Vastuuvakuutus vahingonkorvausriidassa

Abstract

Liability insurance in claims disputes

1. Object of the Study

Liability insurances have a central role in the control of damage and liability. Among other things, liability insurances have an effect on the cover of those suffering the damage, compensation norms and compensation practices. The liability for damages is also of special nature as an insurance risk, since it requires the acknowledgement of a normative legal relationship, i.e. liability for compensation. The developmental span of an insured event can be remarkably long and extend from the act which caused the damage to the res judicata award of damages.

Despite the significance and the special nature of liability insurances, it has not been the subject of actual insurance law studies published in Finland. The purpose of this study is, for its own part, to make up for this deficiency. In particular, the study focuses on problems during the stage of filing insurance claims. The study investigates the relationship of the insurer and the insured from three different thematic perspectives, these being: 1) the legal repercussions and requirements of an insurer’s claims settlement decision, 2) the insurer’s right to control the insured event and 3) the distribution of expenses between the insurer and the insured. Each of these segments is divided into several individual legal questions, of which interpretational recommendations will be made.

These more particularised questions will also be subjected to evaluations on how well the Finnish Insurance Contracts Act (ICA) accounts for the special characteristics of general liability insurances and how the established terms and conditions of insurance policies relate to the said Act’s provisions. In spite of the focus on general liability insurance, this approach enables the evaluation of several questions of a general significance with regard to insurance law.

The status of the damaged party will mainly be looked at only from the perspective of the mutual relationship between the insurer and the insured. The study’s scope encompasses both corporate and consumer insurances. It will also take note of the terms and conditions prevalent in the industry and propose interpretational recommendations thereof.

The following consists of a markedly simplified summary of this investigation’s results.

2. An Insurance Company’s Decision-making

When deciding upon the payment of insurance compensation against liability insurance, the insurer usually has three options. It can either deny its liability for compensation based on the policy’s limitation on liability, approve the claim and pay the settlement, or acknowledge the alleged liability of the insured to fall within the scope of the policy’s coverage but deny liability for compensation on the grounds that the insured is not liable for damages. In the latter case, the insurer – according to the terms and conditions of the policy – is usually obligated to initiate investigations to clarify the insured’s liability for damages. The decision-making of the insurer involves a number of issues with legal import, which are discussed in chapter 3.

Pursuant to the provisions of section 70 of the Insurance Contracts Act, the insurer is obligated to initiate activities on behalf of the insured. The period of time is calculated on the basis of obtaining the clarification concerning the liability, meaning that settling the claims on behalf of the insured first is not required. The burden of proof is divided according to conventional compensation debt relations so that it is the obligation of the insured to prove that a liability for compensating a third party has arisen, and the obligation of the insurer to prove the grounds for limited liability possibly applicable to the case. In reality, the actual burden of proof concerning the insured’s liability for damages in general liability insurances is usually borne by the party claiming damages. From the perspective of the insurer’s and the insured's mutual relation, however, the burden of proof rests with the insured.

The insurer – despite the limitation on liability referred to in section 9 (2) of the Insurance Contracts Act – can be found to be liable to compensate the damage, provided that the insured will be granted with a sufficient degree of trust regarding the settlement of claims. An effect of this kind may occur as a result of, e.g. the insurer’s continued defence of the insured against the claim for damages while being aware of a limitation-of-liability factor possibly applicable to the case.

The insurer is entitled to recover a compensation already paid only in exceptional cases. On the other hand, should such an entitlement arise, the insurer may not only be entitled to recover the actual compensation paid but the costs incurred in the insured’s defence, regardless of whether the insurer’s liability for costs was originally based on the provision concerning salvage costs as set forth in the Insurance Contracts Act (section 61) or the terms and conditions of the policy. The option of recovery may also arise as a consequence of the insured being found liable to compensate the insurer with the settlement which the latter has had to pay to the party claiming damages without cause. However, the usual prerequisite for recovery is that the insured has provided the insurer with misleading or incorrect information. In principle, the party suffering the damage is not liable to restore the compensation paid solely on the basis of an insurance coverage’s inapplicability if the damaged party has been found to be entitled to the damages in the first place.

