Expert: Policy Cancellation Cannot be Done Unilaterally

Hendri Jaya Pandiangan as the Petitioner’s expert delivering his testimony during the material judicial hearing of Article 251 of the Commercial Code, Thursday (12/12), in the Panel Courtroom. Photo by MKRI/Panji.

Jakarta (MKRI) – Petitioner of Case No. 83/PUU-XXII/2024 presented Hendri Jayadi Pandiangan as an expert to provide testimony during the material judicial hearing of Article 251 of the Commercial Code on Thursday, December 12, 2024. Hendri stated that policy cancellation cannot be done unilaterally by the insurer as long as there is no agreement between the insurer and the insured or the cancellation due to a court decision. The insurer must file a lawsuit for cancellation.

“If the norms of Article 251 of the Commercial Code, especially regarding the meaning of void contained therein, are maintained as they have been practiced so far, it will create an imbalance in legal protection between the insurer and the insured. The insurer has a dominant position compared to the insured; the insurer is given the right to cancel the policy at any time; according to the Expert, this is a form of injustice,” Hendri said in front of the constitutional justices in the Plenary Courtroom.

The embodiment of the principle of utmost good faith stipulated in Article 251 of the Commercial Code, according to Hendri, is within the period 'before the policy is made' or at the time of filling out the Insurance Application Form (SPA). The insured must submit a notification correctly and not mistakenly and not hide any circumstances regarding the condition and state of the object of coverage. According to Article 251 of the Commercial Code, the coverage becomes void if there is a mistake or concealment of circumstances.

Non-fulfillment of the principle of good faith results in void coverage. This is as stipulated in Article 251 of the Commercial Code which is the object of testing in this petition. The article states “All false or untrue information, or all concealment of circumstances known by the insured, even though it is done in good faith, which is of such a nature that the agreement will not be held, or not held on the same conditions, if the insurer knows the true circumstances of all these things, makes the coverage void.”

He explained that good faith before the policy is made is required when filling out the SPA submission form for the prospective insured. The embodiment of the principle of utmost good faith during this period from the insured party is the application of the highest honesty when filling out the SPA application submission form. This means that the prospective insured must fill in the SPA submission form correctly and honestly disclose all conditions and circumstances of the object of coverage without concealing any circumstances. Vice versa, the insurer is obliged to convey all information related to the insurance product to be purchased by the insured.

Good faith at the time of making the policy is actually required at the time of drafting the clauses stipulated in the policy or agreement. However, at this time the articles and provisions stipulated in the policy are made and arranged unilaterally by the insurer (standard agreement) so that at this stage the burden of good faith is entirely the responsibility of the insurer, the insurer is expected to arrange the provisions stipulated in the policy fairly and the position of the insurer with the insured is legally balanced (equal) and there are no clauses that can harm the legal interests of the insured. Meanwhile, good faith after the policy is declared active comes down to the obligations of the parties, in this case, the insured and the insurer, to carry out the obligations, namely the achievements and counterproducts stipulated in the policy, reveal the main cause of the risk (proximate cause), and not look for legal loopholes to avoid responsibility.

Previously, the Court had also heard testimony from Related Parties, namely the Financial Services Authority (OJK), the Indonesian Life Insurance Association (AAJI), and the Indonesian Sharia Insurance Association (AASI) on Monday, December 2, 2024. The Related Parties requested the Court that the legal position of the Petitioner be declared unacceptable and that the petition be rejected in its entirety. Thus, they asked 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.

Meanwhile, the Petitioner, in his petitum requested the Court to declare Article 251 of the Commercial Code as long as the phrase “the coverage is void” contradicts the 1945 Constitution of the Republic of Indonesia and has no legally binding force as long as it is not interpreted as “Cancellation of coverage must be by decision of the competent court unless the cancellation is based on the agreement of the insurer and the insured” or “Cancellation of coverage must be by decision of the competent 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 data of the insured between the data stated in the coverage form and the actual data” or ”All false or incorrect information, or all concealment of circumstances known to the insured, even if done in good faith, which is of such a nature that the agreement will not be held, or will not be held on the same conditions.”

According to the Petitioner, the provisions of the norms in the article provide ample room for insurance companies to utilize the law for the company's personal interests. Article 251 of the Commercial Code allows insurance companies to use it as a magic weapon to do various tricky things aimed at avoiding the responsibility of paying claims. In addition, the Article does not provide any room for the insured/policyholder or his heirs to prove that the fault or negligence does not lie with him and prove that the insured has exercised 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.

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Expert: Policy Cancellation Cannot be Done Unilaterally