Background
A public economic enterprise insured its electronic equipment under a policy issued following a procurement process. After an insured device malfunctioned, the insurer accepted that the loss was covered but paid only 51,733.34 Turkish lira of the undisputed 121,891.66-lira repair cost. It applied a proportional reduction because the policy amount was below the equipment’s actual value.
The insured sued for the unpaid balance, arguing that Article 9 of the technical specifications—incorporated into both the procurement contract and the policy—required the insurer to pay repair invoices in full for partial losses that did not exceed the insured amount. The Ankara 5th Commercial Court found the property underinsured by 57.56%, held that Article 9 addressed depreciation rather than underinsurance, and dismissed the action because the insurer had already paid the proportionally reduced amount.
The Court’s Holding
The Ankara Regional Court of Appeal held that Article 9 expressed the parties’ agreement not to apply proportional underinsurance rules to qualifying partial losses. The provision stated that “no depreciation deduction shall be applied, and for partial losses not exceeding the insured amount, the insurer shall pay the invoice amount in full following repair.” Although a depreciation deduction concerns the increase in value resulting from replacing worn parts with new ones, the separate language requiring full payment for partial losses would have no such limited function.
The court therefore granted the insured’s appeal, vacated the trial court’s judgment under Article 353(1)(b)(2) of the Code of Civil Procedure, and entered judgment for the insured. It awarded the unpaid 70,158.32 Turkish lira, together with commercial advance interest accruing from May 21, 2024. The unanimous decision was final because the amount in dispute fell below the statutory threshold for further appeal.
Key Takeaways
- Parties may contract out of proportional underinsurance treatment for partial losses, provided recovery does not exceed the insured amount.
- A policy clause requiring full payment of repair invoices for partial losses was enforceable independently of its separate prohibition on depreciation deductions.
- Where the material facts and damages calculation were established, the appellate court could vacate the dismissal and enter judgment on the merits rather than remand.
Why It Matters
The decision underscores that Turkish courts will give effect to coverage terms contained in procurement specifications when those terms are incorporated into the insurance contract and policy. Insurers cannot rely on default underinsurance principles where the agreed wording requires full reimbursement for covered partial repairs within the policy limit.
The ruling also distinguishes two concepts that may appear in the same clause: deductions for betterment or depreciation and proportional reductions for underinsurance. Treating those concepts separately was decisive to the insured’s recovery.