Illegal Construction Insurance: When the Insurer Cannot Invoke Your Silence

You have just purchased a house in Bruay-la-Buissière, in the Pas-de-Calais, and you discover that the previous owner built an extension without planning permission. You sleep soundly, thinking your home insurance covers you. But a loss occurs, and your insurer refuses to indemnify: according to them, you should have declared that the construction was illegal. Yet, nobody ever asked you the question. Can you really be held responsible for this silence? What if it was you who built without permission, like this owner from Lens who built a house on a virgin plot?

This question was answered by the French Supreme Court (the highest French court) in a judgment of 13 December 2018 (No. 17-28.093). It overturned a Court of Appeal that had annulled an insurance contract on the grounds that the insured had not spontaneously revealed that his building had been erected illegally, without planning permission, on a natural space. The judges recalled a fundamental principle of insurance law: the insurer can only rely on a non-disclosure or misrepresentation if they asked precise questions at the time of conclusion of the contract. In other words, your silence is not a fault if you were not asked anything.

This decision is a victory for policyholders, but it also raises practical questions: how to prove that the insurer did not ask the right questions? What to do if you face a refusal of indemnification? And above all, how to avoid this type of dispute? This is what we will see, starting from the story of Mr. Y., owner in Lens, to concrete advice to avoid finding yourself in this situation.

The Facts: A Story That Happens Every Day

Mr. Y. is the owner of a building in Lens, in the Pas-de-Calais. He took out a home insurance contract with Macif (Mutuelle d'assurance des commerçants et industriels de France) to cover this property. But here's the thing: this building was constructed without planning permission, on a protected natural space. Worse, the mayor of the commune had informed Mr. Y. of the illegality of the construction and asked him to stop the work. Despite this, Mr. Y. continued and insured the property without saying anything to his insurer.

A few years later, a loss occurs (the exact nature of the loss is not specified in the judgment, but it is likely a fire or water damage). Macif refuses to indemnify and seeks annulment of the insurance contract for intentional non-disclosure (deliberately hiding important information). According to the insurer, Mr. Y. should have spontaneously declared that the building was illegal, because this information changed the nature of the risk: an insurer does not want to cover a construction that can be demolished at any time by order of the mayor.

The Court of Appeal ruled in favour of Macif and annulled the contract. Mr. Y. appealed to the Supreme Court. The Supreme Court quashed the Court of Appeal's decision, on the ground that the latter had not established that the insurer had asked precise questions about the legality of the construction at the time of subscription. In short, the insurer cannot blame the insured for not mentioning the illegality if the risk declaration questionnaire did not contain an explicit question on this subject.

An important detail: the judgment mentions that Mr. Y. had already been prosecuted for construction without permission for another house, on a virgin plot. This shows that he was a repeat offender, but the Supreme Court did not take this into account: only the question asked or not at the time of subscription matters.

The Reasoning of the Court — Dissected

The Supreme Court relies on two essential texts of the Insurance Code: Article L. 113-2, 2°, which requires the insured to answer exactly the precise questions asked by the insurer about the circumstances that allow the risk to be assessed; and Article L. 113-8, which allows the insurer to annul the contract in case of intentional non-disclosure or misrepresentation by the insured. But beware: these texts do not give the insurer a blank cheque. The Court specifies that the insurer can only invoke non-disclosure if it results from the answers to questions that they themselves asked.

In other words, the insured's obligation is not an obligation to tell everything spontaneously. It is an obligation to answer sincerely the questions asked. If the insurer does not ask "Was your construction carried out with a building permit?" or "Does the building comply with planning rules?", the insured does not have to guess that this information is crucial.

In this case, the Court of Appeal had annulled the contract on the basis that Mr. Y. had been informed by the mayor of the illegality, and that this non-disclosure had changed the object of the risk (an insurer does not want to insure a property that could be destroyed). But the Supreme Court criticised it for not having checked whether the insurer had asked precise questions on this point. It is not because the information is important that the insured must reveal it spontaneously: it is up to the insurer to ask for it.

This solution is consistent in case law. In a judgment of 10 November 2009 (No. 08-19.377), the Supreme Court had already ruled that the insurer cannot rely on a non-disclosure if the question asked was too vague. Here, the Court goes further: even if the information is decisive for the risk, the absence of a precise question exonerates the insured. This is a strong protection for consumers.

What few people know is that this rule also applies in case of intentional misrepresentation. The bad faith of the insured is not enough: the insurer must still have asked the right questions. undefined, I have encountered cases where insurers tried to annul the contract for omissions that the insured did not have to guess. This decision is therefore an essential safeguard.