3. An Insurance Company’s Right to Control an Insured Event

A liability for compensation may arise through the long-term development of an insured event. This places emphasis on the insurer’s need and its possibilities to participate in the control of an insured event in various ways. In practice, the insurer is always entitled to negotiate the compensation with the party claiming damages on the basis of the terms and conditions of the insurance and to take care of the legal proceedings on behalf of the insured. Nonetheless, an insurer’s right to control the development of the insured event is often, all things considered, dependent on the interpretation of the norms of insurance law and, on an even wider scale, the definition of the relationship between the insurer and the insured. The purpose of chapter 4 is to evaluate issues relating to this. The problems surfacing in the chapter may have limited significance in connection with other types of insurance, in which the insurer is capable – due to the development of the insurance risk – of participating in the control of the insured event, in one way or another.

The insured always has the ultimate right to decide its own status in a claims matter. The insurer, however, is, regardless of the terms and conditions of the policy, entitled to act on the insured’s behalf without limitations even when the insured would be opposed to this, provided that the appropriate handling of the claims issue so demands.

In accordance with section 32 of the Insurance Contracts Act, the insurer is entitled to give precautionary guidelines on how to prevent insured events. Should the insured not comply with such guidelines and the damage consequentially expand in scale, the insured will, as a rule, lose its right to compensation. However, in order to be considered binding, the insurer’s guidelines must, in addition to being pertinent to the prevention of insured events, also be reasonably predictable as to their outcome.

The commitment undertaken by the insurer on behalf of the insured and concerning the grounds for, or the amount of, compensation does not bind the insured, even to the extent of the deductible. Instead, in accordance with Finnish legal praxis (the Supreme Court 1990:12), the insured, with certain preconditions fulfilled, can become bound to a commitment concerning the insurer’s procedures (the aforementioned ruling involved an extension of the time limit for the tort claim).

According to typical insurance terms and conditions, the insurer is entitled to abandon further clarifications on a matter if it can come to agreement on the amount of compensation to be paid with the party suffering the damage, but the insured refuses to accept the settlement. Such terms and conditions also mean that the insurer’s aggregate financial liability will be given a maximum limit. What these terms and conditions do not limit, however, is the insurer’s liability in case the claim of the third party is clearly unjustified. The insurer nevertheless retains quite an extensive right, starting from the financial encumbrance brought on by legal proceedings, to make decisions as to the risks of litigation also in cases in which there is no certainty that the entered defence would be successful.

The insurer’s right to control the insured event requires that it receive information of the impending event at a sufficiently early time. However, section 73 of the Insurance Contracts Act does not stipulate that a claim be filed until a year from when the party entitled to compensation has become aware of such a right. The precise time of the commencement of the said period has been unclear with respect to liability insurance. This study recommends – based on, inter alia, the judicial practice of the Insurance Complaints Board – that the time be calculated from when the insured has become or should have become aware of its possible liability. The terms and conditions of general liability insurances which in practice require a more rapid notice than this are null and void when the Insurance Contracts Act is applied to them as statutory regulation.

The terms and conditions determining the procedures of liability insurances, when considering their ultimate purpose, have to be viewed as the precautionary instructions referred to in section 31 of the Insurance Contracts Act. This also means that the insurer may decrease the compensation on the basis of the insured having neglected an obligation pursuant to these terms and conditions only if such negligence has caused damage.

The insurer’s right to represent the insured in an insurance compensation dispute may yield should the interests of the insurer and the insured be in clear conflict in the procedure. This can take place when, e.g. the insurer is also the claimant (due to, for instance, its right of recourse) or when the success of the claim demands circumstances which simultaneously translate into the application of the limitation of insurance coverage. Furthermore, a conflict of interest may be the consequence of, e.g. the insured having been the subject of other claims as well, the response to which is largely of no consequence or interest to the insurer.

4. The Distribution of Costs

Defence against liability claims may result in substantial costs. Moreover, the usefulness of the costs is uncertain if the outcome of the claim is difficult to predict beforehand. Chapter 5 deals with questions relating to this. In particular, attention is given to the duty of salvage of the insured (section 32 of the Insurance Coverage Act) and the related norms concerning the insurer’s liability for costs (section 61 of the said Act).

