The purpose of the research topic is to conduct an in-depth study of the issues related to integrity and its protection in insurance relations and to identify legal and practical problems that arise in non-compliance with this principle. Consequently, the goal of the topic is to analyze the mentioned problematic issues, highlight them, and subsequently propose potential solutions and recommendations for the benefit of readers.1 Integrity is the principle of civil turnover, therefore its solidity and stability depend on the integrity of the participants in civil turnover. “Integrity is not only a right but also an assumption of fulfilling a duty, because integrity implies the action of the participants of the civil turnover with consideration and responsibility, treating each other with respect for the rights”;2 Consequently since the insurance contract is a type of civil contract, it is natural that the obligation to protect integrity is also essential in relation to it;3 Nonetheless, I believe that in the case of insurance, protection of integrity acquires an even wider meaning and implication. This is because the fundamental principle and core of insurance contracts is based on the supreme trust between the involved parties. Consequently, if the contracting parties fail to uphold the principle of integrity, it could cast doubt on the existence of the insurance.
Keywords: Insurance, Principle of integrity, Insurance contract
The relevance of the research topic is also determined by the continuous growth and increasing importance of the insurance sector. This is primarily attributed to the rapid pace of global development, where insurance has become an indispensable part of people’s daily lives and existence. For instance, in the United States of America, there’s a prevailing perspective that one cannot exist without insurance. Therefore, the insurance industry continues to evolve daily, and Georgia should be no exception to this trend.
As previously mentioned, integrity is a principle of civil law, and it naturally extends to insurance law. Therefore, I believe it is important to elucidate the principle of integrity and its essence in general: “As per the third part of Article 8 of the Civil Code, participants in a legal relationship shall exercise their rights and duties in integrity”. The above-mentioned norm complements the part of Article 361 of the same Code, which stipulates that the obligation shall be performed duly, in integrity, and at the time and place determined and the aforementioned includes the entire private law.
The principle of integrity in the legislation and doctrine of modern developed countries is largely related to moral standards. Integrity encompasses sincerity, justice, and an honest attitude to fulfilling “obligations”. In essence, it can be described as a commitment to decency, with any breach resulting in accountability.
In continental European law, the principle of integrity urges parties to fulfill their mutual obligations in integrity, based on mutual trust and faith. This principle is analogous to assessing human behavior in terms of moral qualities and interpersonal relationships based on the concepts of good and evil.
Chapter I. The Effect of the Principle of Integrity in the Insurance Contract
The principle of integrity in Georgian contract law is not thoroughly explored, with very few examples of its interpretation in contractual norms where the obligation to adhere to this principle is established. Its essence is primarily dispersed across various sections of the Civil Code, including the chapter on insurance contracts. Thus, it is only through a joint and complex study that we can determine the principle of integrity in insurance relationships. This underscores the relevance of the research topic, highlighting the importance of incorporating foreign doctrine and judicial practice to accurately define its essence and significance.
The principle of integrity in insurance law undoubtedly implies that both parties to the contract, whether it's the insured or the insurer (insurance company), must fulfill their obligations under the insurance contract in a manner that is characterized by integrity, fairness, and honesty, as one would reasonably expect from each other.
As it is commonly known, the primary distinguishing feature of an insurance contract is the principle of uberrimae fidei, signifying the utmost integrity between the parties involved. This principle expresses the essence of the insurance contract itself, where the presence of an element of risk is pivotal. It stems from the fundamental uncertainty of whether an insurance risk will be “realized” i.e. an insurance event. Consequently, the parties are obliged to honestly disclose all pertinent and essential facts within their knowledge, which may influence the terms of the contract or its overall conclusion.
When reviewing the concept of integrity within an insurance contract, it's crucial to discuss the accurate interpretation of when the insurance contract becomes effective. This is significant because it marks the point at which the insurance company’s obligation to provide compensation to the insured originates. And since the issue concerns the issuance of insurance compensation, it is natural that the observance of the principle of integrity acquires special importance, especially since the above-mentioned issue is regulated quite imperfectly by the Georgian legislation.
According to Article 806 of the Civil Code of Georgia, the insurance shall commence at 24:00 on the day the contract is entered into and shall end at 24:00 on the last day of the contract period.And according to Article 816 of the same code, until the first or one-time insurance premium is paid, the insurer shall be free from liability. As observed, the aforementioned two articles exhibit some inconsistency, potentially leading to practical challenges, for example, when a person signs an insurance contract with an insurance company, and the contract does not specify the exact time of payment of the initial insurance premium, the insurer planned to pay it after a few days, however, an insurance event occurred on the second day after the contract was signed, Although the insured had an expectation that the insurance contract was concluded and he/she would receive the insurance compensation, however, the insurance company legally refused to disburse the insurance compensation.
In the given example, it initially appears that there is no evident unconscientious attitude on the part of the contracting parties. Nonetheless, considering that insurance contracts rely on the utmost mutual trust and the principle of integrity between the parties, the insurance company should have, in the spirit of integrity, warned the insured of the mentioned issue during the contract signing process.
This is important because the insured probably wasn’t informed about it and likely had different expectations as a result.
In summary, we can conclude that for the insurance contract to be established and become effective, there’s a requirement for both Articles 806 and 816 of the Civil Code to coexist simultaneously. It would be beneficial if these two regulations were consolidated into a single article, while also specifying the timeframe within which the insurer must make the initial insurance payment, commonly known as the premium (ideally, this should be determined on the same day as the contract signing). This step aims to simplify the contractual arrangements between the parties and minimize the potential for legal disputes in the future.
