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Denmark addresses issue of insurance company bankruptcies

18 August 2021

Legal proceedings in Demark against Gable Insurance AG have raised issues over the choice of law and how to apply international private and procedural law in cases where the insurance company is bankrupt.

Gable Insurance, whose insurances were mediated in Denmark by Husejernes Forsikring, went into bankruptcy proceedings in November 2016. To protect 26,000 Danish homeowners from being left without insurance coverage,the Danish Parliament passed a new regulation regarding guarantee funds for insurance companies which allows foreign insurers to join the Guarantee Fund for Non-life Insurance Companies.

As a result, it is possible for foreign insurers underwriting insurance policies in Denmark to join the Fund as the intention is to increase the financial security for Danish consumers who take out insurance with foreign insurers.

The Guarantee Fund for Non-life Insurance has initiated legal proceedings before the City Court of Copenhagen against the estate of Gable Insurance AG and others with a claim for 96 million kroner. The Eastern High Court has accepted the matter as a matter of principle and public interest and the case is now pending.

Recent cases in Denmark have also revolved around choice of law and jurisdiction clauses in insurance contracts and whether these apply to third-party actions.

The case of British American Tobacco v. Gerling Verzekeringen NV was brought before the Maritime and Commercial High Court. It involved a Danish branch of British American Tobacco (BAT) that entered into a contract of carriage with Exel Europe LTD (Exel) for the transport of a shipment of cigarettes from Hungary to Denmark performed by Kazemier Transport BV (Kazemier).

In Denmark, the goods were stolen during transport. Kazemier went bankrupt and BAT filed a lawsuit against Exel and Kazemier in England. The English courts dismissed the claim against Kazemier owing to lack of jurisdiction. BAT consequently brought a direct claim against Kazemier's liability insurer, Gerling Verzekeringen NV (HDI), in Denmark.

The Court decided that Danish law was to apply in respect of the question of jurisdiction and as a result, the injured party was entitled to bring proceedings against insurers in Denmark according to national (Danish) law.

The decision was appealed directly to the Supreme Court, however, the Supreme Court refused to admit the appeal, stating that the requirements for allowing direct appeal on the grounds of principle and public interest had not been met.

In the case of Concordia Forsikring A/S and Tryg Forsikring A/S v. Danish State Railways (DSB) the Danish Supreme Court ruled on whether the DSB, a public institution, is to be considered a self-insurer as understood in the Liability for Damages Act Section 20.

In this case, a train owned by the DSB collided with an untethered horse and the DSB suffered a property and business interruption loss of around 800,000 Danish kroner. The DSB had taken out business interruption and property insurance, but as the deductible under the policy was 25 million kroner, substantially higher than the 800,000 kroner claimed as damages, the claim was not covered by the business interruption and property insurance.

The horse owner had taken out mandatory liability insurance. Consequently, the DSB raised a claim in tort against the horse owner's liability insurers. The liability insurers claimed that because of the high deductible of 25 million kroner, the DSB was to be considered a self-insurer, and thus according to the Liability for Damages Act Section 20 the claim in tort against the horse owner would lapse.

The question for the Supreme Court was whether the high deductible made the DSB a self-insurer despite having a comprehensive insurance programme. The Supreme Court ruled that the DSB was not to be considered a self-insurer.

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