In short. The Spanish Insurance Contract Act (Law 50/1980) is mandatory: a policy may depart from it only to the benefit of the insured (art. 2). The exception is large risks (art. 44), and a company falls into that category, among other cases, when it exceeds two of three thresholds: €6.6 million in total assets, €13.6 million in turnover or 250 employees. The Act also places duties and deadlines on the company: disclosing the risk in line with the questionnaire, notifying any aggravation, reporting a loss within seven days and objecting to renewal one month in advance. Actions under the contract become time-barred after two years in non-life (indemnity) insurance and five in personal insurance. And the injured party has a direct action against the liability insurer (art. 76).
The Spanish Insurance Contract Act — Ley 50/1980, de Contrato de Seguro (Law 50/1980) — marked 45 years in force on 17 April 2026 and remains the statute that decides what your insurer can and cannot raise against you.
The usual reading of the Act is the insurer's: what is covered, what is excluded, how much is paid. Yet the Act also sets duties and deadlines that run against the policyholder. And in practice, most of the cover that is lost is not lost to an exclusion, but to a deadline or a duty that nobody within the company managed.
What does the Spanish Insurance Contract Act regulate, and whom does it protect?
The Act defines the insurance contract as one under which the insurer undertakes, in return for a premium, to indemnify the insured, within the agreed limits, for the damage suffered, or to provide other benefits, should the event whose risk is covered occur (art. 1).
Its decisive feature lies in article 2: its provisions are mandatory, unless they themselves provide otherwise. Clauses that are more favourable to the insured are valid. Put another way, the policy wording can improve on the Act, but not worsen it.
The large-risks exception
Article 44 disapplies article 2 to contracts covering large risks, and article 107.2 allows the parties to such contracts to choose the applicable law freely. The definition is now found in article 11 of Law 20/2015 (the Spanish Act on the regulation, supervision and solvency of insurers):
- Transport (goods, railway rolling stock, aircraft and ships, and the related liability): a large risk under letter (a), with no thresholds.
- Credit and surety: a large risk where the policyholder and the insured carry on an industrial, commercial or professional activity on a professional basis and the risk relates to that activity (letter b). This is the usual position for surety insurance, which the Act itself regulates in article 68 and whose workings we explain in calling on a surety bond.
- Property damage, general liability and pecuniary loss, among other classes: a large risk if the policyholder exceeds two of these three thresholds: €6,600,000 in total assets, €13,600,000 in net turnover and an average of 250 employees (letter c). If it belongs to a group that prepares consolidated accounts, the consolidated figures are used.
The practical consequence is serious: for a large account, depending on the thresholds met by the policyholder and its group, the mandatory nature of article 2 does not apply, and the wording may depart from the Act to the detriment of the insured as well. How that affects the requirements of article 3 for limiting clauses is a matter of interpretation that is best reviewed policy by policy. We develop it in the usual exclusions in a liability policy and when comparing the claims-made and occurrence bases.
Before signing: the duty to disclose the risk
Article 10 requires the policyholder to disclose, in accordance with the questionnaire put to it by the insurer, every circumstance it knows of that may influence the assessment of the risk. If there is no questionnaire, or the circumstance is not included in it, the policyholder is released from that duty.
Where there is concealment or inaccuracy, the insurer may terminate the contract within one month of becoming aware of it. If a loss occurs first, the indemnity is reduced proportionately to the difference between the agreed premium and the premium that would have applied had the true extent of the risk been known. Where the policyholder acted with wilful misconduct or gross negligence, the insurer is released from payment.
For a large account, the underwriting questionnaire for a D&O, cyber or liability programme is the document that defines the risk. The questions that matter are internal: who completes it, with what information from subsidiaries, and who validates the answers before signing. An imprecise answer on overseas turnover or on prior claims is exactly the kind of inaccuracy that gets argued over after the loss, not before.
During the policy period: aggravation, premium and renewal
Aggravation of the risk
Article 11 requires any change to what was disclosed in the questionnaire that aggravates the risk to be notified as soon as possible. Once notified, the insurer may propose an amendment to the contract within two months, and the policyholder has fifteen days to accept or reject it. The insurer may also terminate the contract, giving written notice, within one month of learning of the aggravation (art. 12).
