In our December 2023 Informative Capsule, we provided a brief explanation of "Civil Liability Policies: Occurrence and Claims Made." Ocurrence or Claims Made”.
While it would have been ideal to first address the concept of civil liability before sharing the capsule we published in December, we believe it's not too late to explain the types of civil liability that exist and which are covered—or not—by insurance policies in our region.
Although civil liability (CL) can be classified in various ways, such as objective or subjective, depending on whether or not it is necessary to assess the culpability of the responsible party; by action or omission, depending on whether it arises from an action or inaction; and whether it is intentional or negligent, depending on whether it involves the intent to cause harm or not. Regarding the latter, it can also be related to the violation of a regulation, lack of expertise, or negligence. For the purposes of this particular capsule, it is sufficient for now to know that civil liability can also be contractual or non-contractual.
Contractual Civil Liability:
As its name suggests, this type of liability arises from negligent behavior in fulfilling a contractual obligation. Regarding this type of liability, the Civil Code (Art. 986) states, "Those who, in the performance of their obligations, act with intent, negligence, or delay, or in any way contravene the terms thereof, are subject to compensation for damages caused."
Examples of contractual CL include, to name just a few, a doctor who, during a contracted surgery, causes harm to the patient due to lack of expertise or negligence; or a merchant who, in their contractual relationship with clients, such as towing a car, installing an air conditioning unit, or repairing a vehicle, causes damage to a person or their property.
This type of liability is generally not covered by insurance policies in our region and, furthermore, is expressly excluded from coverage, except in cases where coverage is explicitly contracted, such as in professional liability and D&O (Directors and Officers) policies, which we discussed in another article (May 2023), among others.
Non-Contractual Civil Liability:
This type of liability arises from the culpable behavior of a person, meaning there is no intent to cause harm, but the behavior is negligent or careless. It is, therefore, someone who causes harm "unintentionally." This is precisely the type of liability covered by policies in our insurance market, and I dare say, in most countries. It is the liability that arises from actions where there is no contractual relationship between the one causing the harm and the one receiving it.
Regarding this type of liability, the Civil Code (Art. 1644) states:"Anyone who, by action or omission, causes harm to another, intervening with fault or negligence, is obliged to repair the damage caused. If the action or omission is attributable to two or more persons, each of them shall be jointly responsible for the damages caused."
In addition to the damages a person may cause through their direct and culpable actions, the same Panamanian Civil Code (Art. 1645) also assigns liability to other persons, even if they were not the direct cause of the damage. For example: a) parents are jointly responsible for the damages caused by their minor children who live with them; b) guardians are responsible for the damages caused by minors or incapacitated individuals under their authority; c) owners or managers of an establishment or company are responsible for the damages caused by their employees (this can be broader than it initially seems); d) the State, when acting through a special agent; and e) teachers and directors of arts and trades, for the damages caused by their students or apprentices while under their custody.
Examples of non-contractual CL include, to name just a few, most traffic accidents, lack of expertise in handling equipment, etc.
In our opinion, the topic of civil liability is one of the most fascinating aspects of law, particularly insurance law, due to the complexity and variety of issues that must be considered when determining a person's liability, the consequences it entails, as well as ways to avoid or mitigate its economic consequences, the latter through professional advice from an insurance broker and the appropriate insurance policy.
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