Introduction

Recently, there has been a paradigm shift in the criteria governing insurance matters in Mexico. This shift is primarily attributable to an alleged asymmetrical relationship between insurance companies and the insured, which has resulted in the issuance of new criteria by Federal Courts, including the Mexican Supreme Court of Justice.

These criteria can be divided in two main topics: the first pertains to regulating the procedural relationship between an insurance company and the insured within a commercial proceeding; and the second involves addressing discrimination in the insurance sector.

Asymmetrical procedural relationship

It seems that the criteria adopted by the Federal Courts is that there is a situation of inequality or asymmetry between the insurance companies and the insurer. Therefore, there are several criteria that in a certain way try to close the gap of this alleged asymmetry, but which are detrimental to the insurers.

Burden of proof

In 2011, the First Chamber of the Mexican Supreme Court of Justice issued an obligatory precedent (Jurisprudencia) in which it held that the insured is only responsible for proving in trial the occurrence of a loss under a policy; nothing else. On the other hand, this precedent imposes on the insurance companies the duty that when answering a claim, they must provide all the reasons for denying the claim, and if they fail to do so, any argument that was not expressed prior to trial (i.e. in the claim procedure), cannot be brought up in court. Also, the precedent provides that it is the insurance companies’ burden to prove any exclusion that is not clearly derived from the policy.  See precedent with electronic record 2000167.

In a similar way, a Federal Court has ruled, in another obligatory precedent, that in a court’s proceeding the insured only has the burden of proving: 1) the existence of the insurance policy; 2) the materialization of the covered risk; and 3) that it gave timely notice to the insurer when the risk occurred. No more. In contrast, if the insurance company claims that the exclusion is contained in the general conditions of the policy, it is up to the insurer itself to exhibit the policy in trial, if the insured did not. This criterion relieves the insured from the burden of exhibiting the document base of its claim (i.e. the complete insurance policy, including the general conditions).  See precedent with electronic record 2023798.

Amendment of deficient pleadings

The Supreme Court of Justice established that if the insured party prevails in the merits against an insurance company, the latter should be ordered to pay an indemnity for late payment, even when it was not claimed as a benefit. This criterion implies that the courts can make up for the deficiency of the complaint in commercial matters when an insured party does not expressly claim indemnity for late payment.  See electronic record 2023630.

Punitive damages  

Finally, one of the most relevant criteria issued by the Supreme Court is regarding punitive damages and what Courts have to take into consideration when awarding these types of damages against insurance companies.

A woman sued from an insurance company the forced performance of a health insurance policy, moral and punitive damages. The woman based her claim in the fact that she acquired the health insurance policy because it had an additional benefit of "heart attacks and cancer in women". However, once the insurance was contracted, the insurance company never provided the woman the general conditions of the policy, and the policy was not registered with the National Insurance and Bonding Commission.

Subsequently, the woman was diagnosed with cancer and filed a claim with the insurer. After medical examinations and after obtaining an opinion from external lawyers, the insurance company informed the woman that her type of cancer was expressly excluded in the general conditions of the policy.

The woman alleged in trial that having to initiate a lawsuit to request the performance of the insurance policy caused her moral damage, since she had already been receiving psychological help to deal with her illness and having to proceed judicially makes her ventilate her intimate life in court. The insurance company, when answering the claim, stated that the woman's illness was expressly excluded in the general conditions of the policy. However, it did not exhibit in court the general conditions of the policy.

The insurance company was ordered to perform the insurance policy and cover the women’s medical bills and acquitted the insurer from the moral and punitive damaged claimed. Mainly, the Supreme Court concluded that:

• • When analyzing moral damages, Courts have the obligation to take into consideration whether the insurance company complied with its duty to provide complete information on the coverage of a policy, from the first moment of the contractual relationship (i.e. provide the insurer with the general conditions of the policy).
  • To award punitive damages, bad faith and negligence of insurers must be analyzed. The failure to comply with the duty to inform the woman of the risks covered and to deliver the general conditions of the policy, translated into a serious fault.
  • The fact that the woman had to file a lawsuit to make the insurer comply with the policy increased the anguish she was suffering due to her cancer. This anguish increased with the insurer's requests for invasive medical examinations, which were shared with external attorneys, thus violating the woman's right to privacy. This, therefore, makes the moral damage appropriate for compensating woman.

