission by the group’s organizer may not lead to negative consequences for the insured party if the omission took place without the insured party’s intention or fault. This solution relieves the insured party from the obligation to examine if the group organizer duly performs the organizer’s duties as long as the insured party takes care to timely pay the insurance premium. ¹⁸⁷ Also in this situation, the construction should be used of continuing insurance coverage as a result of concluding (even implicitly) another individual insurance contract, instead of seeking justification for further subsistence of the insurance coverage in the group insurance contract.

The French solution might be a manifestation of the rightful belief that the insured party should not be exposed to unexpected loss of insurance coverage, however, it is not conducive to legal certainty and predictability of court decisions. It should be noted at this point that the tendency to justify further subsistence of insurance protection can be identified, first of all, in matters relating to employee group insurance contracts.

On the other hand, the German legislator decided to introduce explicit normative grounds for the right to continue insurance coverage. This right is vested only in such insured parties that acceded to the insurance of risks relating to their health. It must be noted that the provisions are semi-mandatory. Modification of the solutions discussed below can take place only to the benefit of the policyholder or the insured party (§ 208 VVG).

For the purposes of group insurance, the above-mentioned provision of § 206 (4) VVG modifies the terms of terminating the insurance contract by the insurer. The insurer may terminate the group insurance as long as the insured parties are in a position to use insurance protection under an individual insurance contract.

On the other hand, § 207 VVG provides for the right to continue insurance coverage despite expiry of the group insurance contract for reasons relating to the group’s organizer. At the beginning of this provision, the German legislator reminds that the death of the group organizer (policyholder) leads to expiration of the insurance contract (§ 207 (1) VVG). However, the insured parties may apply for continual insurance by assuming the role of the policyholder within two months from the death of the previous policyholder (§ 207 (1) VVG).

This solution applies as appropriate if the group organizer terminates the insurance contract in relation to all or certain insured parties (§ 207 (2), first sentence, VVG). Termination of the insurance vis-à-vis a particular insured party is affected only as long as the insured party learns about the termination notice given by the insurance operator (§ 207 (2), second sentence, VVG).

If the termination relates to a group insurance contract and the new organizer has not been indicated, the members of the group will have the right to take advantage of insurance coverage as a part of individual insurance (third sentence). This right is extinguished after two months from the date when the insured party learned about the possibility to continue the insurance coverage (fourth sentence).

Individual continuation of insurance protection was also regulated in the Austrian Act on the insurance contract as a special right of the insured parties within the framework of insurance against health-related risks. ¹⁸⁸

If a party insured as a part of group insurance leaves the insured persons’ group, e.g., as a result of termination by the insurer or retirement, or if the entire group insurance contract is terminated, the party insured within the framework of group insurance is entitled to declare that further coverage is to be provided under an individual insurance. In such situations, such terms and tariffs will apply as applicable to individual insurance. Continuation of the insurance does not require a repeated risk assessment if the insured party could have been insured within the framework of individual insurance on the date of acceding to the group insurance (§ 178m (1), first sentence). The premium for the purposes of individual insurance is determined according to the insured party’s age as at the time of acceding to the group insurance (§ 178m (3)).

As under the German legislative framework, in the Austrian law, the right to individual continuation of the insurance expires over time. A request to continue the insurance must be made by the insured party within one month from the loss of the status of member of the group or termination of the group insurance contract (§ 178m (2), first sentence).

The insurer must notify the insured parties about the right to individually continue the insurance (§ 178m (1), second sentence). If the insurer has not informed the insured parties about the possibility to continue the insurance, then the deadline does not begin to run (second sentence). Moreover, at the time of accession to the group insurance, the insurer is obliged to expressly notify every party insured as a part of the group insurance under what terms the insured party’s coverage is terminated and what the consequences are, in terms of the premium amount, of individual continuation of the insurance (§ 178m (6)).

The right of individual continuation is not vested in an insured party who lost the status of the group’s member as a result of termination of the insurance relationship by the insurer for breach by the group’s member of the obligations laid down in the insurance contract (§ 178m (4)).

Changes to the composition of the insured persons’ group may affect the amount of insurance premium. In particular, this relates to a change of the average age of the insured parties (§ 178m (5)).

The right to continue insurance was also regulated in the provisions of the Turkish Commercial Code of 2012. However, it must be noted that, under that Code, the concept of group insurance is referred only to life insurance, being one of the types of personal insurance. Therefore, the right to continue insurance coverage is a special privilege of parties insured within the framework of life insurance.

