Portability and judicial liquidation: what effect does the termination of the insurance contract have on the preservation of guarantees?


“The public order provisions of Article L. 911-8 of the Social Security Code (…) are applicable only on the condition that the contract or membership of the obliging employer and the insurer is not terminated, regardless of whether this termination occurs after the dismissal of the employees concerned. This is the position taken by the Court of Cassation in its judgment of February 15, 2024 (Civ. 2nd, Appeal No. 22-16.132).

The origin of the dispute

After the initiation of liquidation proceedings, the company’s employees were dismissed for economic reasons. The insurance company of the contract on collective health care costs concluded by the liquidated company terminated this contract on the date of its annual validity and asked the liquidator to pay contributions so that the former employees could be covered by individual contracts after the termination took effect. The liquidator called on the insurer to ensure portability continued free of charge and refund the sums paid out under the new individual policies.

The Paris Court of Appeal ordered the insurer to seek portability by ruling “the employees in question have acquired the right to retain their guarantees for the entire period established by the provisions of Article L. 911-8 of the Social Security Code, with subsequent termination being ineffective”. This decision was overturned by the Court of Cassation, which made such a decision for the first time “maintenance of guarantees, which according to 3° of (Article L. 911-8 of the Social Security Code), are valid in the company, means that the contract or membership binding the employer to the insurer does not expire. Such termination, regardless of whether it occurs after the dismissal of the affected employees, terminates the maintenance of the guarantees in favor of the former employees.’

A cohesive solution

The solution presented by the Court of Cassation is completely legally coherent. On the one hand, termination is not prohibited by any text. Remember that when liquidation proceedings are initiated, article L.641-11-1 of the Commercial Code authorizes the judicial liquidator to demand the maintenance of existing contracts. If such maintenance is required, the insurer is prohibited from terminating the contract based on its decision to terminate only based on the initiation of liquidation proceedings. On the other hand, neither this text nor Article L.911-8 of the Social Security Act regarding portability in any way prohibits the application of the public order option to terminate the insurance contract within a one-year period according to Article L.113-12 of the insurance code.

Remember

The principle of portability allows former employees to continue to use their social and health guarantees for a limited period of time and under certain conditions.

Here, the Court of Cassation considers that, within the framework of collective proceedings, the termination of the insurance contract after its one-year expiration results in the termination of the rights of former employees who were dismissed before this termination.

On the other hand, this solution is in accordance with the jurisprudence of the Court of Cassation. He has already implicitly admitted that termination of the insurance contract is possible even in the event of a judicial liquidation of the company. Thus, in its opinions of November 6, 2017 on the issue of the right to portability in the case of judicial liquidation, the court recalled that “preservation of rights means that the contract or membership binding the employer to the insurer is not terminated”, (Cass., Opinion Nos. 17013 to 17017). Likewise, in its judgments of November 5, 2020 (Cass. Civ. 2e, No. 19-17,164) and March 10, 2022 (Cass. Civ. 2e, No. 20-20,898), in which it ruled that portability applies to former employees dismissed from an employer placed in compulsory liquidation, the Court made sure that the insurance contract was still valid before taking a position on the existence or non-existence of the right to portability of former employees’ benefits.

Judgment of 15 February 2024 The High Court now very clearly addresses the question of the impact of the termination of the insurance contract at its one-year expiry on the continuation of portability in favor of employees dismissed prior to such termination in the context of collective action, ruling that such termination results in the termination of the rights of former dismissed employees . The transferability of guarantees is therefore likely to end before the expiry of the maximum retention period of twelve months set out in Article L.911-8 of the Social Security Code. The answer of the court of cassation was expected all the more because the judges had taken different positions on this issue until then. In fact, some have considered that retained guarantees are guarantees valid in the company and that the retention of rights means that the contract binding the employer to the insurer is not terminated (Colmar Court of Appeal, 9 June 2023) or, conversely, that portability must continue until its end, because the dismissals occurred before the termination (Commercial Court of Lille, February 2, 2023; Paris Court of Appeal, June 28, 2022, No. 20/09011, specifying that this same court subsequently issued a contrary decision on April 3, 2023 , No. 21/03429).

Note down

This solution is favorable to the insurer, as the portability of guarantees is likely to end before the end of the maximum retention period of twelve months established by the Social Security Act. From a socio-legal point of view, i.e. employee protection, this decision remains questionable.

The solution adopted here by the Court of Cassation, favorable to insurers, is very coherent and must be approved from a legal point of view despite its social implications. Due to the lack of guarantees still in place in the company, one of the conditions of article L.911-8 CSS is missing, so portability must be terminated. We can think that, in a very indirect way, by fully recognizing the scope of the right to annual termination of public order, the Court of Cassation has evaluated the criticism that has been subjected to its past jurisprudence consisting in putting pressure on the insurers of organizations of obligations imposed on companies. Now it remains to be seen whether the legislator will adjust the conditions for the implementation of portability in the case of judicial liquidation in the future.



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