Insurance Litigation 2022 Comparisons

Insurance disputes in Italy are decided by the ordinary courts under the rules set out in the Italian Civil Procedure Code for general disputes and in the Private Insurance Code, a text that collects all the Italian legislation regarding the insurance sector and defines the competence of the Institute for the Supervision of Insurance (IVASS), a fundamental body for the sector which is meant to ensure the stability of the insurance market and consumer protection.

Italy is currently expecting a significant reform of the civil trial to be adopted within the National Recovery and Resilience Plan, part of the Next Generation EU (NGEU) programme. The reform will be aimed at reducing the time taken by the proceedings and increasing the use of alternative dispute resolution.

First Instance (Tribunale)

The first instance phase starts with an introductory deed which, in ordinary proceedings, is the writ of summons. This writ of summons establishes the procedural relationship between the parties and identifies the subject matter of the claim.

The defendant(s) shall enter an appearance within a period of 20 days before the date of the hearing fixed by the court, and they must raise all the possible procedural and substantive objections that cannot be detected by the judge. Within the same time limit, the defendant must state their counterclaims (if any). In the same deed, the defendant can request the court’s authorisation to call other parties into the proceedings (an option often taken by insurers).

Insurance companies are usually involved in ordinary proceedings as third parties called upon by the insured against whom proceedings have been brought. This is known as a “third-party joinder” (TPJ).

At the first hearing the judge shall verify the validity of the writ and of the notification and any request to call a third party, and they must take all necessary measures to make sure that all the parties have been called appropriately.

All courts in Italy, in recent times, have been using remote hearings and enhanced written hearings to reduce the need for physical presence in the courtroom.

Upon the parties’ request, the court grants terms for additional briefs. The parties often request this.

Once all the pleadings are filed, or when the relevant terms have expired, the judge will take their decision on the possible means of proof to be admitted in the proceedings (eg, witnesses or experts to solve technical questions) and eventually arrange a specific hearing. The judge is free to evaluate the evidence provided by the parties and decide on its admissibility.

If no further activity must be carried out and the case is ready to be decided, the judge invites the parties to finally state their conclusions and fixes a further and final hearing where they grant a further allocation of time to file the final briefs and an allocation of time to reply to the other parties’ final briefs.

Once both terms have expired, the judge will issue their judgment generally within six months of the filing of the final briefs (even if there is not a mandatory time limit).

Interim measure

Within the very same ordinary proceedings, before the final judgment, the parties are entitled to ask the court of first instance to order interim measures such as seizures (to preserve specific assets or to freeze the debtor's property) or even orders of injunction.

The above measures can be immediately enforceable and can be granted only if the request is prima facie grounded (fumus boni iuris) and there is a risk that the debtor's financial situation will deteriorate (periculum in mora).

Appeal

The appeal against the first-instance judgment is aimed at re-examining the judgment both with regard to its merits (ie, the reconstruction of the historical facts) and with regard to any mistakes in the application and interpretation of the laws applicable to the specific case.

The judge of second instance will limit its analysis and ruling to those aspects of the judgment that have been indicated by the party as incorrect. The judge cannot affect parts of the judgment that have not been specifically challenged by the appellant.

The judgment on appeal can be:

• a confirmatory judgment, when the judge confirms the judgment that is subject to appeal; or
• a reform judgment, where, by reforming the judgment, the court definitively decides either that the case should not continue or that it should be resumed ex novo before the first judge.

Recourse to the Supreme Court

Recourse before the Supreme Court consists of an appeal against judgments pronounced in the second or first instance, but only on the grounds of errors of law, since it is not possible for the Supreme Court to reassess the merits of the dispute, as happens in appeal proceedings.

For all intents and purposes, it is a review of legitimacy and therefore a check on the exact application of the rules of law.

The Supreme Court may declare the recourse inadmissible, reject it, uphold it and consequently annul the judgment with or without referring the matter back to the judge of second or first instance, or rectify errors without leading to annulment.

General Rules on Limitation

Any claim deriving from an insurance contract is subject to a two-year limitation period starting either from the date the loss occurred or, for third-party liability insurance, from the date the third party's claim is notified to the insured.