As a starting point, the insured’s right to receive compensation against salvage costs pursuant to section 61 of the Insurance Contracts Act includes a right to be compensated for legal expenses.

According to the legal praxis, the insured’s right to compensation also includes such costs which -- when interpreted in the narrowest sense – no longer have an effect on the prevention of liability risks, but which are nonetheless naturally connected to the action that removed the liability risk (Supreme Court 1997:51, which concerned costs incurred by the removal of contaminated soil). According to this, compensation is likely to include, for example, the legal costs of the counterparty.

Based on the opinion presented in this study, the insured is entitled to full compensation even when the costs benefit responses other than merely the response provided to the grounds concerning the claim.

As a principle, the insurer is liable only to the extent of the insured amount. However, according to section 61 of the Insurance Contracts Act, the insurer is responsible for salvage costs exceeding the insured amount. In corporate insurance, the insured amount usually also figures in the costs incurred in the defence against claims.

The study proposes that the insurer also carry liability for such excesses of the insured amount which are the result of risk assumption where the insurer has been the sole beneficiary. A situation of the kind may surface, e.g. when the insurer – upon exercising its decision-making powers in accordance with the terms and conditions of the insurance contract – disputes a draft settlement of the counterparty that has been within the limits of the insured amount, due to which the insured amount is exceeded in the resulting legal proceedings. The liability of the insurer includes the excess of insured amounts resulting from both the extension of a claim and legal expenses.

5. Finally

In the context of the Insurance Contracts Act, general liability insurances have been observed largely by regulating the status of the damaged party. From the perspective of the questions studied, however, it can be noted that many issues having an impact on the liability of the insurer and the insured are significant in various ways and that they also have a bearing on the status of the damaged party. In fact, it is a result of the insurance practice that the settings of the claims-phase are often very similar, regardless of whether the procedure is based on a notice filed by the insured itself or on a claim against the insurer filed directly by the damaged party, as set forth in sections 67 or 68 of the Insurance Contracts Act.

The Insurance Contracts Act does not contain provisions on all the issues significant from the point of view of general liability insurances. Even to the extent that the Insurance Contracts Act offers a solution to a particular question, the provisions have clearly not been drawn up with situations typical to liability insurances in mind. However, this may not lead to serious problems if the systematics of the Insurance Contracts Act provides sufficient room for insurance type specific interpretations. Some exceptions notwithstanding, the Insurance Contracts Act fulfils this requirement. On the other hand, reasonable interpretations demand that the claim, as an insured event, not be tied down to a single criterion or moment, but that the characteristics of an insurance risk are evaluated separately through the perspective of each norm’s objective.

Typical insurance terms and conditions largely follow the provisions of the Insurance Contracts Act. However, the terms and conditions pertaining to statutory notifications concerning the insured event may lead to the insured’s obligation to disclose arising too rapidly from the perspective of the Insurance Contracts Act. The fundamental problem herein, however, lies rather in the law than in the terms and conditions of insurance contracts, of which the premises are largely understandable.

Väitöskirjassa käsitellään vakuutuksenantajan ja vakuutetun välisiä oikeudellisia suhteita. Tutkimus on rajattu erityisesti korvauksenhakuvaiheen kysymyksiin.

Osapuolten asemaa arvioidaan ensin yleisistä perusteista käsin. Tämän jälkeen syvennytään kolmeen aihepiiriin: vakuutuksenantajan päätöksentekoon, vakuutuksenantajan oikeuteen kontrolloida vakuutustapahtuman aiheutumista ja kustannusvastuun jakautumiseen vakuutuksenantajan ja vakuutetun välillä. Näiden kysymysten taustalla arvioidaan, kuinka hyvin vakuutussopimuslain yleissäännökset soveltuvat vastuuvakuutukseen, jonka kohteena oleva riski poikkeaa useimmista muista vahinkovakuutuksista.

Tutkimuksessa esitetään useita lainopillisia tulkintasuosituksia. Tämän lisäksi tutkimuksen tuloksena on, että vakuutussopimuslaki soveltuu paikoin huonosti vastuuvakuutukseen. Lain tulkinta edellyttääkin eräiden kysymysten osalta melko joustavaa ja reaaliset olosuhteet huomioon ottavaa tulkintaa.