Proportional rule of premium
Reduction of the indemnity in the ratio of the premium paid to the premium that would have been due had the risk been correctly disclosed.
Articles L. 113-8 and L. 113-9 of the French Insurance Code work as a pair: the first voids the policy for intentional misstatement, the second cuts the payment when bad faith is not proven. That second text is the proportional rule of premium. A policyholder who paid 400 euros where correct disclosure would have called for 500 collects 80% of the indemnity, whatever caused the loss. The ratio is computed from the insurer's own rate tables, which it must produce in the file. Intent decides between voidance and reduction, and the burden of proving it sits with the insurer. The rule bites even when the inaccuracy has nothing to do with the loss, which makes it harsh. It stays proportionate all the same, since it restores the economics of the contract instead of wiping them out. Since the mixed chamber ruling of the Court of Cassation on February 7, 2014, the insurer must also have asked precise questions before inception. In compulsory liability lines the reduction cannot be raised against the victim, who is paid in full, and the insurer then turns on its own policyholder.
Articles L. 113-8 and L. 113-9 of the French Insurance Code work as a pair: the policy is void if the misstatement is intentional, the indemnity is reduced if not. A policyholder who paid 400 euros where correct disclosure would have called for 500 collects only 80% of the indemnity, whatever caused the loss. On February 7, 2014, the mixed chamber of the Court of Cassation made any sanction conditional on precise questions having been put before the contract was signed.
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