Notification by the insured to the insurer of the third party’s claim stays the two-year limitation period until the claim becomes due and payable or the third party’s claim against the insured (or the insurer for motor vehicle liability insurance) becomes time barred. In life insurance policies, however, the limitation period is extended to ten years.

The recourse to alternative dispute resolution has recently been strongly encouraged by Italian law. The alternative dispute resolution (ADR) methods most frequently used in Italy are mediation, negotiation and arbitration.

Mediation

The mediation procedure introduced in 2010 is defined as the “activity carried out by an impartial third party and aimed at assisting two or more persons in seeking an amicable agreement for the settlement of a dispute, including the formulation of a proposal for its resolution”.

The application for mediation is submitted, through a lawyer, to a mediation body among those listed by the Ministry of Justice.

This procedure may be optional or mandatory and lasts for a maximum of three months. It must be noted that, when based on an insurance contract, the mediation procedure is a condition for proceeding before a judge.

The conclusion of the first meeting without an agreement is sufficient to fulfil the condition for the action to proceed in court.

If the mediation results in an agreement, this may have the value of an enforceable title.

Negotiation

The so-called “assisted negotiation”, introduced in Italy in 2014, is a binding contract in which the parties involved in a dispute, as an alternative to the ordinary jurisdiction, agree to sign an agreement by which they agree to co-operate in good faith and with loyalty to settle a dispute amicably, assisted by one or more lawyers.

This procedure may be optional or, in some cases, mandatory. When it is mandatory, for example for requests for compensation for damage resulting from the circulation of vehicles, it is considered as a condition of admissibility of the judicial request.

Arbitration

The arbitration procedure is governed by the Code of Civil Procedure.

This alternative method of dispute resolution is not very common in the Italian legal system, at least as far as the insurance field is concerned.

The parties may include clauses in the insurance contract giving them the option/obligation to resort to arbitration in the event of disputes between the insurance company and the insured, for example, on the interpretation of the contract. Such clause is subject to a number of limitations, namely when a consumer is involved. It is for this reason that it is more common to have clauses containing arbitration as an option rather than as an obligation.

However, it must be noted that a specific arbitration body for insurance disputes is expected to be established as a result of the implementation of Article 15 of the European Insurance Distribution Directive (EU) 2016/97.

Generally, the parties are free, according to Italian law, to contractually choose the jurisdiction, provided that the choice results from a written deed and that the dispute concerns rights the parties can legally dispose of. The clause can be considered void in the presence of a weaker party (eg, the insured person). The weaker party can generally opt for the jurisdiction of the country where they ordinarily reside.

In the absence of a choice having been made, EU Regulation 1215/2012 applies. The Regulation, as well as Italian law, establishes a rule according to which persons domiciled in the territory of a specific EU member state are summoned, regardless of their citizenship, before the courts of that member state.

In the matter of civil offences, the Regulation provides for the alternative forum of the place where the harmful event has occurred or may occur, or where the offence occurred.

In the field of insurance contracts, a more favourable criterion is envisaged for the policyholder as a weaker party, which goes as far as to allow them access to justice in their state of habitual residence.

According to the Italian system of private international law, recalling EC Regulation no 593/2008, the parties are free to choose the law applicable to their contract (with the possibility for the weaker party to invoke any more favourable national mandatory laws).

In the absence of a choice, the applicable law is determined by the provisions of the rules of Italian private international law, which recalls EC Regulation no 593/2008.

Foreign civil judgments issued in an EU member state which are enforceable in that member state shall be enforceable in Italy even if they are not final and binding, by virtue of Regulation 1215/2012 (Brussels I).

In this case, an application must be filed before the competent Italian court pursuant to Article 42 of Brussels I and some bureaucratic procedures will have to be carried out in order to guarantee the authenticity of the decision adopted by the foreign judge.

The process involves the translation and notification of the decision to the sentenced person as well as the compilation of a form by the Authority that issued the sentence on the basis of which the existence and the authenticity of the decision is guaranteed.

