By means of a recent order issued in 2025, the Council of State (hereinafter, the “CE”) ruled on a negative jurisdictional conflict between the civil and the administrative courts.

When analyzing the conflict, the CE made several clarifications concerning insurance law, particularly regarding who are the parties to a performance bond insurance contract and the legal nature of such contract.

The CE’s main considerations were as follows:

1. Parties to the insurance contract
   
   The CE recalled that, pursuant to Article 1037 of the Colombian Commercial Code, the parties to an insurance contract are the insurer and the policyholder.
   
   In the case under review, the contracting public entity did not have the status of insurer or policyholder of the performance bond insurance but was merely designated as the insured and beneficiary. Although this designation grants the right to claim indemnification, it does not imply that the public entity is a party to the performance bond insurance contract.
    
2. Insurance on behalf of a third party
   
   When the policyholder takes out insurance on behalf of a third party (Article 1038 of the Colombian Commercial Code), such third party only becomes a party to the contract if it ratifies the agreement executed in its name.
   
   In this case, the contractor did not take out the insurance in the name of the contracting entity nor sought its ratification; the contractor merely purchased the performance bond insurance “on its own behalf” to cover the insurable interest of the contracting entity. Therefore, the contracting entity/insured did not assume any obligations as policyholder and did not become a party to the insurance contract.
    
3. The performance bond insurance is an autonomous contract
   
   Performance bond insurance is a principal, autonomous, and independent contract from the underlying public contract it secures.
   
   The insurer’s obligation is its own and consists of a conditional duty to pay indemnification to the insured upon the occurrence of the loss, equivalent to the assumption of the contractor’s obligations by the insurer. This autonomy prevents the insurance contract from being considered part of the public contract and precludes the insurer from being regarded as a party thereto.
    
4. Performance bond insurance is not always a public contract
   
   The public purpose of protecting State assets and the close relationship with public procurement do not, in themselves, transform performance bond insurance into a public contract. It would only qualify as such if a public entity acted as the insurer or as the policyholder.
   
   In this case, since both the policyholder and the insurer were private companies governed by private law, the insurance contract could not be considered a public contract.
    
5. Conclusion
   
   The CE referred the case file to the Constitutional Court so that it may determine the competent jurisdiction in this matter.