MarIus

2.4 The co-insured’s indirect liability insurance

The presentation in 2.3 shows that if the co-insured breaches his duties of due care and thereby causes damage to the insured object, he will lose cover for his own economic interest in the object. If the assured is identified with the co-insured and he also loses cover for his economic interest, the insurer is free from liability and any further claims must be settled between the assured and the co-insured. However, if the assured is not identified with the co-insured, the insurer will have to compensate the assured for his loss. The question then arise if the insurer may raise a subrogated claim against the co-insured being liable for the damage. This is the question of the co-insured’s indirect liability insurance, i.e. if the co-insured is protected against this subrogated claim.

A similar question may arise for a third party with no economic interest in the insured object or enterprise, but who is in a position to cause damage to this enterprise. This is sometimes called “protective co-insurance”, which refers to a situation where a third party is exposed to liability for loss of or damage to the insured object itself.^{(1) Commentary NP 2019 to chapter 8, General, Wilhelmsen/Bull p. 229, see also Bull p. 539.} Such co-insurance may be effected according to ICA § 7-5 or NP Cl. 8-2.

The starting point is that the insurer has a right of subrogation against a third party causing damage to the insured object. The development of this rule is complicated, but today it appears to be an established rule on “legal cesjon” based on court practise.^{(2) Trine-Lise Wilhelmsen, Regress i skadeforsikring, Tidsskrift for erstatningsrett, forsikringsrett og trygderett, no. 1, 2019 pp. 7-32 (Wilhelmsen 2019) at p. 13, with reference to Rt. 1986 p. 381 and Rt. 1968 p. 48, Viggo Hagstrøm and Are Stenvik, Erstatningsrett, 2015 (Hagstrøm og Stenvik 2015), s. 539–540. See also Ot.prp. no. 60 (1980–1981) Om lov om endringer i erstatningslovgivningen for så vidt gjelder lemping av erstatningsansvar, forsikringsgivers regressrett m m, p. 43.} The tort law contains a limitation to this rule for consumer-insurance where the loss is channelled to the injured party’s casualty insurance and thus subrogation is barred,^{(3) Tort act § 4-3 cf. § 4-2.} but for insurance of commercial activity the right of subrogation is intact.^{(4) Tort act § 4-2 cf. § 4-2 no. 1 letter b.} In a situation where for instance a contractor is liable for fire to the building project and the insurer pays compensation to the owner, the insurer may raise a subrogated claim against the contractor.

The same rule follows from NP § 5-13 for marine insurance:

If the assured has a claim against a third party for compensation of a loss, the insurer is, upon payment of compensation to the assured for the loss, subrogated to the rights of the assured against the third party concerned.

This regulation may be seen as part of a general principle that a party who has covered another party’s obligation normally and as a starting point has a valid recourse action. It is the limitation of any such recourse action that requires specific legal basis.^{(5) Rt. 1997 p. 1029 at p. 1036.}

If the liable party is co-insured, it is however stated in the preparatory documents to the ICA that co-insurance also contains a so-called indirect liability insurance, and that the co-insured is protected against a claim for recourse brought against him by the insurer to the same extent he is protected as an assured. This means that the ICA chapter 4 applies to the subrogated claim and that the insurer may only make a claim against him if he is in breach of rules of change of risk, violation of safety regulation or has damaged the insured object through gross negligence or deliberately.^{(6) NOU 1987:24, p. 145, with further reference to Selmer, Forsikringsrett (1982) (Selmer), p. 129-130, Bull 2008 p. 539.}

In the NP, this situation is expressly regulated:

Clause 8-2. Protection of third parties against subrogation claims from the insurer
The insurer does not have any right of subrogation against the co-insured third party unless and to the extent that such right is specified in the insurance contract or the co-insured third party has undertaken an express contractual obligation to an assured to remain liable for losses of the kind otherwise covered by the insurance.

The main rule here is similar to the “indirect liability insurance” which is described as an inherent element in co-insurance according to the ICA, but both the insurance contract and the contract that provides for co-insurance may depart from this starting point. Interestingly, the Commentary has the following example upon how the contractual obligation may reinstate the right of subrogation:^{(7) Commentary NP 2019 to Cl. 8-2, printed at Chapter 8 - NordicPlan}

The principle of “indirect liability insurance” may also protect a third party A with no economic interest in the insured object or enterprise, but who is in a position to cause damage to this enterprise. This is sometimes called “protective co-insurance”, which refers to a situation where a third party is exposed to liability for loss of or damage to the insured object itself.^{(8) Commentary NP 2019 to chapter 8, General, Wilhelmsen/Bull p. 229, see also Bull p. 539.} Such co-insurance may be effected according to ICA § 7-5 or NP Cl. 8-2.