The Italian judge can decide not to recognise the sentence adopted by the foreign judge if the judgment has not been issued in accordance with the Italian Code of Civil Procedure and when it is contrary to public policy (the Italian Court of Cassation recently admitted the recognition of foreign sentences containing punitive damages even if these are not provided in the Italian legal system).

The recognition and enforcement of non-EU judgments is governed by Law 218 of 31 May 1995, which provides for an application to be filed before the court of appeal of the place where the judgment will be enforced. In order to be recognised and enforced, non-EU judgments must be final and binding.

Once the EU or non-EU judgment has been recognised as enforceable, their enforcement is regulated by the Italian Code of Civil Procedure.

International insurers should be aware that in Italy the estimated time for ordinary civil proceedings’ conclusion can be extremely long, although this can sometimes turn into an advantage, for example in negotiations for the settlement of the dispute (where the insured might be willing to immediately accept a lower amount rather than waiting years for the conclusion of the proceedings).

The time for the conclusion of a first-instance judgment is approximately three to five years, three to four years in case of the second instance and approximately four years for proceedings before the Cassation Court. The average duration of a full trial is therefore about eight to ten years. It must be noted though that first instance judgments are immediately and temporarily enforceable and that the appeal or recourse to the Cassation Court does not automatically suspend enforceability.

The Italian Code of Civil Procedure also provides for the possibility of resorting to special procedures, which are characterised by their speed and simplicity compared to the ordinary procedures.

A so-called summary proceeding can be pursued when the case is based on documents or does not require complex means of proof. Other options include proceedings for urgent precautionary or interim measures, such as the proceedings available under Article 700 of the Civil Procedure Code, which is an exceptional residual remedy that is only available when no other standard interim remedies are available or adequate. An interim measure can be granted only if the request is prima facie grounded (fumus boni iuris) and there is a risk that the situation deteriorates (periculum in mora).

Devolution of Dispute Resolution from the Ordinary Court to the Arbitration Court

Where a party brings an action before an ordinary court to seek the resolution of a dispute arising out of a breach of a contract containing an arbitration clause, the counterparty generally raises a plea of lack of jurisdiction of the ordinary court in favour of the arbitral body.

In such cases, the ordinary court usually upholds the aforementioned objection and refers the case to the arbitral body.

The Arbitration Provisions in the Insurance Contract

In relation to the insurance contract, as to any other typical or atypical contract subject to Italian law or to another legal system, an arbitration clause or a separate arbitration agreement may be validly inherent to settle by arbitration the legal disputes that may arise on the conclusion, interpretation and performance of such contract between the contracting parties (insured and insurer).

In this case, there is total overlap between the contractual area embraced by the insurance contract and the area of possible litigation, which can only refer to elements included in the aforementioned contractual area.

The litigating parties are the same parties who issued the contract, the subject matter of the dispute relates to aspects governed by that contract, and arbitration may bring clarity to the legal situation governed by the contract.

New York Convention

The 1958 New York Convention was ratified by the Italian Parliament with Law no 62 of 19 January 1968 (with effect from 1 May 1969).

Recognition and Enforcement of a Foreign Arbitral Award into Italian Jurisdiction

Whoever wishes to enforce a foreign arbitral award in Italy must apply to the president of the court of appeal in whose district the other party resides; if that party does not reside in Italy, the court of appeal in Rome is competent.

The applicant must produce the original or a certified copy of the arbitral award, together with the deed of compromise, or an equivalent document, in the original or a certified copy.

Where the documents above are not in Italian, the applicant shall also produce a certified copy. The President of the Court of Appeal, having ascertained the formal regularity of the award, shall declare by decree, without contradictory, the effectiveness of the foreign award in the Italian system, unless:

• the dispute could not be settled under Italian law; and
• the award contains provisions contrary to public policy.

Opposition to the decree granting or denying the effectiveness of the foreign arbitral award is admissible by summons to the Court of Appeal within 30 days from the communication in the case of a decree denying effectiveness or from the service in the case of a decree granting it.

The Court of Appeal shall give its decision in a judgment that may be appealed to by cassation.

