Deputy Commissioner of Legal and Investigation of OJK Yuliana delivering her testimony during material judicial review of Article 251 of the Commercial Code (KUHD) in Case Number 83/PUU-XXII/2024, Monday (2/12). Photo by MKRI/Bayu.
Jakarta (MKRI) – The Constitutional Court held another material judicial review hearing of Article 251 of the Commercial Code on Monday, December 2, 2024. The agenda of the hearing of Case Number 83/PUU-XXII/2024 was to hear testimony from related parties: Financial Services Authority (Otoritas Jasa Keuangan or OJK), Indonesian Life Insurance Association (Asosiasi Asuransi Jiwa Indonesia or AAJI), and Indonesian Sharia Insurance Association (Asosiasi Asuransi Syariah Indonesia or AASI). OJK stated that the provisions of Article 251 of the Commercial Code were established because insurance agreements need honesty and good faith from all parties when making the agreement, during the agreement period, and at the time of the claim.
“Because of that, the insurance agreement is called a contract of uberrimae fidei (contract of the utmost good faith) that is an agreement made based on the principles of honesty and utmost good faith,” Deputy Commissioner of Legal and Investigation of OJK Yuliana said in the Courtroom.
She explained that the legal requirements of insurance agreements are regulated under the provisions of Article 1320 of the Civil Code, Article 250, and Article 251 of the Commercial Code. The provisions impose a burden or obligation on every prospective insured/policy-holder to notify and submit all statements, information, data, and circumstances regarding the object to be insured and do not impose an obligation on the insurer/insurance company to find out all statements, information, data, and circumstances (material facts) from the object to be insured. It is because those who know the condition of all these things are the parties who will insure as the owner or who control the object of insurance and have an insurable interest in the object of insurance. This is intended to create a balance between the insured and the insurer in the insurance contract, where information asymmetry can be minimized as stipulated in Article 251 of the Commercial Code.
The provisions in Article 251 of the Commercial Code contain principles of honesty, good faith, and transparency, which are fair in delivering all statements, information, and data regarding the object to be insured to the insurer/insurance company. Furthermore, the provisions of Article 251 of the Commercial Code also require a person who is going or willing to insure an object on insurance to be honest and open, not lie or conceal information, data, and circumstances that affect the high risk that the insured/policyholder has known.
The statement, information, facts, and circumstances (material fact) regarding the object to be insured, which the insurer receives, will be used to assess the risk that will be accepted or insured. The risk assessment process is called underwriting. All material facts are very important for the insurer because they will affect the attitude and decision of the insurer (prudent insurer) in determining the attitude and making decisions in issuing policies for the insured, as a basis for determining the size of the premium to be paid by the insured/policyholder and determining risk analysis.
“Based on the reasons above, without Article 251 of the Commercial Code, it will be difficult for the insurance company to assess risks which must be insured appropriately by the insurance company and the calculation of insurance premiums to be paid by policyholders, so this will affect the insurance business to be operated and exercised based on prudential and sustainable principles,” Yuliana stated.
In addition, she said that the Petitioner did not exhibit constitutional losses due to the enactment of Article 251 of the Commercial Code and did not have legal standing to file for his material judicial review petition. According to OJK, the dispute faced by the Petitioner, who asked for a full payment of her insurance claim, is a civil dispute between the policyholder and the insurance company. It is because the insurance/coverage is based on the insurance agreement stipulated in the policy as regulated in Article 1 point 1 of Law Number 40 of 2014 on Insurance and not a constitutional dispute.
Yuliana added that the petitioner was yet to take a dispute resolution through the Indonesia Insurance Mediation and Arbitration Body (Badan Mediasi dan Arbitrase Asuransi Indonesia or BMAI), now called Financial Services Sector Alternative Dispute Resolution Institution (Lembaga Alternatif Penyelesaian Sengketa Sektor Jasa Keuangan or LAPS SJK) or file for a lawsuit with the court. Hence, according to the OJK, the petitioner’s arguments regarding her constitutional losses due to the enactment of provisions in Article 251 of the Commercial Code are not reasonable by law, so it does not fulfill the cumulative requirements of constitutional loss due to the enactment of a law.
In addition, AAJI delivered the statement through legal counsel Adnial Roemza. According to AAJI, if If it is related to the principle of sharia insurance, which adopts the principle of Tabarru', namely contributions or donations collected from insurance participants to help fellow participants who experience disasters, then for the sake of the implementation of the principle of healthy insurance management, the insurer must be prevented from closing the coverage that contains false or incorrect information, or every not telling things known by the insured. It can be imagined if due to the existence of coverage based on false or incorrect information, or any failure to notify things known by the insured, where then the insurer is required to continue to carry out the coverage so as to cause the running of the Tabarru' principle, then in this case it will have an impact on tabarru' funds which are the rights of other insurance participant customers to be used.
“This is actually unfair and even eliminates the protection of guarantees for property rights and property that are the interests of other insurance participant customers,” he said.
