City of Buenos Aires Supreme Court Rules on Policy Limits

The Supreme Court of the City of Buenos Aires issued its decision in the case Provincia Seguros S.A. s/ queja por recurso de inconstitucionalidad denegado en Roldán c/ Barbo, where it addressed, among other issues, the application of policy limits where damages are assessed as of the date of judgment, rather than the date of the loss, and the applicable interest rate.

Regarding interests, the Court followed the approach that the Argentine Supreme Court adopted in Barrientos and reversed the application of the active interest rate from the date of the loss through the first-instance court judgment, when damages were assessed. The Court held that a pure interest rate should apply during that period and, in this particular case, set an annual rate of 8%, as the appellant insurer had not challenged that percentage. The main novelty of the decision, however, involves the treatment of the policy limit.

Regarding the policy limit, a three-justice majority consisting of Lozano, Otamendi, and De Langhe held that it is inappropriate to directly compare a policy limit stated in historical terms—namely, the amount provided for in the policy in force at the time of the loss—with damages assessed in currency values as of the date of judgment. The majority relied on the Argentine Supreme Court’s decision in Flores regarding the enforceability of the policy limit against the injured third party, but addressed an additional issue: how that limit should operate when the damages award and the policy limit are expressed in monetary values corresponding to different points in time.

Under this approach, determining whether the damages award exceeds the policy limit requires comparing amounts expressed by reference to the same point in time. This avoids the distortion that would result from directly comparing a historical policy limit with damages assessed at later values. The majority held that the damages award should be expressed in currency values as of the date of the loss and then compared with the policy limit. For this purpose, Lozano’s opinion identified deflation based on the Consumer Price Index as a possible calculation method, an approach also endorsed by Otamendi and De Langhe.

However, applying this approach did not lead the Court to reverse the court of appeal’s ruling on the policy limit. The three justices found that the insurer had failed to establish that the damages award, expressed in currency values as of the date of the loss, exceeded the ARS 10,000,000 policy limit. The appeal was therefore rejected on this issue, and the operative part of the decision reversed the lower court’s ruling only as to interest.

This decision establishes an important standard for reconciling the binding effect of policy limits with damages assessed at different points in time. Rather than replacing the policy limit with the coverage limit in force under regulations issued by the Argentine Insurance Superintendency (SSN) as of the date of judgment, the majority’s approach maintains the contractual limit and expresses the damages award in values as of the date of the loss, thus allowing a comparison of economically equivalent amounts.