In a recent ruling, the Italian Supreme Court clarified the legal nature of posthumous ten-year insurance policies, which, pursuant to Article 4 of Legislative Decree No. 122/2005, builders are required to take out in favor of purchasers.
The case before the Supreme Court involved a company that was using a warehouse under a lease agreement and sought compensation for damages caused by the collapse of part of the adjacent square. This ruling provided a definitive interpretation of the legal nature of the insurance contract mandated by the aforementioned law.
More specifically, the Court of First Instance (and subsequently the Court of Appeal) upheld the claim under Article 2043 of the Civil Code, holding the contractor and the project manager liable for compensation. However, the courts dismissed the claim under Article 1669 of the Civil Code, particularly regarding the activation of the posthumous ten-year insurance policy taken out by the contractor at the time of constructing the square, which later collapsed, ruling that the claim was time-barred.
The plaintiff then appealed to the Supreme Court, arguing that the lower courts had not properly assessed a crucial aspect of the case: the appellant’s standing to appeal in relation to Article 1669 of the Civil Code and Article 4 of Legislative Decree No. 122/2005.
In accepting the appeal, the Supreme Court definitively clarified that the posthumous ten-year policy required by law must be regarded as insurance on behalf of the entitled party. This means that the policy is designed to cover not only damages for which the builder is liable under Article 1669 of the Italian Civil Code but also damages caused to third parties.
Thus, this insurance contract should be classified as indemnity insurance on behalf of the entitled party. Even though the insured third party is generally unknown at the time of contract execution, they must have the right to enforce the policy. Simultaneously, the contracting party (the builder) may also be entitled to act, provided that specific contractual provisions allow for it, which should be assessed on a case-by-case basis.
For a long time, legal scholars debated the correct interpretation of Article 4 of Legislative Decree No. 122/2005. On the one hand, some argued that the reference to Article 1669 of the Civil Code suggested that the policy was a civil liability insurance in favor of the builder, with the purchaser considered an external party without direct rights in the event of a claim. On the other hand, the reference to “in favor of the purchaser” supported an interpretation of indemnity insurance taken out for the benefit of third parties, namely the beneficiaries.
The Supreme Court has now resolved this interpretative dispute by classifying the posthumous ten-year insurance policy as insurance on behalf of the entitled party.
According to the Court, the purpose of this legislation was to protect the property rights of buyers of under-construction real estate from the risks of a builder’s financial crisis or insolvency—situations that are, unfortunately, becoming more frequent. If the policy were classified solely as civil liability insurance under Article 1669 of the Civil Code, the purchaser would have no recourse in the event of defects in the property or damages to third parties. Instead, under the interpretation now affirmed by the Supreme Court, the purchaser may directly activate the policy, even though it was taken out by the builder.