Arbitration and Dispute Resolution

In the Italian system, for a large number of insurance contracts, there is a discrepancy between the area of contract and the area of litigation; this discrepancy constitutes one of the main weaknesses of arbitration in insurance disputes.

Generally speaking, in insurance contracts, arbitration is used to resolve problems in the quantification of damages, while any disputes arising from the interpretation of the contract fall within the jurisdiction of the courts. The action, which concludes with the stipulation of an arbitration agreement or clause, may be either voluntarily requested by the parties or imposed by the contract, but only if there is an ad hoc clause in the contract.

Lines of Business where the Arbitration Clause is Generally Applied

All the insurance contracts may provide that the resolution of disputes arising between insureds and insurers be referred to the insurance arbitral authority.

However, insurance arbitration is mainly used in disputes arising from traffic accidents.

Applied Rules, Nature of the Arbitration and Appealability of the Arbitral Award

In insurance arbitration, the general rules provided by Italian law for the conduct of arbitration apply.

The decision made by the arbitrator (or by the arbitration board) is called lodo arbitrale, which has the same function as a judgment in ordinary proceedings; it is therefore binding on the parties, who may also render it enforceable by filing it with the court registry and take appropriate action to enforce it.

The Italian lodo arbitrale is subject to an appeal on grounds of nullity, revocation and third-party objection.

Insurance contracts are defined by the Italian Civil Code, which provides specific articles defining the content and structure of such contracts.

The Civil Code specifically provides for terms that mandatorily apply to insurance contracts, in which respect any derogation is considered null and void unless more favourable to the insured party.

In particular, the following provisions mandatorily apply to insurance contracts:

• timing of the insurance proposal (1887);
• risk mandatory disclosure and prior knowledge (1892-98);
• insurance automatic renewal limitation (1899);
• missing payment of premiums, insurance suspension and termination of the contract (1901);
• actions toward the insurance agents acting on the behalf of insurers (1903);
• coverage of the insured’s fees to avoid or limit the damage (1914);
• limitation of coverage for negligent omission to notify the claim or avoid/limit the damage, coverage of the insured’s fees to oppose the claim (1917); and
• change of the insured’s risk (1926). 

Furthermore, the content of particular insurance contracts that differ from the asset defined by law, in case of litigation, can be subject to evaluation to ascertain the worthiness of the contracts and can be amended by the court to balance the obligations between the parties to the contract, on a case-by-case basis.

Insurers have the right to obtain a correct and full discovery of the risk by the insured.

Should the insured fail to provide a correct and full discovery of the risk, with wilful misconduct or severe negligence, the insurance contract can be declared null.

To obtain such declaration, insurers must provide proof that, had they known of the actual risk, they would not have issued the insurance contract (or not with the same conditions).

In order to have the contract declared null and void, insurers have to inform the insured, within three months of obtaining knowledge of the actual risk, that they will exercise their right to discovery.

If a claim arises before the expiry of the three-month term, payment of the claim can be refused.

Furthermore, when an insured fails to provide a correct and full discovery of the risk without wilful misconduct or severe negligence, the insurance contract can be terminated by insurers within three months of obtaining knowledge of the actual risk.

In this second case, if a claim arises before the expiry of the three months term, payment of the claim can be reduced to an amount equal to the premium considered appropriate in relation to the actual risk.

Generally speaking, in policy coverage disputes, the most frequent issues are related to the following:

• policy period and extension: disputes may arise as to the interpretation of duration, automatic renewal and specific cases of coverage extension (eg, in case of retirement, or death for posthumous professional claims);
• risk disclosure and prior knowledge claims usually arise from missing/incorrect/partial information about the insured risk, discovered by insured only after the claim is made, legitimising several remedies to decline/limit coverage;
• policy exclusion for damages deriving from an act committed with wilful misconduct, and Italian law provides a specific exclusion in this regard that cannot be derogated from by the parties; and
• risk exclusions: the policies provide specific exclusions to better define and limit the risk guaranteed. Interpretation of such risks may differ and give rise to claims.