In this regard, the situation is different in German law, which distinguishes three stages of the beginning of insurance: the “formal” commencement of the insurance, which coincides with the conclusion of the contract by the parties, when all essential conditions are agreed upon, the “technical”' initiation of insurance, wherein the contract is considered finalized based on the date specified in the record or policy; and finally, the “material start of insurance”, where the contract is considered to commence from the moment the insured pays the insurance premium.
Chapter II. Insurance Value
When discussing the principle of integrity in insurance relationships, it is appropriate to consider the issue of insurance value. This is because the principle of integrity holds particular significance in insurance law when evaluating the insurance value.
The insurance value represents the monetary amount at which an individual’s life or health is insured. It is determined through an agreement between the parties, considering the insured risk. Meanwhile, an insurance assessment (or value) is the evaluation of the insured object expressed in monetary terms. It’s interesting to note that “while property insurance restricts the insured amount to the value of the insured object, in contrast to the aforementioned, life insurance places no such limitations. In the case of life insurance, the coverage is unlimited and is solely determined by the agreement of the parties involved in the contract, which is logical given the priceless nature of human life”. However, on the other hand, this flexibility that we enjoy in setting the insurance value for personal insurance carries a certain element of risk, for instance, in the case of life insurance, when insurance is carried out within the limits of a substantial sum insured, the risk of artificially (unfairly) causing an insurance event naturally increases, which primarily endangers the insured and their life. In such a case, obviously, we have the composition of the crime, which is punishable by law, but to protect the insured’s life and health from such cases as much as possible, I believe it is necessary for the legislator to define the scope of the insurance value even more strictly, and in each specific case, before signing the insurance contract, a thorough analysis, study, investigation, and personalized approach to each insured object should be conducted prior to signing the insurance contract, we can also use an illustration from the United States, where if an individual consumes even a few cigarettes daily, or half a pack, they are categorized as smokers and may not be able to sign a life insurance contract with the company at all, or receive it but within the limits of another insurance amount (far more expensive or more in a smaller amount than in the case of a non-smoker).
In addition to this unique aspect, “insurance companies in the United States typically collaborate with specialized medical institutions before concluding a life insurance contract. These institutions serve as information centers regarding individuals who have applied for life insurance from other participating companies”.
A noteworthy aspect is that the insurance company has the authority to seek information about the prospective policyholder from their physician before finalizing the insurance contract. This practice provides an added layer of protection for both the insurer and the insured. I believe that this meticulous and thorough approach sets a high standard for insurance practices in this country, and it would be beneficial to consider incorporating a similar approach into our legislation.
Chapter III. Insurance Risk
Insurance risk is one of the main foundations of the insurance relationship. It refers to the situation outlined in the contract, the occurrence of which could result in the insurer’s loss or reduction of their property interest.  These events are primarily characterized by the fact that the parties to the contract can assume only the possibility, probability, and not the inevitability of its occurrence. In relation to the assessment of insurance risks, insurance companies, as a rule, have developed for a specific type of insurance, written questionnaires about the circumstances of the risk. It is the insurer’s responsibility to provide an accurate answer to this questionnaire. In relation to this, Article 810 of the Civil Code stipulates the following; “If the insured was required to respond to written queries about the circumstances of a danger, the insurer may terminate the contract for the failure to communicate the circumstances, which, though not inquired about, were intentionally withheld by the policyholder”. This means that the insured is obliged, in integrity, to inform the insurance company about a danger that no one inquired about but of which the insured had specific knowledge, and deliberately and unconscientiously concealed such a fact.
The article mentioned above undeniably safeguards the principle of integrity in insurance relationships. Violating this principle can undermine the very foundation of the insurance system, as the essence of insurance lies in the parties having only the probability or assumption of an insured event occurring. This assumption is the main distinguishing feature of an insurance contract from other types of contracts, and naturally, if the parties fail to uphold the principle of integrity in assessing insurance risk, we will not have an insurance contract.
As a result of the research, the special importance and influence of the principle of integrity in the insurance contract was highlighted. While this principle may not be explicitly defined by legal regulations, this principle holds such significance in insurance relationships that it can be regarded as the primary and fundamental foundation for the formation of insurance contracts.
While working on the paper, a comparative-legal analysis was conducted, primarily focusing on foreign countries, particularly in relation to the United States of America. As a result, it was determined that it is appropriate to incorporate a requirement to protect the principle of integrity in the legal norms governing insurance relations, and it is also important to instruct the parties to an insurance contract to act with integrity towards each other.
It is crucial to emphasize the importance of safeguarding integrity when calculating insurance risk and value. In this context, it would be beneficial for the legislator to consider practices in the United States of America and adapt them to the specific needs of the Georgian population in our legislation, although not necessarily identical to those in the aforementioned country.
As it is well known, the legislation undergoes certain changes along with the development of the country, which is a natural process. Nevertheless, I believe that the insurance law lags behind other agreements outlined in the Civil Code. This is primarily due to the continuous growth of the insurance sector, as previously mentioned. It is evident that the applicable law in Georgia “On Insurance”, including those in the Civil Code, no longer adequately addresses the contemporary demands of the insurance market. Consequently, this deficiency leads to complex insurance relationships. This is why it’s crucial to undertake the so-called “modernization” of insurance legislation and establish a strong foundation for the country's progress. For example, I propose consolidating Articles 801-816 into a single provision to accurately define the commencement of the insurance contract’s effectiveness. Additionally, it would be beneficial to specify the time for the payment of the initial insurance deposit (premium).
Based on all of the above, I believe that this field requires revision and refinement by the legislator.
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