Art. 1496 (4) TTK provides that: “In the event of losing the status of the group’s member in the period of insurance, the insurance coverage provided as a part of group insurance may be continued under individual insurance by the policyholder, the insured party or the beneficiary. Continuation of the insurance by the insured party or the beneficiary is possible as long as they assume the role of the policyholder.” In the third sentence of the discussed provision, it is stipulated that such persons (the insured party or the beneficiary) are then jointly and severally liable together with the previous policyholder for any overdue premiums. It must be noted that the Turkish legislator provided for a possibility of further provision of the insurance coverage in an unchanged subjective configuration. The group organizer may act as policyholder concluding an individual insurance contract for account of a particular member of the group.

A special manifestation of the tendency for the unification of international contract law are the model rules on the insurance contract, better known as the Principles of European Insurance Contract Law (PEICL), developed by the members of the Project Group on a Restatement of European Insurance Contract Law. ¹⁸⁹ As a part of the project, which initially was a typically academic undertaking, an effort was made to create uniform rules on the insurance contract which would make a set of solutions positively evaluated by the representatives of legal science and market participants. It was intended to reach that objective taking into account the conclusions following from comparative law analysis. Because of the supranational character of the prepared rules, precedence in interpretation of its provisions was afforded to the conception of autonomous construction. ¹⁹⁰

In 2016, the full text of the PEICL was published together with commentary. ¹⁹¹ The original version of the PEICL did not contain the provisions on group insurance. ¹⁹²

As the works progressed, the authors of the PEICL eventually decided to introduce a definition of the group insurance contract which – beside the definition of “insurance contract,” “damage insurance” and “fixed-sum insurance” – was covered by the provision of Art. 1:201, in paragraph (7)of that provision. It was concluded that group insurance contracts are based on the agreement between the insurer and the group organizer concluded for the benefit of the insured parties who have a common connection with the organizer and meet the requirements set forth in such agreement. So determined circle of the insured parties is referred to as “group”. At the same time, the definition expressly mentions the possibility of obtaining protection by members of the insured party’s family under the group insurance contract.

Researchers from the Restatement Group opted as well for sanctioning the distinction between insurance with compulsory accession (accessory group insurance) and insurance with voluntary accession (elective group insurance). The first of these concepts is defined as group insurance in which the existence of insurance protection is a consequence of belonging to a given group. The insured party may not withdraw from the insurance coverage. The second category, on the other hand, refers to situations in which accession to a group insurance is a consequence of submitting to the insurer a notice of intention to join the circle of insured parties or absence of refusal to accede to the insurance. ¹⁹³

In the provision of Art. 1:201 PEICL, containing a dictionary of terms used in the PEICL, the authors additionally introduced definitions of the group insurance contract (Art. 1:201 item 7), group insurance with compulsory accession (accessory group insurance) (Art. 1:201 item 8) and group insurance with voluntary accession (elective group insurance) (Art. 1:201 item 9).

At the same time, the authors of the PEICL decided to refer to the person entering the group insurance contract with the insurer as “group organizer.” This term applies regardless of the compulsory or voluntary nature of accession to the group insurance contract. However, the authors did not decide to define that concept under Art. 1:202, which determines the meaning of such terms as “insured” (Art. 1:202 item 1) or “insurance agent” (Art. 1:202 item 5). It must be noted that the authors of the instrument use of the term “group organizer” inconsistently. As a part of the provisions on group insurance contracts, they also make references to the “policyholder” (Art. 18:204 item 2). It seems, however, that the distinction is unintentional and the terms “group organizer” and “policyholder” can be used interchangeably for the purposes of the discussed rules.

There are important structural differences between insurance contracts with compulsory accession and insurance contracts with voluntary accession. An insurance contract with compulsory accession (accessory group insurance) is an insurance contract sensu stricto. On its basis individual insured persons obtain insurance coverage. However, direct application of the PEICL provisions could give rise to multiple doubts bearing in mind the specific nature of group insurance. It seems that such doubts are shared by the authors of the PEICL. According to the principle expressed in Art. 18:201 PEICL, where necessary, the PEICL, shall be applied to accessory group insurance mutatis mutandis.