The last year has seen a significant increase in disputes related to the COVID-19 pandemic, extreme meteorological events (due to climate change) and war (as a result of the recent conflict in Ukraine).

Pandemic scenarios, extreme events and war are usually included among the risks excluded by policy provisions.

However, several claims have been raised for compensation with reference to damages caused by forced closures and business interruption.

Both insurance and reinsurance coverage disputes are generally resolved in ordinary civil proceedings.

The ordinary civil proceedings may last two or more years for each stage of judgment (ie, first-instance court, Court of Appeal and Supreme Court), subject to variations due to the complexity of the case.

Although in some cases they are preliminary conditions to commencing action before a court, out-of-court proceedings like mediation and negotiation are not effective in resolving disputes.

In Italy, consumer protection in the insurance field is granted by specific law provisions and handled by IVASS, the insurance supervisory authority.

The provisions on the behavioural rules that the intermediary must observe are summarised in the Private Insurance Code, but the main principles are consistency, clarity and transparency.

Consistency is achieved through the correspondence of the insurance offer to the actual needs of the consumer and thus protects their needs.

Clarity and transparency can be achieved through pre-contractual and on-going disclosures. This principle applies to the contracts, which must be clear and complete, as well as any further insurance document drafted by the insurers. Specific requirements are set by the law to ensure clarity of the contracts.

As to the resolution of disputes, specific out-of-court procedures are set by law when a consumer is involved.

The consumer may forward a complaint to IVASS when they have not received an adequate reply to their request from the insurance company within 45 days. The relevant data on the complaints received by insurance companies and IVASS are subject to public disclosure.

Insurance arbitration is not yet active, but such authority is based on the banking arbitration model, which is already in operation in Italy. Insurance arbitration will be aimed at reducing court cases, with a specific focus on small claims.

Italian law does not generally allow third parties to enforce an insurance contract or sue an insurer in connection with an insurance contract, but the following exceptions apply.

• Liability arising from the circulation of motor vehicles and boats, for which mandatory insurance is required by law. The damaged party is entitled to take direct action against the liable party’s insurers.
• Liability arising from the exercise of medical and healthcare activities, for which mandatory insurance is required by law. The damaged party is entitled to bring direct action against the doctor's/health professional’s insurers.
• Liability of the airline company to the passenger. The damaged passenger is entitled to bring direct action against the airline’s insurers.
• Damages caused by aircrafts to third parties. The damaged party is entitled to take direct action against the aircraft’s insurers.
• Liability arising from hunting activities. The damaged party is entitled to bring direct action against the hunter’s insurers.
• Liability arising from nuclear activities (nuclear power plants are not permitted in Italy and only storage activities are currently allowed). The damaged party is entitled to bring direct action against the insurers of the legal entity exercising the nuclear activity.
• Insurance contracts issued on a third party's behalf. In such contracts, the policyholder (who signs the contract) is a different subject than the insured person/beneficiary. The insured person/beneficiary (ie, a third party in respect of the contract) is entitled to take direct action against insurers.

General Overview

Generally speaking, in Italy, reference is made in several rules to the concept of good faith (but not bad faith). References are particular prevalent in the area of contracts.

Good faith implies the absence of awareness of the harm one may be causing to another person or of the fact that one is contravening or circumventing rules and it is nothing other than the duty of mutual correctness in relations between legal entities, required by the legislator in the physiological phases of the negotiation act.

Insured’s Bad Faith

According to Italian law (Article 1892, Italian Civil Code), an insured’s bad faith can be considered when the insured has consciously and willingly omitted to report circumstances likely to exert a real influence on the insured risk to the insurer, despite being asked to do so.

This behaviour:

• implies that the insurance contract is voidable on the grounds of reticence or misrepresentation; and
• in case of claim, the insurance coverage is deniable according to the (very frequently invoked) exclusion clause provided by the policy.

Connection between Bad Faith and Bad Handling in the Insurance Claim (Insurer)

All that is required on the insurer's behalf is the correct and good handling of a claim.

Bad handling of a claim takes place whenever the insurer, in handling the litigation (or in failing to handle it), prejudices the interests of the insured, either through excessive care of its own interests or through negligence and carelessness.

