No Longer a Rubber Clause

Prior to Constitutional Court Decision Number 83/PUU-XXII/2024, Article 251 of the Commercial Code (KUHD) was often used in practice as a basis for unilaterally canceling insurance coverage or rejecting claims. The problem lies not only in the wording of the norm but also in how the norm is practiced. In many disputes, the provisions regarding errors or concealment of information are interpreted very formalistically, so any inaccuracy of information risks being directly used as a reason to nullify the coverage.

In fact, insurance law issues are not as simple as distinguishing right from wrong in black and white. There is an important difference between intentional dishonesty, negligence, and reasonable errors. When all are treated with the same legal consequences, the contractual relationship becomes unbalanced. The insurer gains an overly dominant position, while the insured is in a vulnerable position because their claim can be rejected simply by adhering to a unilateral interpretation of the disclosure obligation.

The Constitutional Court Corrects, But Does Not Close All Loopholes

Through Decision Number 83/PUU-XXII/2024, the Constitutional Court affirms that Article 251 of the Commercial Code is conditionally constitutional insofar as it is not interpreted to mean that the cancellation of coverage must be based on the agreement of the insurer and the insured or based on a court decision. The Court also explicitly assessed that Article 251 of the Commercial Code has not explicitly regulated the mechanism of conditions for cancellation or the procedures for carrying out the cancellation, thus giving rise to diverse interpretations and unfair legal uncertainty, especially for the insured.

This decision is important because it stops the assumption that cancellation of coverage can occur automatically simply because the insurer finds inconsistent information after a claim is submitted. With this decision, cancellation can no longer stand on unilateral will. The dispute must first be placed within the framework of the parties' agreement, mediation, or ultimately tested through the courts as a last resort.

From a legal protection perspective, this is no small progress. The Constitutional Court's decision restores the basic principle that an insurance agreement remains a civil law relationship that must be carried out in a balanced manner. The insurer has the right to obtain honest information, but the insured also has the right to a non-arbitrary cancellation mechanism. In that context, this decision shifts insurance law from an overly formalistic pattern towards Due Process of Law healthier.