MK Decides that Insurance Companies Cannot Cancel Policies Unilaterally
On Friday, January 3, 2025, the Constitutional Court (MK) announced its decision regarding the judicial review of Article 251 of the Indonesian Commercial Code (KUHD). The petition was filed by Maribati Duha through her legal representatives, Eliadi Hulu and Rendi Vlantino Rumapea, under case number 83/PUU-XXII/2024. Eliadi Hulu described the decision as a progressive step toward providing balanced protection and justice for both parties: the insurer and the insured. He also stated that Article 251 of the KUHD has often been used by insurance companies to unilaterally cancel policies, ultimately disadvantaging policyholders or their heirs by depriving them of their rights to claim insurance benefits.
This judicial review decision marks a significant step in protecting the rights of policyholders in insurance agreements. The MK declared that the provisions of Article 251 of the KUHD contradict the 1945 Constitution (UUD 1945) and no longer have binding legal force unless interpreted to mean that the cancellation of insurance agreements must be based on mutual agreement between the insurer and the insured or through a court ruling.
The MK emphasized that Article 251 of the KUHD lacks clarity regarding the mechanism for canceling insurance agreements. Moreover, the article was deemed conditionally unconstitutional because it could lead to varying interpretations, particularly regarding the conditions under which an insurance agreement can be annulled. The MK stated that an agreement should provide balanced positions based on the principles of contract law. However, Article 251 of the KUHD merely serves as a warning to the insured without ensuring a balanced protection of their rights within the agreement formed jointly with the insurer. This poses a risk of creating legal uncertainty for the parties involved. In its ruling, the MK noted that the article only provides options for the legal consequences, such as the annulment of the agreement or changes to its terms, without stipulating clear procedures.
Constitutional Court Judge Ridwan emphasized that in cases where there are errors or withheld information in the drafting of an insurance agreement, the cancellation of a policy can only be carried out through mutual agreement or a court ruling. This is an effort to ensure fairness for both parties. With this decision, insurance companies no longer have the prerogative to unilaterally cancel insurance claims without considering the insured’s legal defenses. This decision is expected to create a fairer relationship between the insurer and the insured, while also increasing public trust in the insurance industry.