NEW RULING ON SEVERAL GENERAL INSURANCE LAW ISSUES
A recent judgment on construction insurance - even though it was a simple claim and a modest subject matter - addresses several insurance law issues of a general nature. Firstly, the judgment considers whether the prerequisites for obtaining insurance cover under the rules on averting danger, cf. sections 52 and 53 of the Danish Insurance Contracts Act (FAL), apply. Secondly, the judgment addresses the question of the circumstances under which expenses can be covered as consequential damages or as clean-up costs. Thirdly, the judgment deals with a plea that the fact that the insurance company has chosen to pay a certain amount of compensation could be regarded as a cover commitment that there was a coverable insurance event.
The judgment illustrates in particular that it is not sufficient to obtain coverage for measures to avert danger, cf. FAL §§ 52 and 53, that it has been reasonable or perhaps even necessary to incur the expense in question to avert or limit damage. It is also a prerequisite that there must be an immediate danger of damage occurring and that the damage is to an object/interest covered by the insurance. The policyholder has the burden of proving that these conditions are met, and the contractor could not meet this burden of proof in this case.
Furthermore, the ruling shows that expenses related to an object/interest not covered by the insurance cannot be covered as a consequential loss.
The construction insurance policy in question included coverage for cleanup costs, but as this policy term was worded, there was no coverage for expenses related to a non-insured item.
Finally, the judgment shows that at least when the insurance company has formulated itself so clearly, as was the case in this case, an undertaking of coverage cannot be extended to include anything more than what the company has expressly undertaken to indemnify.
I am of course available to answer any questions you may have about the new ruling