For contractual liability of the insurer to arise, it is sufficient, irrespective of a specific and express request by the insured, that the insurer itself has been enabled to assess, using ordinary diligence and observing the obligations of fairness and good faith, the merits of the injured party's claim for damages.

Obviously, mismanagement of the dispute has not occurred when the insurer, on the other hand, exercises the right to defend the insured (and, therefore, also themselves) in court against the injured party's claims which have turned out to be excessive or unfounded, fulfilling its obligation to indemnify the insured against the groundless claims of the third party.

Form of Penalties and Applicable Rules

According to the Italian system, if the insurance companies misbehave and violate the rules of good faith and transparency towards customers/insureds and those awaiting compensation, these parties can turn to IVASS to report the non-compliance, and if the complaint is well-founded, the insurance company will be heavily sanctioned. IVASS can impose sanctions on insurance companies: it may impose a fine on companies that violate a rule that protects a customer, consumer or injured party.

The penalties consist of fines, the amount of which can vary from a few thousand to several tens of thousands of euros. Infringing companies will not be subject to pay compensation to the customer nor will they receive prison sentences - which are reserved for criminal cases for which a trial is necessary. Instead, they will incur monetary fines, which have a considerable deterrent effect because they are imposed quickly and are not capable of cancellation except by recourse to theRegional Administrative Court. In the meantime, the reputation of the companies sanctioned will be considerably damaged. This is why these sanctions are very effective in discouraging behaviour and use of mechanisms that could delay or circumvent the satisfaction of the rights of customers, injured parties and consumers in general.

Anyone who has been subjected to unlawful conduct by an insurance company can turn directly to IVASS without the need for a lawyer and without incurring costs.

IVASS has a specific regulation governing the procedure for imposing sanctions.

Firstly, when a report of irregularity emerges, IVASS formally notifies the insurance company, which may defend itself within 60 days by providing its written observations and counter-arguments.

The IVASS sanctions service then decides whether or not to impose the sanction. If it does decide to impose a sanction, it issues an actual payment injunction against the company found to have violated a rule, and the company will have to pay the established amount, within the limits set by law. On average, each sanction amounts to around EUR5,000, but there are often those imposed with much higher amounts. For example, IVASS imposed a fine of EUR60,000 on companies that had not made an offer of compensation to the injured party and had not even communicated the reasons for the refusal.

According to Italian system, an insurance broker is a professional figure whose job is to mediate between insurance companies and its clients, with the aim of finding insurance solutions that best meet the needs of those who rely on his service.

Thus, the insurance broker, unlike the insurance agent, has no exclusive ties with any insurance company.

The broker may also take care of the management of the insurance policies, from negotiation to cancellation, supervising the progress of the loss assessment and the payment of claims.

The most valuable element for the insured is that the insurance broker stands on the side of the insured, because their job is to find suitable cover for the insured at the most affordable price, usually the result of negotiation with the insurer.

There are therefore no declarations/representations that bind the insured. It should be noted, however, that very frequently a so-called “broker clause” is included in insurance policies, according to which the policyholder and the insurance company generally mutually acknowledge that any communication pertaining to the execution of the contract shall be transmitted from one party to the other solely via the appointed broker. Therefore, any communication sent by the policyholder to the broker shall be deemed to have been sent to the insurance company and vice versa.

In Italy's insurance system, it is quite common for an insurer to be represented in the acceptance of risks, in underwriting and in handling the claims. It is a kind of agency mandate that some insurers use to be present in foreign markets without being subject to the legal obligations of the third country. Others use it to penetrate unexplored market segments.

However, these kind of relationships between insurers and brokers may lead to litigation.

With regard to liability insurance, the Italian Civil Code provides for the insurer's obligation to bear the costs incurred by the insured in defending a claim covered by the policy. The rationale of this rule lies in the fact that the insured's defence is carried out first and foremost in the interest of the insurer (as it would have to pay for the claim).