If a loss occurs without the aggravation having been notified, the insurer is released where there was bad faith; otherwise, its indemnity is reduced proportionately. In a company, the typical situations are a new plant, entry into the United States, a change of activity or an acquisition.
The premium
If the first premium has not been paid before the loss, the insurer is released, unless otherwise agreed. For subsequent premiums, cover is suspended one month after the due date, and the contract is extinguished if the insurer does not claim payment within six months (art. 15). Why this matters when requesting a certificate from a supplier is explained in how to validate a liability insurance certificate.
Duration, renewal and objection
Article 22 caps the duration at ten years, with renewals of up to one year at a time. The policyholder may object to renewal by written notice given one month before expiry; the insurer, two months before. The insurer must also give two months' notice of any amendment to the contract, and these deadlines must be highlighted in the policy.
In a corporate programme, that month is the real window for going to market. If renewal negotiations start late, the company is negotiating with the renewal already locked in.
Are the deadlines for objecting to the renewal of your programme under control? Request a review of your programme.
What must the company do when a loss occurs?
Notify it within seven days of becoming aware of it, unless the policy sets a longer period (art. 16). Failure to do so does not forfeit cover: it entitles the insurer to claim the loss and damage caused by the lack of notification. The company must also report the circumstances and consequences of the loss, and it forfeits the right to indemnity only if it breaches that duty with wilful misconduct or gross negligence.
Mitigate the consequences (art. 17). Salvage and mitigation costs are borne by the insurer up to the agreed limit (or, absent agreement, up to the sum insured), even if they prove unsuccessful, provided they are neither untimely nor disproportionate to the property saved.
Demand the minimum amount. Within forty days of the notification, the insurer must pay the minimum amount it may owe on the basis of the circumstances known to it (art. 18).
If it has not paid within three months of the loss (or the minimum amount within those forty days), it is in default, and article 20 imposes statutory interest increased by 50%, and no less than 20% a year once two years have passed since the loss. We set this out in detail in when the insurer pays late.
In non-life (indemnity) insurance, article 38 adds a further duty: to submit, within five days of the notification, a list of the items affected and an estimate of the damage, and it governs the expert appraisal procedure where there is no agreement.
Limiting clauses: what article 3 requires
Clauses that limit the rights of the insured must be specially highlighted and specifically accepted in writing. The distinction from a clause that defines the risk covered decides many disputes: a limiting clause that fails those requirements cannot be enforced against the insured.
The Act itself classifies the temporal delimitation clauses of article 73 — those of the claims-made basis — as limiting. We do not repeat here what is already explained elsewhere: see limiting and defining clauses, the choice between claims-made or occurrence and how to read the limits, sub-limits and deductible of a policy.
Can the injured party claim directly against the insurer?
Yes. Article 76 grants the injured party or their heirs a direct action against the liability insurer. It is the piece that makes liability insurance for companies a guarantee for the third party as well.
The direct action is immune to the defences the insurer has against its insured: an aggravation that was not notified or an inaccurate answer in the questionnaire, for example, cannot be used to refuse payment to the injured party. The insurer may, however, raise the injured party's sole fault and any personal defences it has against them. The insured, for its part, is obliged to disclose the existence and content of the policy to the injured party.
The consequence for the company is less comfortable than it appears. The insurer pays the third party and, if the damage resulted from the insured's wilful misconduct, may seek recovery from it. A breach of the company's duties as insured does not, as a general rule, leave the injured party uncompensated, but it may end up turning against the company.
What can be enforced against the third party, such as the agreed limit (art. 27), is covered in the section «What can be enforced against an injured third party?» of our guide to limits and sub-limits.
We review your policy wording and your calendar of deadlines before the next expiry date. Talk to us.
When do insurance claims become time-barred?
Article 23 sets the limitation period for actions arising from the contract: two years in non-life (indemnity) insurance, which includes liability, and five years in personal insurance. This is the period between the parties: that of the insured company against its insurer.
The injured party's direct action is a different matter. According to the prevailing case law, its limitation period is tied to that of the injured party's action against the person liable, not to article 23. That period depends on the type of liability and the applicable law: under the Spanish Civil Code, one year for non-contractual liability (art. 1968.2) and five years for personal actions with no special period (art. 1964.2); under the Civil Code of Catalonia, three years for non-contractual liability (art. 121-21.d) and ten as the general period (art. 121-20). The distinction between contractual and non-contractual liability is therefore decisive.