Adnial continued, according to AAJI, Article 251 of the Commercial Code does not conflict with the 1945 Constitution of the Republic of Indonesia. Article 281 and Article 282 of the Commercial Code provide a balance to the position of the insured and the insurer. In fact, there are also legal instruments in the field of insurance issued by the OJK specifically to provide protection to consumers of the financial services sector including consumers in the insurance sector with the provision of strict sanctions to the insurer (insurance company).
The Indonesian Sharia Insurance Association, represented by its legal counsel Ricardo Simanjuntak, also stated that it was incorrect and contrary to the law if the meaning of the word “cancel” based on Article 251 of the Commercial Code could only be carried out by agreement of the insurer and the insured because it was clear that the basis of the cancellation action was attached to the provisions of Article 1231 of the Civil Code, which if the insured did not recognize it or rejected it, he could defend his legal rights and interests by filing a lawsuit with the District Court, Simple Lawsuit Court, LAPS SJK, and the Consumer Dispute Resolution Agency. Therefore, the Related Parties request the Court that the Petitioner's legal position be declared inadmissible and reject the a quo petition in its entirety. Therefore, they request the Court to declare that Article 251 of the Commercial Code does not conflict with the provisions of Article 1 paragraph (3), Article 27 paragraph (1), Article 28D paragraph (1), and Article 28G paragraph (1) of the 1945 Constitution of the Republic of Indonesia.
Also read:
Insurance Beneficiary Challenges Commercial Code
Heirs of Insurance Beneficiaries Revises Petition on Commercial Code
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Govt: The Principle of Good Faith is the Main Priority of Insurance Agreements
Maribati Duha, heir to and beneficiary of the deceased Sopan Santun Duha, has filed a material judicial review petition No. 83/PUU-XXII/2024 against Article 251 of the Commercial Code (KUHD). The Petitioner proposed three alternatives for interpreting or giving new meaning to Article 251 of the Commercial Code.
Article 251 of the Commercial Code reads, “Every incorrect or false notice, or every concealment of facts known by the insured party, even though made in good faith, the nature of which is such that the agreement concerned would not have been made, or would not have been made under the same conditions if the insuring party learnt the factual situation of all these matters, shall render the insurance concerned void.”
In the petitum, the Petitioner requests that the Court declare the phrase “the insurance concerned void” in Article 251 of the Commercial Code unconstitutional and not legally binding if not interpreted as “cancellation of insurance must be based on a decision of an authorized court unless the cancellation is based on an agreement between the insurer and the insured” or “cancellation of insurance must be based on a decision of an authorized court unless the cancellation is made by the insurer within a maximum period of 6 (six) months due to the discovery of discrepancies in the insured’s data between the data stated in the insurance form and the actual data” or “All false or incorrect notifications, or all concealment of circumstances known to the insured, even if done in good faith, which is of such a nature that the agreement would not have been made, or not made on the same conditions.”
The Petitioner believes the article has allowed insurance companies to use the law for their own gain. It can also be used to avoid liability for errors or omissions made by the insurance company’s own internal team. Such negligence includes re-underwriting or risk selection, which is the process of assessing and classifying the level of risk that exists in a prospective insured.
Underwriting is almost always done by insurance companies when the beneficiary files a claim for the benefits promised in the policy. The Petitioner experienced this when submitting a claim to Prudential. In such a situation, insurance companies frequently cancel the policy or at least reduce the benefits that can be claimed by the beneficiary, which the Petitioner experienced. The move seems valid in the eye of the law because of Article 251 of the Commercial Code.
Article 251 of the Commercial Code allows insurance companies to use it as a loophole to avoiding the responsibility of paying claims. In addition, it does not allow the insured/policy holder or their beneficiary to prove if that the fault or negligence does not lie with them and to prove that the insured has made the utmost good faith. This is certainly contrary to the principle of the rule of law stipulated in Article 1 paragraph (3) of the 1945 Constitution.
Sopan Santun Duha was the beneficiary of PT Prudential Life Assurance policyholder Latima Laia. Until the petition was filed, Prudential still has an obligation to pay the remaining claim by Sopan Santun Duha amounting to Rp510.5 million. However, until he passed away on January 7, 2024, Prudential had not paid the claim. The Petitioner asserts that as the legitimate heir to the policy’s beneficiary, she has the right to the insurance claim.
Also read:
Insurance Payout Inaccurate, Commercial Code Challenged
Petitioner of Commercial Code Passed Away
Sopan Santun Passed Away, Petition on Commercial Code Dismissed
Sopan Santun Duha filed a similar petition, No. 2/PUU-XXII/2024. However, at the petition revision hearing on February 5, it was revealed that he had passed away on January 7. At the ruling hearing on February 13, the Court declared the petition inadmissible since, with the petitioner’s passing, the petition lost its legal subject and could not continue.
Author: Mimi Kartika
Editor: N. Rosi
PR: Fauzan F.
Translator: Rizky Kurnia Chaesario/Yuniar Widiastuti (NL)
Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian versions, the Indonesian version will prevail.
Monday, December 02, 2024 | 13:57 WIB 32