Brazil: When The Credit Of The Insurer Against The Principal Is Subject To Judicial Recovery

In a trial held on May 21, 2018, the 2^nd Business Law Judicial Chamber ("Câmara Reservada de Direito Empresarial") of the Court of Appeal of the State of São Paulo, when analyzing the plea made by the Principal of a Surety Bond under Judicial Recovery, in the Appeal ("Agravo de Instrumento") No. 2219349-78.2017.8.26.0000 (in summary, the Court discussed whether the credit of the Insurer against the Principal under Judicial Recovery should be included or not in the Creditors' List, on the alleged basis that such credit existed and was ascertainable prior to the filing for Judicial Recovery, thus being subject to its effects), ruled that the credit of the Insurer against the Principal due to the subrogation of the former in the Insured's rights "will [only] begin to exist upon payment of the insurance indemnity¹", hence "if there's no payment of indemnity previous to the filing of the Judicial Recovery proceedings, such credit shall not be included in the Creditors' List, because until then it did not exist²"

At the end, after asserting that "the time lapse that defines when the Insurer's credit begins to exist is the date of the payment of the insurance indemnity by the appealed³" (i.e., in that case, the Insurer), the Court stated that "the appeal should be rejected, bearing in mind that the credit did not exist when the request for Judicial Recovery was filed by the appealed party, so that, as a consequence, it should not be subject to the Judicial Recovery⁴".

In our view, the decision referred to above is of great importance to the insurance market, considering that it eliminates the uncertainty as to when the credit of the Insurer against the Principal will become subject to the effects of the Judicial Recovery.

Our firm acted on the defense of 4 (four) Insurers in the Judicial Recovery proceeding aforementioned.

Footnotes

1 Free translation "existirá com o pagamento da indenização securitária"

2 Free translation "se não há o pagamento da indenização antes da apresentação do pedido de recuperação judicial, não há que se falar em habilitação de crédito, pois o crédito, até então, não existe"

3 Free translation "o marco temporal que define a concursalidade do crédito é a data do pagamento da indenização pela agravada"

4 Free translation "descabida a pretensão recursal, tendo em vista que o crédito não existia quando da apresentação do pedido de recuperação judicial pelas agravantes, não estando, portanto, sujeito à recuperação judicial"

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