Through the sentence 67240 OF MARCH 1, 2023, the Third Section of the Council of State (hereinafter, the " CE ") resolved an appeal filed by a public entity against the first instance ruling handed down by the Administrative Court of Arauca, which acquitted an insurer of payment of the indemnity derived from compliance insurance, considering that the actions derived from the insurance contract against the insured entity had prescribed.

In its considerations, the EC supported the reasons set forth by the court of first instance and resolved to confirm the contested decision. This decision was accompanied by the following considerations:

1 .The prescription term of the actions derived from the insurance contract can begin to be counted from (i) the moment in which the administration learned of the breach attributable to the contractor or (ii) the moment in which the administration should reasonably have known of the breach attributable to the contractor . In addition, knowledge of the contractor's breach can be deduced from various circumstances such as the examination of the term within which the obligation had to be fulfilled and the warning of the breach that the entity should have inferred after it expired:

"That the term of prescription is counted from the time the administration became aware of the fact or from the moment in which it reasonably should have been aware of it, since this is what the rule refers to when it indicates that it elapses from when the interested party <: either it is clearly proven when it was known, as in this case, or that knowledge can be deduced from other circumstances, such as the examination of the period within which the obligation had to be fulfilled and the warning of non-compliance that the entity should have deduced later that he himself won."

2. The prescription of the actions derived from the insurance contract does not exempt the contractor from his indemnity obligation towards the insured public entity, since the insurer's indemnity obligation is conditioned to the existence of the contractor's obligation and not vice versa: "

This The decision will not cover the obligation imposed on the contractor in the administrative acts sued, because the prescription provided for in article 1081 of the Commercial Code refers to the actions derived from the insurance contract and, therefore, applies only in relation to the insurer that issued the policy. It does not apply in relation to the contractor to whom the obligation to pay the damages generated by the defects of the work was imposed -mainly-.The obligation of the insurance company is conditioned to the existence of the obligation of the contractor, not the other way around. 

3. The knowledge of the fact that the insured must have before the start of the prescriptive term of the actions derived from the insurance is not qualified knowledge or subject to any condition. In this sense, the term that the insured grants the contractor to make repairs is irrelevant:

“That the factual knowledge by the defendant entity is not knowledge that must have some type of qualification or conditioning. To consider this exception as proven, it is enough for the company to prove that the insured was aware of the damage (in the case of stability) or of the fact that generates the right.A contrary reading, adding the term that the entity grants the contractor to make the repairs, would imply considering that the prescription term is subject to the extension or the handling that the insured wants to give it. From knowledge of the fact, the entity knows that, if it intends to enforce the guarantee against the insurance company, it is obliged to do so (claiming as an individual, or issuing the administrative act) within a term of two years (...)". 

4. If the insured chooses to issue an administrative act to declare the occurrence of the loss, the prescription period continues to be counted from the moment the public entity became aware of the contractor's breach and not from another date: "(...) if it chooses to issue

an administrative act, this term is not counted from when the tests were carried out to determine that the damage was indeed the responsibility of the contractor, nor can the term granted to repair the imperfections noticed in the work be taken into account: the prescription term is account since he has knowledge of them ”.

5. The extraordinary prescription is not the call to apply in this case because said term is only counted when the insured did not know and could not know the breach of the contractor: "

That the administrative act that makes the guarantee against the insurance company effective must be issued in the ordinary term of two years, since the prescription is counted since the insured entity knew or should have known of the fact and this circumstance excludes the extraordinary prescription term of five years, which is counted from its occurrence, and only operates when it is evident that the entity did not know and could not know the circumstance that generates the right”. 

6. In the specific case, the ordinary prescription was established since the insured entity knew the facts constituting the accident on November 28, 2007 and issued the resolution ordering payment of the compensation to the insurer on April 5, 2010, since "More than two years elapsed between the knowledge of the fact and the declaration of the accident made in the administrative acts."

Based on the foregoing considerations, the EC decided to confirm the first instance ruling that ordered the public entity to reimburse the insurer for the money received as compensation, in compliance with the resolutions in question. Additionally, it confirmed the sentence imposed on the contractor as a consequence of having breached its contractual obligations.