Statute of Limitations in Insurance Contracts in Brazil: Impacts of recent decisions issued by the Brazil`s Superior Court of Justice.

In recent years, judicial decisions on statute of limitations regarding insurance contracts have generated debates and significant changes in the understanding of the Insureds’ rights in relation to Insurers, as well as dictated new procedures to be adopted by Insurers during loss adjustments.

Note that in insurance contracts in Brazil, the statute of limitations is governed by the Civil Code of 2002, which establishes the deadlines within which Insureds must exercise their right to request indemnification from Insurers. It is important to note that the Civil Code of 2002 establishes different deadlines depending on the nature of the claim. For example, the statute of limitations for the Insured to request indemnification from the Insurer is one year counted from the knowledge of the fact that generated the right to indemnification, according to article 206, paragraph 1, item II, paragraph “b”.

In this context, there were numerous appeals filed before the Superior Court of Justice (“STJ”) in order to discuss the exact moment of “the knowledge of the fact that generated the right to indemnification“.

Thus, STJ was provoked several times to clarify the concept of the generating fact that would trigger the commencement of the statute of limitations: whether the occurrence of the damage or the eventual denial of the Insurer, with the latter motivating the need to seek judicial action.

Thus, in the emblematic ruling issued on 15/Mar/2022 in Special Appeal No. 1,970,111/MG, the Justices of the Third Panel of STJ, in a non-unanimous decision, established that “the statute of limitations only begins when the insured becomes aware of the denial of insurance coverage“.

The above represented a significant change in STJ’s position, since it conflicted with the understanding that had been adopted by STJ since 1999 (established in Precedent[1] No. 229[2]).

---

[1] Precedents are the summary of understandings consolidated by the court and serve as guidance to the entire legal community on the case law established by STJ, which has the constitutional mission of unifying the interpretation of federal laws.

[2] Precedent 229: “The request for payment of indemnification to the insurer suspends the statute of limitations until the insured is aware of the decision.”

In this sense, the Panel stated that “in order for this conceptual evolution to be imposed, it was necessary to take into account the new legal concept of statute of limitations, linked to the idea of extinction of the cause of action (article 189 of the Civil Code of 2002), and, then, the new criterion of the initial term of the statute of limitations for the insured’s action, fixed no longer on the fact authorizing the action, but on the generating fact of the cause of action (article 206, § 1, II, b, of the Civil Code of 2002)“.

In addition, the Panel determined the possibility of revising a long-established understanding, under the argument that Precedent No. 229 of STJ would have been issued under the previous legislation (in this case, the Civil Code of 1916), which, unlike the current legislation (Civil Code of 2002) would not contemplate “the theory of actio nata,  according to which the statute of limitations begins at the exact moment of the arising of the cause of action“.

Notwithstanding the above, this change in their position did not imply the automatic repel of Precedent No. 229, given that it was a prevailing understanding for the 20 (twenty) years of the Civil Code of 2002. It was proposed that the “viability” of Precedent No. 229 of the Superior Court of Justice under the Civil Code/2002 be “analyzed, within the scope of the Second Section, in another supervening case“.

However, in the rulings from 2022 onwards, it can be seen that STJ has adopted the most recent understanding, which is more favorable to the Insured. This is because the statute of limitations begins from the moment the Insured is unequivocally aware of the Insurer’s denial of insurance coverage.

In view of the change in STJ’s position, the internal procedures of the Insurers are being impacted, considering that they now have an additional duty to make sure that the Insured has the unequivocal knowledge of the denial of coverage, given that only from this unequivocal knowledge does the statute of limitations begin for the Insured to exercise its claim against the Insurer aiming at the payment of the indemnity.

Due to the restrictive understanding of the “unequivocal knowledge of the denial of coverage”, the Insurers have filed several requests for the reopening of loss adjustments that were shelved due to the Insured’s inertia in submitting information or documents, on the grounds that, as the shelving did not occur due to the denial of coverage,  but rather due to the failure to submit documents and clarifications, the statute of limitations for the Insured to exercise its claim against the Insurer had not begun, effectively granting additional time to the Insured.