This criterion is relevant for the insurance sector, not only because it sets the rules for awarding punitive damages, but also because it imposes the obligation to provide complete information to the insured from the first moment of the contractual relationship and to have their products duly registered before the National Insurance and Bonding Commission. Failure to do so could be considered a serious fault that could give rise to claims for moral damages or punitive damages.  See review motion 4306/2020.

Discrimination in the insurance sector

As of the 2013 reform to the Amparo Law (Ley de Amparo), a private party may be designated as an authority for purposes of the amparo proceeding to protect human rights. Also, in 2011 the Mexican Constitution was reformed to widen the protection of human rights and, amongst others, the concept of horizontal protection of human rights appeared. These two reforms make it possible to conceive that not only authorities may violate human rights, but private individuals too.

As a result, the Mexican Supreme Court has ruled that an insurance company can be indicated as the responsible authority in an amparo proceeding, if it violates human rights of the insured (i.e. right to non-discrimination) when rejecting a claim, or denying to insure.  See docket 40/2020.

Regarding discrimination in the insurance sector, the Senate recently approved a Bill to reform the Insurance and Bonding Institutions Law (Ley de Instituciones de Seguros y Fianzas) and the Insurance Contracts Law (Ley Sobre el Contrato de Seguro) regarding the rights of people with disabilities, which was passed to the Congress for review and approval.

The Bill provides for the amendment of the Law of Insurance and Bonding Institutions to provide that Insurance Companies may not refuse to receive an insurance application for reasons of ethnic or national origin, gender, age, disability, among others that violate the human dignity of the applicant. The Bill also intends to reform the Insurance Contract Law to expressly provide for the prohibition of denying access to an insurance policy or to increase the costs of premiums based on the aforementioned reasons, unless they are based on justified, proportionate and reasonable causes, which should be previously and objectively documented.

Another Bill was filed before the Congress (July 2023) to reform, amongst others, the Insurance Contracts Law to prohibit insurance companies to deny insuring a person based their ethnic origin, sex, gender, age, disability, social status, or similar conditions.

In the evolving landscape of Mexico's insurance sector, recent changes are challenging the traditional relationship between insurers and the insured. With courts favoring more equitable procedures and protection against discrimination, insurance companies must adapt to new requirements to ensure fair treatment for policyholders. By providing complete policy information, upholding human rights, and avoiding discriminatory practices, insurers can thrive in Mexico's transformative era of insurance trends.

Other hot trends and hot topics within the Mexican insurance landscape to pinpoint

As much as Court Precedents will contribute to reshaping all principles and standards in this specific industry, and at the legislative level,  regulatory and supervision agencies, and other key players, operators, and aspects in this field will also follow paramount modifications. It is worth highlighting the following topics:

• Digitalization of insurance services: in line with global trends, the Mexican insurance industry is expected to continue its digital transformation in the coming years. Insurers will continue to invest in technology to enhance the customer experience, streamline operations, and increase efficiency.
• • Greater focus on cybersecurity: with the increasing threat of cyber attacks, the Mexican insurance regulator is expected to issue guidelines and regulations on cybersecurity for insurers. This will ensure that insurers have adequate measures in place to protect customer data and mitigate risks associated with cyber threats.
  • Expansion of mandatory insurance: the Mexican Government may expand the range of mandatory insurance products to include new sectors such as health and transportation. This will create new business opportunities for insurers and drive growth in the industry.
• • Enhanced consumer protection: the Mexican Government is expected to continue to prioritize consumer protection in the insurance industry. Regulations may be introduced to ensure that insurers are transparent in their operations, provide clear and concise information to customers, and act in the best interests of their clients.
• • Increased regulatory oversight: the Mexican insurance regulator, Comisión Nacional de Seguros y Fianzas (CNSF), is expected to increase its regulatory oversight of the insurance industry. This will include increased scrutiny of insurers' financial and operational practices, as well as enforcement of existing regulations.

Insurers should stay abreast of these developments to ensure that they are well positioned to navigate the changing regulatory landscape.

Authored by Alejandro Garcia Gonzalez, Luis Ernesto Peon Barriga and Fernanda Serrano