Subscription Agreement In Insurance Law
1. DEFINITION AND LEGAL CHARACTER OF SUBSCRIPTION CONTRACTS
Subscription contracts are agreements wherein the overall interest and risk related to the insurance are broadly defined; subsequently, the insurer’s premium is established, and coverage is granted in exchange for this premium, bounded by a specific timeframe or maximum sum. Although subscription contracts are not regulated under the Turkish Code of Commence, they are frequently encountered in practice, especially in freight shipment. In practice, the insurer and the insurant commonly reach consensus regarding the insurance of potential risks anticipated during transportation over a specified duration (e.g., 6 months/1 year, etc.), while also considering geographical limits. Following this, for each shipment, the policyholder informs the insurer, who then formulates a policy based on distinct criteria relevant to that shipment. These overarching agreements, initially established in broad outlines, evolve into individualized insurance contracts. Consequently, rather than requiring the parties to repeatedly create a new insurance contract, the framework contracts are populated with subscription agreements, streamlining the process for greater practicality.
Subscription agreements have found a place in our country with the influence of German law. While these agreements are not specifically addressed in the Turkish Code of Commerce, there are viewpoints suggesting their legal essence is rooted in preliminary, conditional, and framework contracts. The prevailin opinion in the doctrine is that subscription agreements resemble framework contracts.
2. ATTRIBUTES AND COMPONENTS OF SUBSCRIPTION CONTRACTS
a) Determination of the Risk:
A risk is an event characterized by uncertainty regarding its occurrence, and should it transpire, it leads to detriment Risk constitutes a pivotal factor that shapes the insurer’s responsibility to provide protection, thus, both the nature of risks and their limits must be clearly defined in the contract. For instance, in a subscription contract pertaining to transportation insurance, the risk is commonly delineated based on the potential modes of conveyance such as road, sea, or air, especially when the specific mode of transportation is uncertain. In the subscription contract where the risk is determined in general terms, the insurance contract is concretized with the notification to be made by the insurant. The insurer’s obligation to provide insurance protection shall commence with the conclusion of the individual insurance contract. Therefore, unlike other insurance contracts, it is sufficient to determine the risk in general without necessitating intricate and specific delineation.
b) Determination of Interest:
If there is a potential loss to the insurant or the insurer due to an event, it is acknowledged that there is a relationship of interest between the insured and the insurer and the thing insured against this loss. For the validity of insurance contracts, the insurer or the insured must have an interest that can be measured in money. In a subscription insurance contract, the interest subject to insurance is determined in general. For example, the goods to be exported during transport may be specified in general as “construction materials”. In a subscription insurance contract for transport insurance, the goods to be exported in relation to the field of activity of the insured company are generally specified: as in various electrical and electronic devices or various construction materials. In a subscription insurance contract, the interest may be determined by the type, as well as the owner of the interest can be determined in general. Therefore, unlike individual insurance contracts, it may be sufficient to determine the interest in a general manner without the need for a precise determination.
c) Contract of Continuous Performance:
The obligor’s perpetual performance of the obligation without being bound to a specified time is defined as a continuous performance. In a subscription insurance contract, the insurer and the insurant are obliged to conclude an individual contract. The insurer is obliged to conclude an insurance contract regarding the risks covered and to provide coverage under the contract, while the insurant is obliged to conclude an insurance contract and pay the premium. The insurer’s stake in the consistent fulfillment of their duty to finalize an insurance agreement remains ongoing. The objective of the insurant is to secure an insurance contract with pre-established terms, avoiding the need to seek out an insurer each time, thereby ensuring convenience and availing premium discounts. The core of subscription contracts lies in the creation of “forming a confidential legal bond between the involved parties, rooted in trust and good faith, emphasizes the significance of initial contract fulfillment, with subsequent outcomes being firmly established” with a continuous indebted relationship.