Dr. Gabriella Benisch, partner in the Budapest office, gave a presentation on the history of insurance dispute settlements at the XII. AIDA Budapest Colloquium held last November in Budapest. Following is a short summary of her presentation. Link to Hungarian version.

Dr. Benisch reviewed the history of out-of-court settlements of insurance disputes from the complaint submission to the Financial Arbitration Board. In particular, she focused on the practical effects of insurance litigation. In the early 1900s, a type of professional insurance assessor committee existed that could grant opinions legally binding for both the insurer and the insured. In the years 1949 – 1986, during the era of the state-owned insurance institution, the current Civil Code was created and reregulated the civil law questions of insurance in detail.

For cases involving insurance dispute settlements, arbitration was not an option. Rigid regulations during this period did not permit dispute resolutions as a means of settlement. In fact, before 1994, arbitration clauses were largely only permissible if at least one or both of the contractual parties was a foreign national. Legal literature that claims that the number of out-of-court proceedings was insignificant at the time needs to be viewed with caution because typically other special out-of-court dispute resolution processes and techniques were created in place of arbitration. The complaint procedure of the socialist era was also unique and regulated by the State Administration Code until 1977. Today, the Hungarian Financial Supervisory Authority has power over complaint procedures.

After 1989, out-of-court settlements were used in various types of insurance disputes but ordinary court proceedings continued to prevail. Neither arbitration nor mediation acquired any significant role in insurance dispute settlements. The effectiveness of dispute settlements should not be evaluated based on whether proceedings occurred in or out of court, but rather on whether the experts involved in the resolution (judges, attorneys, and assessors) have insurance-related experience.

The late Dr. Károly Bárd (first Chairman of the State Insurance Supervisory Authority and former President of the International Association of Insurance Law (AIDA)) once said, “Nothing is more costly for the client – whether corporate of private – than legal advice, representation or protection provided without proper professional knowledge.”