The most basic obligation of the insurer in insurance contracts is to assume the risk. Risk is defined as situations that are not known whether they will occur or not. The liability of the insurer who assumes the risk begins with the payment of the premium or the first installment, provided that there is no provision to the contrary in the contract. However, in some cases, it is possible to protect risks that occurred before the insurance contract was concluded within the scope of insurance.

According to Article 1548 of the Turkish Commercial Code titled Retroactive Insurance; Insurance can be made in a way that insurance protection is provided as of a date before the contract is made. However, if the insurer, the policyholder and the insured, provided that they are aware of the insurance, know that the risk has occurred or that the possibility of its occurrence has ceased, the contract is invalid. In cases where the risk has occurred or the possibility of occurrence has been eliminated is known by the policyholder or the insured, but not by the insurer, the insurer is entitled to the entire premium to be paid, although it is not bound by the contract.

As can be understood from the provision, the parties to the contract may determine the starting date of the insurer’s liability as a date before the payment of the premium or the first installment or as a date before the conclusion of the contract. If the parties agree that the insurer’s liability begins on a date before the date the insurance contract is concluded, retroactive insurance is in question. In other words, retroactive insurance is the conclusion of the insurance contract in a way that the material starting time starts from a date before the formal starting time. Retroactive insurance is established at the time the insurance protection is contracted by the insurer and the policyholder to be effective in the past, and thus the parties enable the insurance protection to be extended to a date prior to the establishment of the contract, i.e. to have a retroactive effect.[1]

While insurance with retroactive effect is regulated in the Turkish Commercial Code, under the section on Damage Insurance and the title of Property Insurance, it is also possible to conclude an insurance contract with retroactive effect in terms of liability insurance due to the reference in Article 1458 of the Turkish Commercial Code. However, the situation is different in terms of life insurance. There is no regulation regarding retroactive insurance in the provisions regarding life insurance, nor is there any reference to Article 1458. Therefore, it is not possible to conclude insurance with retroactive effect in terms of life insurance.

When it is necessary to look at the conditions of an insurance contract with retroactive effect, the first thing to focus on is that there is an agreement between the insurer and the policyholder regarding the conclusion of insurance with retroactive effect. In other words, the insurer and the policyholder must have agreed that the liability of the insurer will begin on a date prior to the date the insurance contract is concluded.

The second issue is related to the awareness of the risk. According to the clear provision of the law, an insurance contract with retroactive effect can only be concluded in cases where it is not known that the risk has occurred. In other words, if the insurer, the policyholder and the insured, provided that they are aware of the insurance, know that the risk has occurred or that the possibility of occurrence has been eliminated at the time of the contract, the contract is invalid. It should be noted that in such a case, the consent of the policyholder or the insurer is of no importance. If the risk is known, the contract will probably be invalid. However, in cases where the policyholder or the insured knows that the risk has occurred or that the possibility of occurrence has been eliminated but the insurer does not know, the insurer is not bound by the contract and is entitled to the full premium to be paid.

If the insurance contract with retroactive effect has been concluded validly, when the policyholder learns that the risk has occurred in the past, this matter will be notified to the insurer without delay. The insurer’s obligation to pay compensation becomes due after the risk has occurred and the documents related to the risk have been given to the insurer, and after the insurer’s investigations regarding its performance have been completed and, in any case, forty-five days after the notice to be given in accordance with Article 1446 of the Turkish Commercial Code. When the debt becomes due, the insurer goes into default without the need for a notice. In addition, the provisions of the contract that provide for the insurer to be relieved of the obligation to pay default interest are invalid.[2]

Finally, it is necessary to evaluate the issue of insurance with retroactive effect in terms of different insurance types.

Since compulsory traffic insurance is a compulsory insurance, the insurance contract must be concluded before the risk occurs. Since it is a compulsory insurance type, it is not possible to conclude compulsory traffic insurance with retroactive effect. Since the insured are mostly vehicle owners, they are in a position to know whether the risk will occur or not. However, the situation may differ for legal entities. Motor vehicles in the assets of legal entities are insured by their authorized bodies. If the authorized bodies do not know that the risk has occurred, the contract they have concluded with retroactive effect must be considered valid. The explanations regarding compulsory traffic insurance are also valid for Casco Insurances. In other words, retroactive insurance is not possible in Casco insurances either.

