The ipso jure termination of surety insurance due to the failure of noticing a risk condition alteration

Abstract

In Judgment SC1983-2025, the Supreme Court of Justice clarifies its position on the termination of surety insurance contracts due to failure to provide timely notification of modifications to the state of risk. The Court specified that the policyholder or insured has a legal obligation to inform the insurer, with the advance notice established in Article 1060 of the Commercial Code, of any modification to the guaranteed contract that implies an aggravation of risk or variation of its local identity. It emphasized that this obligation is especially rigorous in surety insurance, given its irrevocable nature and its economic-social function as a guarantee. It clarified that material alterations requiring notification include, among others, modifications affecting the nature of the contract, the contracting parties, the object, the content and scope of obligations, the value of benefits, or the execution terms. It held that failure to provide such notification produces ipso jure termination of the contract from the moment the modification is introduced, without the need for judicial declaration. In the specific case, the Court partially overturned the judgment of the Superior Court of the Judicial District of Barranquilla, for having improperly assessed the response to the third-party claim and for failing to recognize that the insurance contract had automatically terminated when the recipient of the advance payment was modified without notifying the insurer.