Mexico – Supreme Court fails (for a second time) to clarify the extent of insureds' burden of proof when claiming under insurance policies

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Mexico – Supreme Court fails (for a second time) to clarify the extent of insureds' burden of proof when claiming under insurance policies

Published 11 April 2017

In November 2016 the 1st Chamber of Mexico's Supreme Court upheld judgments handed down by lower tribunals in relation to an insurance coverage suit filed in 2010 by, amongst others, El Puerto de Liverpool, S.A. B. de C.V. ("Liverpool"), the operator of a chain of Mexican department stores.

The claim concerned the partial collapse in 2008 of the roof of Galerías Tabasco, a shopping centre in the City of Villahermosa, following heavy rains. Liverpool took the view that much of the structure had been critically impaired, and proceeded to demolish and reconstruct 60% of the original 37,000m2 three-levelled shopping centre. They claimed under an insurance policy that provided a stand-alone cover for "pluvial inundation", by which cover was conditional upon four requirements being met: (i) an unusual and rapid water accumulation or surge caused by rain water; (ii) as a consequence of pluvial precipitations; (iii) such pluvial precipitations being classified as strong, very strong or intense by the Mexico's Water Commission; and, (v) such classification having been made by the Commission as measured at the closest meteorological station. Strictly speaking, none of these stipulations actually required that the said inundation had caused the alleged structural failure, though it might be thought that this was a given, in the context of an insurance coverage clause.

The question arose because there existed a competing causation theory, pointing to faulty installation of a steel material used in the construction of the centre, coupled with poor maintenance. Initially, the insurers won on appeal, after the original first instance judgment that had gone in favour of Liverpool. However, there then followed a series of protracted judicial review proceedings before federal tribunals, and subsequently the Supreme Court, as to whether the correct guidelines had been applied in assessing the evidence adduced by the parties. Finally, in Recurso de Inconformidad 1053/2016 the Supreme Court held in favour of Liverpool, determining that the lower courts had at the third time of asking, correctly applied the guidelines in so far as they related to the insuring clause in question. In line with earlier precedent, the Supreme Court determined that Liverpool needed only to establish that the insuring clause had been triggered, and that an interpretative analysis beyond the plain language used in the clause was not warranted. In other words, it was enough that there had occurred an inundation at the insured property, which inundation satisfied the four objective contingencies set out in the clause. Cover was accordingly engaged for the reconstruction work.

The insurer argued that it was not enough to demonstrate the mere occurrence of qualifying floods, and they contended that they could support their alternative theory on the evidence. The Supreme Court confirmed that the alternative theory could have been the subject of a separate judicial review claim. However, the case before it was a narrow one, namely whether or not the lower courts had applied the correct principles in determining that the mere inundation was enough, on its face, to trigger the insuring clause. Having concluded that the lower courts had acted correctly in this respect, the remainder of the dispute was academic. The court therefore simply had no jurisdiction to hear evidence as to the alternative causation theory.

This case serves as a reminder of the often formalistic approach taken in Mexican courts, the need for insurers to seek legal advice on claims disputes at an early stage, and the importance of running all relevant coverage arguments at the appropriate time. Later attempts to expand the remit of the insurers' case will often be unsuccessful.


Sascha Stullenberg

Sascha Stullenberg


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Anthony Menzies

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