What This Changes for You — Concretely

For owner-occupiers or landlords, this decision means that you are not obliged to spontaneously reveal all irregularities of your property when taking out insurance. If the insurer does not ask you a precise question about the legality of the construction, you are covered. Let's take an example: you bought a house in Bruay-la-Buissière whose extension was built without permission. You take out home insurance. The form does not contain a question about planning compliance. A fire occurs. The insurer cannot refuse to indemnify by invoking your silence on the illegality. On the other hand, if the form asks "Does your property comply with the planning rules in force?" and you answer yes, then you are making a false declaration and the insurer can annul the contract.

For tenants, this decision may also concern you. If you take out rental insurance (mandatory), the insurer may ask you questions about the condition of the dwelling. But they cannot blame you for not reporting that the landlord built without permission, unless they specifically asked you about it.

For buyers, it is more delicate. When you buy a property, you must check its planning compliance (building permit, planning certificate). If you do not, you could have problems with your insurer in case of a loss, but only if they asked you precise questions. In practice, insurers are starting to include questions about the compliance of constructions in their forms. It is therefore essential to read the questionnaire carefully before signing.

Finally, for co-owners, the situation is similar. If the co-ownership carried out work without permission, the building's insurer may refuse to indemnify if the question was asked to the syndic. But if the question was not asked, the syndic's silence is not a non-disclosure.

Concretely, if you are faced with a refusal of indemnification based on an alleged non-disclosure, you must check the risk declaration questionnaire you filled out. Ask your insurer for a copy. If no precise question concerned the illegality of the construction, you can contest the refusal. Do not hesitate to consult a lawyer specialised in insurance law, as the limitation periods (2 years from the loss) are short.

Four Tips to Avoid This Type of Dispute

• Keep the risk declaration questionnaire carefully: when taking out your insurance contract, you fill out a form. Keep a signed and dated copy. In case of a dispute, this is the proof of the questions asked and your answers. Without this document, it will be difficult to prove that the insurer did not ask you about a specific point.
• Answer precisely and exhaustively the questions asked: if the insurer asks you "Was your construction carried out with a building permit?", do not lie. An intentional misrepresentation can lead to the nullity of the contract and refusal of indemnification. If you are unsure about a question, ask your insurer or an adviser for clarification.
• Check the planning compliance of your property before taking out insurance: if you know that your property has an irregularity (construction without permission, non-compliance with the local plan), anticipate. Find out about the possibilities of regularisation (retrospective building permit, prior declaration). A regularised property is easier to insure.
• In case of a loss, do not hide anything from your insurer: even if you are not obliged to reveal everything spontaneously at the time of subscription, in case of a loss, you must declare all known circumstances. If you lie about the cause of the loss, the insurer may reduce or refuse indemnification, regardless of the questions asked initially.

Further Analysis: Related Case Law and Developments

The decision of 13 December 2018 is part of a line protective of policyholders. In a judgment of 10 November 2009 (No. 08-19.377), the Supreme Court had already ruled that the insurer cannot rely on a non-disclosure if the question asked was too general. For example, the question "Do you have any medical history?" is too vague to justify a nullity if the insured omits a minor detail. Similarly, the question "Is the property in good condition?" does not allow the insurer to blame the insured for not reporting a hidden defect.

Conversely, in a judgment of 14 February 2019 (No. 17-31.079), the Supreme Court admitted the nullity of an insurance contract for intentional misrepresentation, because the insurer had asked a precise question about the existence of a building permit and the insured answered affirmatively when the permit did not exist. The difference is clear: the precise question allows the insurer to rely on the lie.

The current trend is therefore towards making insurers responsible: they must draft clear and precise questionnaires. Courts are increasingly demanding on the wording of questions. This means that insurers will likely refine their forms to include questions on all aspects of the risk, including planning compliance. In the future, it will therefore be more difficult for an insured to hide behind the absence of a question. But for now, the rule remains: no precise question, no non-disclosure.

Key Points to Remember

• The insurer must ask precise questions: they cannot blame you for not spontaneously revealing information, even important, if no precise question was asked at the time of subscription.
• Keep the risk declaration questionnaire: it is your best evidence in case of a dispute. Without it, you might struggle to prove that the insurer did not ask the right questions.
• Answer honestly the questions asked: if the insurer asks you about the legality of the construction, do not lie. An intentional misrepresentation can lead to the nullity of the contract and refusal of indemnification.
• Anticipate irregularities: if your construction is illegal, try to regularise it before taking out insurance. This will save you a lot of trouble in case of a loss.
• If you face a refusal of indemnification, act quickly: the limitation period to contest is 2 years from the loss. Consult a specialised lawyer as soon as possible.

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