As we have stated before, it is possible to conclude retroactive insurance in liability insurances. According to Article A.1/b of the General Conditions of Professional Liability Insurance, coverage is provided against claims that may be made against the insured only during the contract period due to an incident that occurred before the contract was made or while the contract was in force, including reasonable expenses related to the claim up to the amount specified in the contract. Therefore, the parties to the professional liability insurance contract may decide to claim risks that occurred before the contract was made during the contract period.[3]

As a result, it is possible to conclude an insurance contract with retroactive effect in our law. However, for this, the policyholder and the insurer must agree on this matter. In addition, if it is known that the risk has occurred, the contract is invalid regardless of the consent of the parties to the contract. In cases where the policyholder or the insured knows that the risk has occurred or the possibility of occurrence has disappeared but the insurer does not, the insurer is not bound by the contract but is entitled to the entire premium to be paid.

The 11th Civil Chamber’s Decision, Merits No. 2020/1388 and Decision No. 2021/4935 regarding the subject is as follows;

The case arises from a retroactive insurance contract.

The basic element in all insurance contracts is risk. In the sense of Insurance Law, risk is an event that is not known in advance whether it will occur (property insurance) or when it will occur (life insurance) even if it is certain to occur (Ünal Samim Insurance Law, 1.P.14). Retroactive insurance can be decided in all types of property insurance (transportation and liability insurance, etc.).

If the risk to be insured under the insurance contract has occurred or its probability of occurrence has been eliminated, since the subject of the contract has become impossible for the insurer (risk carrying obligation), the contract should be deemed absolutely void according to the general sanction. On the other hand, retroactive insurance contracts are allowed to be made in a way that provides insurance against risks that have occurred or ended before the date of establishment; as long as the parties do not know about this.

In retroactive insurance, legal consequences are clearly tied to the fact of “knowledge”. Therefore, the possibility that one of the parties “should have known” or “could have known” does not have any consequences within the context of this article. However, if the party in question has refrained from obtaining the information in bad faith, it will be deemed that he “knew” and sanctions will be applied. Similarly, if “not knowing” is not possible according to the circumstances of the case, it will be deemed that the relevant party knew. The sanctions tied to the parties’ knowledge of the risk while the insurance contract is being established concern public order; therefore, in the event of the existence of retroactive insurance, the court shall take into consideration the provisions of Article 1458 of the TCC due to its duty (ex officio). In the event of the existence of “knowledge” as observed in the article, the parties’ wills no longer have any significance; the contract is invalid. The party who claims that the other party “knew that the risk had occurred or disappeared” has the burden of proving this claim. This claim can be proven with any kind of evidence, including witness testimony.

In retroactive insurance, the sanction of invalidity of the contract should be applied to the policyholder who did not notify that the risk had occurred or disappeared, not the rules regarding the breach of the declaration obligation, but as a special provision.

REFERENCE

Çapa, M. S. (2014). Geçmişe etkili sigorta. Ankara Hacı Bayram Veli Üniversitesi Hukuk Fakültesi Dergisi, 18(3), 341-362.

The 11th Civil Chamber’s Decision, Merits No. 2020/1388 and Decision No. 2021/4935

Turkish Commercial Code and Related Legislation

[1] Çapa, M. S. (2014). Geçmişe etkili sigorta. Ankara Hacı Bayram Veli Üniversitesi Hukuk Fakültesi Dergisi,

18(3), 341-362.

[2] Çapa, M. S. (2014). Geçmişe etkili sigorta. Ankara Hacı Bayram Veli Üniversitesi Hukuk Fakültesi Dergisi,

18(3), 341-362.

[3] Çapa, M. S. (2014). Geçmişe etkili sigorta. Ankara Hacı Bayram Veli Üniversitesi Hukuk Fakültesi Dergisi,

18(3), 341-362.