The authors of the PEICL have also noticed threats relating to the double status of the group organizer in relation to particular members of the group, as voiced in Art. 18:102 (1). This provision imposes on the group organizer (policyholder) an obligation to act dutifully and in good faith taking account of the legitimate interests of the group member when negotiating and performing the contract. This principle applies both to insurance with voluntary accession and to insurance with compulsory accession. The norm under Art. 18:102 (1) was placed in Part 6 Section 1 of the draft, containing the general provisions on group insurance. It should be concluded that the obligation set out in Art. 18:102 (1) PEICL refers predominantly to the activities undertaken by the group organizer as a part of the relationships between the group organizer and particular members of the group.

The principle laid down under Art. 18:102 (1) PEICL shows a far-reaching similarity to the solution adopted as a part of the Community regime of commercial agent under Directive 86/653. ¹⁹⁴ Under Art. 3 of the Directive, in performing his activities on behalf of his principal, a commercial agent must look after the principal’s interests and act dutifully and in good faith. ¹⁹⁵ An analysis of the remaining provisions of the draft prepared by the researchers from the Restatement Group reveals further similarities between their proposal and the solutions adopted in the above-mentioned Directive. The agent’s duty to act dutifully and in good faith was made specific in Art. 3 (2) of the Directive. Under this provision, in particular, a commercial agent is obliged to communicate to his principal all the necessary information available to him (Art. 3 (2) letter (b) of the Directive). An analogous solution has been adopted in Art. 18:102 (2) PEICL, under which the group organizer shall forward any relevant notices issued by the insurer to the group members and inform them about any amendments to the contract.

As a part of another section, the authors introduced the provisions on group insurance contracts with voluntary accession (elective group insurance). At the same time, the authors accentuated the special type of relationship between the insurer and an individual insured person that can be observed in this type of contracts. As opposed to contracts with compulsory accession, in this case the insurance contract sensu stricto is concluded only between the insurer and the insured person. The group organizer, on the other hand, is a party to the framework agreement concluded with the insurer (Art. 18:301 (1) PEICL). Group insurance with voluntary accession makes up a specific legal construction, being a combination of individual insurance with a special type of framework agreement between the insurer and the group organizer (Art. 18:301 PEICL). However, the question of applicability of the PEICL to the insurance contracts concluded between the insurer and individual insured parties is resolved by the parties to the framework agreement. The framework agreement, as such, is not an insurance contract. As a consequence, it should not be subject to the provisions of the PEICL. However, categorical application of this solution might lead to a situation in which insurance contracts are governed by the PEICL provisions, whereas the law applicable to the framework agreement is inadequate to the requirements of the construction laid down under Art. 18:301 PEICL. Recognizing a possibility of discrepancy in that regard between the insurance contracts and the framework agreement, the researchers from the Restatement Group decided that the requirement under Art. 18:102 (1) PEICL to act dutifully and in good faith when considering the interests of the group members applies also to the agreement entered into by the group organizer (Art. 18:301 (2)).

The above observations arouse doubts whether Art. 11:103 PEICL applies to the group insurance contract with voluntary accession. It should be reminded that the provision in question is intended to individualize civil law sanctions for improper performance of the duties imposed on the insured person. The provision introduces a principle according to which a breach of duty under the insurance contract by one insured person does not adversely affect the rights of the other persons insured under the same insurance contract. The group insurance contract with voluntary accession is not an example of insuring several insured persons “under the same insurance contract.” At most, one can speak of a bundle of individual insurance contracts that have been concluded thanks to a single agreement organizing the insurance.

An issue vividly discussed by the members of the Restatement Group was the question of disclosure obligations the proposed instrument was to impose on the insurer and the policyholder.

As far as individual insurance is concerned, the question of disclosure obligation is governed by the provisions of Art. 2:202 PEICL. Under the provision of Art. 2:202 (1) PEICL, when concluding the contract, the insurer shall warn the applicant of any inconsistencies between the cover offered and the applicant’s requirements of which the insurer is or ought to be aware, taking into consideration the circumstances and mode of contracting and, in particular, whether the applicant was assisted by an independent intermediary. In the light of the above, the addressee of disclosure obligations at the contracting stage is the insurer. The provision of Art. 2:202 (2) PEICL provides for sanctions for non-performance or improper performance of the discussed obligations. Beside the right, conferred on the policyholder under Art. 2:202 (2) letter (b) PEICL, to terminate the contract, the provision of Art. 2:202 (2) letter (a) PEICL obliges the insurer to pay the benefit to the policyholder also in respect of “all losses resulting from the breach of this duty to warn unless the insurer acted without fault.”

