Zurich Refuses to Honour Bank Guarantee Arguing the Developer is Bankrupt
Zurich Insurance, one of the leading insurance companies in Spain through its ACC Seguros y Reaseguros branch, has refused to pay the sum guaranteed on an insurance policy to a client of our firm on the basis that the developer had stopped all works as it was put into Administration. This dangerous situation, which we would all think is the number one reason for a bank guarantee and/or insurance policy to exist is precisely the impediment put forward by Zurich to say “I´m sorry, we can’t”.
Zurich did attend the payment of just under 40 checks to clients of this firm on the Larsol development as it was not going to be finished, although the developer is still operating. Conversely the above developer, Nadalsol, even though technically insolvent, may be finalizing the works at Medina Golf Residencial Granada, though with a significant delay.
Zurich has decided not to pay based on the following:
- That the recent Insolvency Act precludes them from paying out on the policy as it would jeopardize their right to reclaim this sum from the developer in a separate recourse action, as the insolvency administrators could argue that the execution was unduly granted.
- That as we extended the validity date of the policy (which we did, just in case) we also inadvertently extended or agreed to a new completion date for the property bought on contract (The funny thing here is that the validity of insurance policies and bank guarantees for the purpose of guaranteeing funds are never limited in time, except by the license of occupancy, according among other to a most recent ruling by the AP Madrid 27th Dec. 2007).
- (That perhaps they have ran out of money!).
Well, none of the arguments can be sustained for the following:
- Argument 1: Because the relationship between the Insurer and the Consumer is autonomous from the vicissitudes affecting the developer as the latter is not party to the contractual relationship.
- Argument 2: Because it is plain daft and stupid! How can extending the maturity of a insurance policy relate to a completion date for a property?
It is extremely frustrating when trying to explain disappointed investors that a company like Zurich Insurance will look for any excuse on the book to try to not abide by the clear wording of consumer protection laws on off-plan purchases which envisaged the protections specifically for cases of insolvency.
So if Zurich does not pay, who will then in this current climate?
Hi, I am taking legal action against ACC (a subsidiary of Zurich) in relation to their failure to honour my claim on my guarantee in relation to a property purchase at Medina Elvira. I am interested to hear if many people have made claims on the original insurance policy, and if they are now pursueing the matter through the legal system. Is there any opportunity for claimants to act together to put pressure on ACC?
Regards,
Donal Crowley
80 Ballinclea Heights
Killiney
Co Dublin
Ireland
Hi there Donal i took ACC to court in Madrid last Oct i lost my case even though the development was 11 month late in completion we are now in the hands of the Appeal Courts GOOD LUCK Martin
‘Extend the validity date of the policy’
According to LEY 57/68 Article 4:
Articulo cuarto – Expedida la cedula de habitabilidad por la Delegacion Provincial del Ministerio de la Vivienda y acreditada por el promotor la entrega de la vivienda al comprador se canceleran las garantias otorgadas por la Entidad aseguradora o avalista.
So a Bank Guarantee or Certificate of Insurance must not have an expiry date. It only expires when the Certificate of Habitability (Licence of First Occupation) is issued by the Local Town Hall.
There are several instances of Case Law to support Article 4 of LEY 57/68.
Many Banks & Savings Banks deliberately included pre-determined expiry dates in their Bank Guarantees which is clearly contrary to Article 4 of LEY 57/68.
This is yet another clear example of the gross negligence and complete lack of professional due diligence by the Banks & Savings Banks with regards to off-plan deposits and Bank Guarantees.
In 2008 the Banco de España stated: “There are obligations imposed by LEY 57/1968 on financial institutions – some banks have not acted with diligence”
The Banco de España is the Supervisor of the Spanish Banking System and must act immediately to ensure that all Banks & Savings Banks are forced to comply with obligations imposed on them by LEY 57/1968.
Kind regards
Keith
http://www.fincaparcsactiongroup.com
Just wondering, 3 years on and a number of successful claims for buyers using ley 57/68, whether there has been any success against Zurich?
Chris, Zurich has already paid millions to property purchasers and refunded on this development, without needing to resort to Court action. I am not sure as to how many Court cases do they currently have ongoing and/or whether they have already been ruled on and being appealed.
Many thanks Antonio. Why would they appeal some cases and pay up without going to court in others? Are they somehow hoping something will change and go in their favour?
Chris, these companies will deal with each caseindividually if they can; in other words, if the trail of paperwork is different between cases then they may agree to settle on a case but fight another.
For example, Zurich gave BGs to property contract holders with different wording, providing for different types of claim scenarios. This is not necessarily legal, from a Consumer Law point of view, but it means that claims are dealt with diversely.