Enforceability of Exclusion Clauses against Third-Party

1. The Facts and the First Instance Court Ruling
As a result of the collision between an SUV Fiat Fiorino, in which five persons were traveling in the cargo space, and a Fiat Uno car, one person was injured and another died. The injured person and the parents of the deceased sued the owners and drivers of both vehicles and their insurers for compensation for damages suffered. In turn, the driver and the owner of the Fiat Uno sued the owner and driver of the other vehicle.
The Fiat Fiorino insurer raised the defense of lack of standing to be sued for lack of coverage, based on a clause contained in the insurance policy pursuant to which the insurer will not indemnify damages suffered by third parties transported in excess of the capacity of the vehicle, or in places unfit for such purpose.
In the case it was established that the victims were traveling in the cargo space of the Fiat Fiorino with three others, this space was not enabled for the transport of persons, wooden planks had been placed as improvised seats and neither seat belts nor headrests were in place. Moreover, the insurance policy specifically excluded indemnification for damages to persons transported under such conditions.
The lower ruling, issued by the judge in charge of the First Instance Civil Court No. 42 sitting in Buenos Aires, attributed liability to the driver of the Fiat Fiorino and ordered him, the car owner and the insurance company to pay the amounts set forth therein, rejecting the objections raised by them and dismissed the proceedings against the driver and owner of the vehicle Fiat Uno.
The ruling was appealed and later confirmed by Tribunal H of the Civil Court of Appeals.

2. The Appeals Court Ruling
The appeals court upheld the first instance decision that rejected the defense of lack of standing to be sued for lack of coverage raised by the insurer of the cargo vehicle. To this end, it invoked the plenary ruling rendered by the National Civil Court of Appeals in re “Obarrio” (please refer to “Enforceability of the Deductible against the Injured Third Party - Status of Case Law of National Court of Appeals in Civil Matters and of the Supreme Court of Justice of the Nation” in Insurance News #6, September 2011), which ruled on the unenforceability of the deductible against third-party victims; also it invoked consumer protection legislation to hold that in the case of compulsory insurance covers —such as automobile insurance— exclusion clauses contravene the nature of the obligations of the insurance companies and are unenforceable against the victims because the law protects an interest that is superior in order to repair the damage caused to third parties. The appeals court held that the recklessness of the victims was not the efficient cause of the accident and that it should be assessed only in relation to the extent of the compensation to be awarded.
The insurer of the cargo vehicle filed an extraordinary appeal against the appeals court judgment, and since leave to appeal was not granted, it filed a direct appeal to the Supreme Court.

3. The Supreme Court Ruling (I)
The Supreme Court maintained the position held in previous rulings dealing with the enforceability of the deductible against third-party victims (II) and held that victims are third parties in the legal relationship between the parties to an insurance contract, so that if they want to invoke such contract they must abide by its terms and conditions.
As for consumer protection regulations, the Supreme Court held that a subsequent general statute (like the Consumer Protection Act) neither repeals nor implicitly or tacitly amends a past special statute (like the Insurance Act). The Court recalled that under Article 118 of the Insurance Act, a judgment handed down against an insured is enforceable against the insurer “to the extent of the insurance contract”.
The Supreme Court also stated that the social function of a liability insurance does not imply that all damages suffered by the victim must be repaired regardless of the terms of the contract invoked, especially in this case where the victims were traveling in a place unsuitable for the transport of persons and thereby contributed to the harmful result for which they seek compensation.
Consequently, taking into account the undisputed factual circumstances of the case and the existence of the exclusion clause, the Court concluded that there was no legal reason to limit the rights of the insurer and reversed the appeals court decision, ordering the case to be remanded to the court of origin in order for a new ruling to be issued. I: Judgment rendered on April 8, 2014, in re “Recurso de hecho deducido por La Perseverancia Seguros S.A. en la causa Buffoni, Osvaldo Omar c/ Castro, Ramiro Martín s/ daños y perjuicios”.
II: “Fallos” 329: 3054; 329: 3488; 331: 379; “Obarrio María Pía c/ Microómibus Norte S.A. y Otros”; “Cuello Patricia Dorotea c/ Lucena Pedro Antonio”.