More specifically, costs incurred in resisting an action by a third party against the insured shall be borne by the insurer up to ¼ of the policy limit. In the event that the damages due to the injured party exceed the policy limit, the defence costs shall be shared between the insurer and the insured in proportion to their respective interests.

Policy provisions cannot derogate from this rule except in a manner most favourable to the insured.

Policies often contain a clause stating that the insurer may assume control of the claim defence by appointing lawyers on behalf of the insured and paying their fees directly. This constitutes a permitted derogation from the duty to pay or reimburse defence costs, as it is deemed more favourable to the insured. Problems may arise if the insured does not accept the lawyer named by the insurer and wants to choose the lawyer to be appointed, requesting that the related fee be covered by the insurer. The issue is debated, but case law tends to hold that if the insured, without a justified reason, refuses the lawyer offered by the insurance company, they lose the right to reimbursement of legal costs.

No changes are expected in the next few years.

The current Italian judicial system is often slow and inefficient, and civil proceedings last much longer than the EU average.

In recent years, the trend is to favour alternative dispute resolution systems in order to reduce the workload of the courts and resolve disputes in a shorter time and with lower costs. However, to date, ADR systems have had little success in the area of insurance litigation.

A reform of the Italian civil process is also under way with the aim of improving the efficiency of its civil justice system and significantly reducing the length of proceedings.

New features will include:

• the amendment of the content of the summons and response brief in order to fully define the framework of the respective claims and the means of evidence requested before the first hearing;
• enhancement of the role of the first hearing, encouraging the personal participation of the parties and providing that the judge must fix the next hearing for the taking of evidence within 90 days;
• some changes concerning the decision-making phase, in order to favour the reduction of the duration of proceedings, also by imposing time limits;
• extensions of the possibility for the judge to conciliate the parties; and
• simplification and rationalisation of the procedure, also with regard to the appeal stage and the enforcement proceedings.

New resources for the administration of justice, further incentives for alternative dispute resolution instruments and the strengthening of digitisation are also envisaged.

This reform represents a unique opportunity to strengthen the justice sector and make it efficient, reducing the length of proceedings and bringing Italy in line with the EU average.

Legal expenses insurances cover the insured’s legal costs for both active and passive claims. More specifically, according to the Code of Private Insurance, legal expenses insurance is a contract by which an insurance undertaking agrees to bear the costs of legal proceedings and expert services or to provide other services needed by the insured for purposes of the defence of their rights before the court in any kind of proceedings, or out-of-court, mainly for the purposes of securing compensation for the loss, damage or injury suffered by the insured person or for defending themselves in respect of any claim made against them, provided that the claim is not filed by the undertaking providing cover for legal expenses.

The insured person has the statutory right to entrust the defense of their interests to a lawyer of their choice (from this point of view, the cover granted by legal expenses insurances differs from that covered in 5.1 Main Areas of Claims Where Insurers Fund the Defence of the Insured)

Compared to other European countries, legal expenses policies are less widespread in Italy, but the market is expanding.

Sometimes, legal expenses coverage is sold as an add-on when purchasing another kind of insurance policy (eg, motor third party limited, travel, property).

Insurers have the right to pursue third parties who have caused an insurance loss to the insured to recover the amount of the claim.

The right to pursue third parties for the recovery of the indemnified loss is called right of subrogation and is provided for by Article 1916 of the Italian Civil Code.

An insurer who has paid the indemnity shall be subrogated, up to the amount of the indemnity, for the rights of the insured against liable third parties. Subrogation shall not take place if damages are caused by the insured person's children, affiliates, descendants, other relatives or relatives-in-law permanently co-habiting with them or by domestics (the rationale of this last provision is to avoid the consequences of subrogation falling directly or indirectly on the insured, rendering the coverage of the risk ineffective). Policy wordings sometimes add additional parties in respect of whom the insurer waives subrogation, such as the insured's employees. This waiver obviously does not apply to damage caused intentionally.

The prerequisites for subrogation under Article 1916 of the Italian Civil Code are the following.