However, this construction is incompatible with group insurance. First, the policyholder does not pay the insurance benefit to the insured persons. Doubs arise in the context of the attempts to adopt, for the purposes of disputes relating to group insurance, such interpretation of Art. 2:202 (2) letter (a) PEICL so as to obligate the policyholder to indemnify the insured person against the difference between the benefit that could have been received and the benefit actually paid by the insurer. An analogous construction introduced by the French judiciary is a source of numerous interpretative doubts and may discourage policyholders from entering into contracts for account of persons interested in the accession to group insurance. The provision of Art. 2:202 PEICL, following the solutions adopted by national legislators, is an expression of the belief that the policyholder is the weaker party of the insurance contract, who concludes the contract on the terms authoritatively imposed by the insurer. However, the situation looks different in the context of group insurance, in which case the role of policyholder is assumed by a party having at its disposal the support of specialists, with the involvement of whom the terms of insurance are negotiated. In the light of Art. 2:202 (1) PEICL, the insurer should adjust the form and contents of the information to the policyholder “taking into consideration the circumstances and mode of contracting and, in particular, whether the applicant was assisted by an independent intermediary.” When these criteria are applied to the policyholder in group insurance arrangements, it can be concluded with some caution that the insurer is exempt at all from disclosure obligations to the policyholder.

Within the framework of the PEICL, the authors decided to define the scope of the disclosure obligation according to the type of insurance contract. An exception in this regard is the above-mentioned provision of Art. 18:102 (2) PEICL. In group insurance with voluntary and compulsory accession, the group organizer is obliged to forward to the group members any notices issued by the insurer which are relevant from their point of view, and to inform them about any amendments to the contract (Art. 18:102 (2)).

The principle of acting dutifully, in good faith and taking account of the interests of group members applies to the assessment of any activities undertaken by the policyholder. Therefore, it seems that it should serve as a specific directive of interpretation allowing to specify how the disclosure obligation should be discharged when it is insufficient to merely read the provisions of the PEICL for the assessment of a particular case.

The direction of works on the legal regime of group insurance under the PEICL allows to conclude that the authors of the instrument decided to clearly specify the consequences of exercise by the insurer of the insurer’s right to terminate the insurance contract. In the context of specific national legislative frameworks, there have been doubts relating to the establishment if the notice of termination given by the insurer leads to termination of the insurance contract effective vis-à-vis all insured persons or only vis-à-vis particular persons covered by the insurance protection.

In case of insurance with obligatory accession, the authors of the PEICL clearly resolved that matter by adopting a solution affording fuller protection to the interests of the group members. If the insurance contract provides a sanction for a breach by the insured person of the precautionary measures in the form of the insurer’s right to terminate the contract, the notice of termination given by the insurer is effective only vis-à-vis the group member whose act or omission could cause a damage (Art. 18:203 (2)). Similar conclusion should be drawn in the context of disposal of the object of insurance by one of the group members (Art. 18:203 (3)). The insurance contract is terminated only vis-à-vis that person. In the light of the general principles of the PEICL, this rule will not apply when the change of the entitled party is a consequence of inheritance (“transfer of title by inheritance”) or when otherwise agreed in the insurance contract (Art. 12:102 (3)). In consequence, the authors of the PEICL adopted a solution according to which a transfer of title to the insured object, as a rule, implies the need to establish a new insurance law relationship with the transferee.

It is necessary to track down the reasons behind the popularity of group insurance contracts with a view to identifying the nature of that insurance product and its legal construction. Group insurance is not a simple aggregate of individual insurance contracts. It belongs to a wider category of collective insurance. The essence of group insurance is that it may cover multiple persons belonging to a group identified according to specific criteria, though not necessarily all such persons, and the premium does not have to be paid by the policyholder, so that one contract gives rise to a number of insurance relationships. The differences between group insurance contracts and individual insurance contracts are:

No definition of group insurance exists at any international level. Even when ruling on group insurance, the Court of Justice of the European Union (CJEU) refrained from providing any definition. It causes a lot of problems in private international law. ¹⁹⁷

Normative goals which should be regulated are:definition of group insurance contract, information duties of group organizer, asserting claims under the group insurance contract, based on the construction of Insurance contract for account of a third party; the content of the obligation to pay the premium, termination of group insurance contract by the Insurer and right to continue cover