By judgment issued under case file number 25 000 23 41 000 2013 02764 01 on November 28th, 2024, the Administrative Litigation Chamber, First Section of the Council of State (hereinafter, the “CE”), ruled on an appeal filed by the Office of the Comptroller General of the Republic (hereinafter, the “CGR”) against the decision that declared the nullity of certain administrative acts that had designated an insurance company as a civilly liable third party in a fiscal liability proceeding.
Facts:
The dispute arose from a fiscal liability proceeding initiated by the CGR against certain officials of a territorial entity due to a financial loss caused by failed investments. To mitigate potential risks, the entity had procured E&O insurance.
In 2006, the CGR conducted an audit of the territorial entity and identified the failed investment transactions. As a result, in 2008, the CGR initiated a fiscal liability proceeding against the responsible officials, based on Law 610 of 2000.
In the order initiating the proceedings, the CGR involved the insurer as a civilly liable third party, relying on an E&O insurance in effect during that period. Two years later, in 2010, the CGR extended the insurer’s involvement, this time based on a different insurance contract, arguing that both insurance contracts covered the events that had caused financial damage. Finally, in 2013, the CGR issued a fiscal liability ruling determining that the insurer was civilly liable for indemnification arising from both insurance contracts.
The litigation focused on the validity of the insurer’s designation as a civilly liable third party, as it argued that the statute of limitations for claims arising from the insurance contract had already become time-barred, pursuant to Article 1081 of the Commercial Code. The insurer contended that the CGR became aware of the facts in 2008, meaning that the two-year period to bring a claim had expired in 2010, long before the 2013 ruling was issued. Dissatisfied with the fiscal liability ruling, the insurer filed a lawsuit challenging the administrative act.
Procedural History:
In 2016, the Cundinamarca’s Administrative Court ruled in favor of the insurer and declared the annulment of the section of the fiscal liability ruling that the insurer—party to both insurance contracts—into the proceedings. The court also ordered the reimbursement of any payments made by the insurer.
Discontented with this decision, the CGR appealed the first instance ruling, arguing that the statute of limitations under Article 1081 had not been triggered. The CE rejected the CGR’s arguments and upheld the lower court’s decision based on the following considerations:
Legal Analysis:
- Applicable Statute of Limitations Before Law 1474 of 2011:
The CGR argued that there was no judicial precedent indicating that the statute of limitations under Article 1081 of the Commercial Code applied to fiscal liability proceedings governed by Law 610 of 2000, and that instead should apply the period established under Article 120 of Law 1474 of 2011.
Relying on its own case law, the CE rejected this argument and reaffirmed that, before Law 1474 of 2011 took effect, the statute of limitations applicable to insurance claims within fiscal liability proceedings was the two-year period established under Article 1081 of the Commercial Code, as Law 610 of 2000 did not regulate this matter.
“Law 610 of 2000 did not establish a statute of limitations for insurance policies under which a guarantor was designated as a civilly liable third party in fiscal liability proceedings. This gap was later addressed by Article 120 of Law 1474 of 2011.
Accordingly, this Section has clarified that ‘(...) the designation of the guarantor as a civilly liable third party is a special type of action to enforce the insurance coverage and, therefore, may be considered parallel to the fiscal liability action, even though it takes place within the same proceeding. However, the statute of limitations applicable to the two actions cannot be equated, as they are of a different nature.
In this context, prior to the enactment of Law 1474 of 2011, the statute of limitations applicable to claims arising from an insurance contract was that established under Article 1081 of the Commercial Code.’”
- Concurrent statutes of limitations:
The CE emphasized that the ordinary and extraordinary statutes of limitations under Article 1081 of the Commercial Code operate independently and may run concurrently. As such, the first to expire—whether the ordinary two-year period (starting when the interested party became aware of the loss) or the extraordinary five-year period (starting when the right arises)—is legally binding.
“These two statutes of limitations are independent and autonomous; they may run simultaneously, and the first to be triggered becomes legally enforceable. The ruling further noted:
‘(...) as clarified in CSJ SC June 29, 2007, case file 1998-04690-01, these two statutes of limitations are independent and autonomous and may run concurrently, meaning that the first one to be triggered prevails. The extraordinary statute of limitations applies universally and begins running when the right arises (objective criterion), and it will apply unless the ordinary statute of limitations is triggered first.’”
- Application of the ordinary statute of limitations:
The CGR contended that the extraordinary five-year statute of limitations should apply, because it applies “against all persons,” whereas the ordinary statute of limitations only applies to “interested parties.” Additionally, the CGR asserted that it was not a party to the insurance contract and was therefore unaffected by the ordinary statute of limitations.
Notwithstanding, the CE dismissed this argument clarifying that “interested parties” include individuals who derive rights from the insurance contract, such as the insured and beneficiaries. Consequently, the CGR was subject to the ordinary two-year statute of limitations under Article 1081.
“Lastly, the ruling further clarified the distinction between ‘interested parties,’ to whom the ordinary statute of limitations applies, and ‘all persons,’ to whom the extraordinary statute applies:
‘[...] It is undisputed that, in principle, only those who derive rights from the insurance contract are considered ‘interested parties,’ including the insurer and the policyholder (Article 1037 of the Commercial Code), as well as the insured and the beneficiary (Article 1047, paragraph 3) (...)’”
- Interruption of the statute of limitations:
Citing Article 2539 of the Civil Code, which provides that the statute of limitations may be interrupted by either acknowledgment of the obligation by the debtor or the filing of a lawsuit, the CGR argued that the statute of limitations was interrupted when the insurer was designated as a party in the fiscal liability proceeding.
The CE rejected this interpretation, concluding that the insurer had neither expressly nor implicitly acknowledged the obligation, nor had any lawsuit been filed that could have interrupted the statute of limitations.
“The appellant further argued that Article 2539 of the Civil Code should apply as a general rule, as it provides that ‘the statute of limitations on claims may be interrupted, either naturally or civilly. // It is naturally interrupted if the debtor acknowledges the obligation, either expressly or implicitly. // It is civilly interrupted by the filing of a lawsuit, except in the cases listed in Article 2524’ (...).
However, the Chamber finds that this argument lacks legal basis, as there was no acknowledgment of the obligation by the debtor, nor was any lawsuit filed that could have interrupted the statute of limitations.”
- Determination of the commencement of the statute of limitations:
Finally, the Council of State clarified that the ordinary statute of limitations period under Article 1081 of the Commercial Code is counted from the moment the interested party had knowledge of the loss.
In this case, the CGR became aware of the facts during the 2006 audit and joined the insurer to the proceedings in 2008 and 2010. Therefore, by the time the fiscal liability ruling was issued in 2013, the legal action arising from the insurance contract aimed at obtaining the indemnity payment had already become time-barred.
“(iii) Moreover, it is worth noting that, as specified by the Supreme Court of Justice, Civil Cassation Chamber, regarding the temporal point from which the statute of limitations must be calculated, the rule establishing that the ordinary period is counted, pursuant to Article 1081 of the Commercial Code, from the moment the party became aware of the fact giving rise to the action, while the extraordinary period is counted from the moment the respective right arises, corresponds to the same principle.”
If you wish to consult the full judgment issued under case file number 25 000 23 41 000 2013 02764 01 on November 28, 2024, click here.