• The payment of the indemnity by the insurer to the insured (or their assignee). A receipt may be sufficient to prove this, provided that it shows that the payment of the indemnity for the loss in which the liable third party is involved. The production of the policy is therefore necessary only when the above elements do not appear in the receipt.
• The liability (for presumed fault or strict liability or for fraud or negligence) of a third party to pay compensation for the same loss as that paid by the insurer.

If the insurer has not indemnified the entire loss (because of the deductible, self-retention, policy limit) and the insured has been left uncovered for a part of it, the subrogation is only partial, and the insurer and the insured shall be entitled to act against the liable third party in proportion to what is owed to them, unless otherwise agreed.

Under the right of subrogation, the insurer assumes the same position against the third party as the insured, both with respect to the substantive and procedural advantages (eg, burden of proof, presumption of fault), and with respect to the defences that can be invoked against it.

Consequently, the third party may raise against the insurer all the defences which are enforceable against the insured, but not those which are not enforceable, for example that the insurer was not obliged to pay under the insurance contract. It follows from the derivative nature of the insurer's right that any prejudice caused by the insured to the right against the third party - by preventing the third party's liability from arising, by acknowledging its non-liability, or by causing its extinction by remission, settlement, lapse of time or prescription - falls upon the insurer.

In order to avoid this, the law states that the prejudice must fall on the insured, imposing compensation for the damage on the insurer (Article 1916) when the prejudice affects the whole of the third party's right and may cause the extinction of the insurer's obligation towards the insured by compensation.

In addition to the general case of subrogation foreseen by the aforementioned legal provision, there are certain special subrogation rights in the legal system, such as the one set out in Article 142 of the Private Insurance Code, under which, in motor liability insurance, it is possible to take subrogation action directly against the insurance company of the party responsible for the damage.

The COVID-19 pandemic is still the main macroeconomic factor that has affected the type or amount of litigation and insurance-related litigation in Italy. There has been a significant increase in claims related to business interruption, travel, disease, cyber incidents or professional liability (especially for healthcare professionals).

Moreover, a new trend of litigation is arising as a result of the government emergency legislation, which expressly qualified COVID-19 infection as an “accident at work” for the purposes of compensation provided for by the public employment coverage system.

No particular changes are foreseen in the next 12 months.

Specific coverage issues are mostly clarified through normative interpretations by the courts.

By way of example, with regard to the issue mentioned in 7.1 Type and Amount of Litigation as to the qualification of a COVID-19 infection as an “accident” or a “disease”, a recent court ruling opted to consider a COVID-19 viral infection as an accident, which therefore makes it subject to insurance coverage in the private sector of personal accident policies. It will, however, be necessary to await further developments in case law in order to form a clearer picture of how the matter will be legally qualified.

No particular impacts of these developments are evident with regard to risk appetite.

As for the scope of insurance cover, the market has seen the introduction of some new products related to the COVID-19 pandemic.

For example, for households, insurance companies have proposed specific insurance products to cover the expenses and damages resulting from infection and/or possible hospitalisation.

For companies, insurers have proposed additional cover for business interruption resulting from the pandemic and/or lockdowns (previously, claims resulting from the pandemic or authority measures were usually excluded, especially in cases of business interruption cover ancillary to a property policy).

The ESG factors have not yet significantly affected the underwriting and litigating of insurance risks.

However, there is an increasing demand for insurance contracts covering damages against properties, given the frequent catastrophic weather events occurring over recent years.

In particular, it is worth mentioning the proposal of the Italian Association of Insurance Companies (ANIA), which has called for the introduction of a legal obligation to insure one's home against climatic risks. Such a possibility is currently subject to debate and many consumer associations have opposed it; however, it will be a central topic over the coming months and years.

With regard to insurance litigation, a significant development in the Italian insurance market is the arbitrator for insurance disputes, a mechanism that is expected to be definitively in place by the end of 2022. This alternative dispute resolution body is intended to strengthen confidence in the insurance system by offering customers a simple, quick and inexpensive means of resolving pre-contractual and contractual disputes with the company or intermediary; it may help to relieve civil court litigation and thus limit the costs, potentially having positive effects on premium levels. The formation over time of “case law” of the Insurance Arbitrator also may lead to clearer insurance law.