Nathan Müller: Unilateral termination of insurance


Unilateral cancellation of the life insurance contract by the insurer is considered abusive. This is the majority understanding of jurisprudence, including in the Superior Court of Justice. There is an impossibility of the termination, unilaterally on the part of the insurer, due to the lack of payment of the premium by the insured.

The delay in the payment of monthly installments of the life insurance contract premium does not, by itself, generate the automatic cancellation of the contract and the policy, and prior notification to the insured is essential. It also does not generate the immediate suspension of the insurance contract signed between the parties.

Due prior notification of the insured or successors is essential for its constitution in default, so that it is given the opportunity to settle the debt.

In cases of default by the insured, the Courts maintain the position of analysis of the peculiarities of the specific case. Let’s see, if the default is irrelevant, that is, if it is for a period shorter than the total time of contractual performance, and the value is not significant, the automatic cancellation clause of the policy may not have effect, by observing its function and objective good faith, is the understanding of Precedent 616 of the Superior Court of Justice, in verbs:

“Precedent 616/STJ. Insurance indemnity is due when the Insured’s prior communication about the delay in the payment of the premium is absent, as it constitutes an essential requirement for the suspension or termination of the insurance contract”,

A scenario where the insurer offers life insurance to a young person is unfeasible and, when old, the contract is terminated, based on the principle of contractual freedom. This action by the insurer is clearly a violation of the social function of insurance contracts, and must be contained.

In addition, the mere intention of the insurer to terminate the contract unilaterally or to impose a new plan on the insured, with relevant changes to the contract in force, is already offensive to the principle of good faith supported by the Consumer Defense Code, since it generates a contractual imbalance to the detriment of the weakest part of the relationship – the insured.

In this way, the insurance contract must have a prior and express agreement for its alteration, since the freedom to contract has to fulfill its social function, as or more important than its economic aspect.

Further, a person of advanced age cannot be deprived of the maintenance of the life insurance contractual relationship, maintained for years, on the grounds that it is not financially convenient for the insurer to maintain the contract, which aims at a unilateral termination of said contract.

Notwithstanding the fact that the insurance has clauses already pre-established in its “general conditions”, these rules have their scope relativized. Unilateral cancellation would frustrate the consumer’s expectation of insuring his own life, irreparable damage, since he will probably not be able to contract new life insurance because he no longer has full health.

The confidence of the insured that they are and intend to continue to be protected by the contracted risks, especially in view of the objective good faith that imposes on the contracting parties the duty to act in accordance with the fundamental principles of the contracts. Not only did the policyholders trust the stability and, above all, the security of the legal transaction they entered into, including their presumption that the insurer acts correctly and loyally towards its consumers. This understanding leads to the conclusive reasoning: the cancellation or termination of the insurance contract, due to the default of the premium, without prior notification to the insured or successors, is configured as undue.

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