These are general periods: how they are calculated and interrupted depends on each case.
The Act's deadlines in one table
| Deadline | What | Article |
|---|---|---|
| 1 month | Termination for concealment or inaccuracy in the disclosure | 10 |
| 2 months / 15 days / 1 month | Proposed amendment for aggravation / policyholder's response / termination | 12 |
| 1 month | Suspension of cover for non-payment of a subsequent premium | 15 |
| 6 months | Extinction if the insurer does not claim the premium | 15 |
| 7 days | Notification of the loss (unless the policy sets a longer period) | 16 |
| 40 days | Payment of the minimum amount | 18 |
| 3 months | Insurer in default from the date of the loss | 20 |
| 1 month / 2 months | Objection to renewal (policyholder / insurer) | 22 |
| 2 months | Notice of amendments before expiry | 22 |
| 5 days | List of items and estimate of damage after notification (non-life insurance) | 38 |
| 2 years / 5 years | Limitation period (non-life / personal) | 23 |
Alongside these deadlines sit rules with no date attached that are worth bearing in mind, such as the proportional rule for underinsurance (art. 30), which may be excluded by agreement.
The role of an independent broker
Almost every deadline in the table runs against the company, and none of them manages itself. As an independent brokerage registered with the Spanish DGSFP under reference J0140, we act on the client's mandate, not the insurer's: we prepare the underwriting questionnaire with you, keep the calendar of renewals and notices, notify losses on time and defend your position before the insurer when there is a disagreement.
To place these rules within the full picture, types of company liability explains how the different forms of liability fit together.
Frequently asked questions
Is Law 50/1980, the Spanish Insurance Contract Act, still in force? Yes. Its consolidated text is published in the BOE (Spain's Official State Gazette), with the latest update published on 3 October 2026. Among its most recent amendments are Royal Decree-law 5/2023, which added to article 10 the so-called "right to be forgotten" for cancer survivors in life insurance, and Law 4/2026 of 1 October, which amends the fourth additional provision on non-discrimination on grounds of disability and will enter into force on 23 October 2026.
What happens if the company failed to disclose something in the questionnaire? Where there was concealment or inaccuracy, the insurer may terminate within one month of becoming aware of it and, if the loss occurs first, reduce the indemnity in proportion to the premium it would have charged. With wilful misconduct or gross negligence, it is released. If the circumstance was not in the questionnaire, the company was not required to disclose it (art. 10).
Within what period must a loss be notified to the insurer? Within seven days of becoming aware of it, unless the policy sets a longer period (art. 16). Late notification does not forfeit cover, but it allows the insurer to claim the loss and damage it suffers as a result.
How long does the company have to bring a claim against the insurer? Two years in non-life (indemnity) insurance, including liability, and five in personal insurance (art. 23). How the period is calculated and interrupted depends on each case.
Can the insurer refuse to pay the injured party because the company breached the policy? As a general rule, no. The direct action under article 76 is immune to the defences the insurer has against its insured. It may raise the injured party's sole fault and its personal defences against them, and seek recovery from the insured if the damage resulted from its wilful misconduct.
Sources and legislation
- Law 50/1980 of 8 October, on the Insurance Contract (Ley de Contrato de Seguro; consolidated text, latest update published on 3 October 2026), articles 1, 2, 3, 10, 11, 12, 15, 16, 17, 18, 20, 22, 23, 27, 30, 38, 44, 68, 73, 76 and 107, and fourth additional provision.
- Law 20/2015 on the regulation, supervision and solvency of insurance and reinsurance undertakings, article 11 (large risks).
- Resolution of 17 June 2022 of the DGSFP, updating the amounts in article 11 of Law 20/2015 to €6,600,000 and €13,600,000 (effective from 19 October 2022).
- Law 4/2026 of 1 October, amending the fourth additional provision of Law 50/1980.
- Royal Decree-law 5/2023, amending article 10 of Law 50/1980.
- Spanish Civil Code, articles 1964.2 and 1968.2.
- Law 29/2002, first law of the Civil Code of Catalonia, articles 121-20 and 121-21(d).
This information is for guidance only and does not constitute binding advice. Covers, limits and exclusions are governed in every case by the specific terms of each policy. New Brokers Correduría de Seguros, S.L., registered with the DGSFP under reference J0140.
