In review: the legal framework for insurance disputes in Sweden

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An excerpt from The Insurance Disputes Law Review, 4th edition

The legal framework

i Sources of insurance law and regulation, supervisory authority

The Law on Insurance Contracts (LIC) governs the relationship between the insurer and the insured. It is the centerpiece of insurance legislation under Swedish law. The ICA covers both commercial and consumer insurance. It covers, among other things, the requirements relating to the information that the insurer must provide to the insured, the insurance policy, the limitations of liability of the insurers, the premium, the insurance coverage, the adjustment of claims to the policy title and the rights of third parties under the policy.

The LSA does not contain any provision covering the interpretation of insurance policies. In fact, there is no legislation covering the interpretation of contracts in general in Sweden. In the absence of legislation concerning the interpretation of insurance policies, the principles of interpretation have instead evolved through legal doctrine and case law. The Supreme Court has created interpretive precedents concerning, among other things, the exemption of liability clauses in insurance policies.

The Swedish Insurance Distribution Act (AID) entered into force on October 1, 2018, transposing the EU Insurance Distribution Directive (IDD) into national law. The main objective of the IDD is to harmonize the rules for the distribution of insurance and reinsurance within the EU. DLI also aims to achieve, where possible, a level playing field and equal protection of clients with respect to investments made directly in financial instruments as compared to investments in life insurance (i.e. – say when insurance premiums are invested in financial instruments). AID covers the intermediation of all types of insurance. Swedish law goes beyond certain EU minimum rules in some aspects. These include requirements for third party compensation and impartiality, as well as stricter marketing rules.

The Insurance Business Act establishes the regulatory regime for insurance operations. The Swedish Financial Supervisory Authority (FI) is responsible for oversight, authorization, assessment of sanctions, issuance of regulations and reporting matters for the insurance industry. FI has drawn up regulations based on Swedish law. The regulations address, among other things, matters relating to underwriting license applications, knowledge and skill requirements, employee compensation systems, and claims adjustment and impartiality requirements. . There are also special provisions for the distribution of insurance-based investment products and certain types of pension insurance.

ii Insurable risk

In accordance with Chapter 6 Section 1 and Chapter 8 Section 18 of the LSA, compensation may be paid for any legal interest covered by the insurance.

According to mandatory law, illegal interest does not constitute a basis for the right to insurance compensation. Thus, insurance should not cover illegally incurred loss of income. In addition, the insurance contract cannot cover any payment obligation or any damage resulting from decisions of public sanctions such as fines, environmental sanctions or the confiscation of property. However, the insurance policy may, among other things, provide coverage for certain types of losses suffered by an employer and caused by illegal actions by an employee against the employer.

Certain types of administrative fees, such as GDPR penalties, should probably be considered uninsurable interest as insurance against these is not available. However, according to some legal doctrines, it has been suggested that these administrative costs can be covered by insurance. The issue is not covered by any Swedish case law. Thus, the legal situation under Swedish law is not entirely clear in this regard.

Since there are several different and mutually exclusive types of Swedish financial penalties, it could be argued that the assessment of whether the costs of a certain financial penalty are insurable or not should be made on a case-by-case basis, taking into account account, among other things, the reasons for the sanction in question and the actions of the insured.

The parties are free to agree to insure any interest other than that related to pure economic loss, real or bodily injury (for example, insurance against moral damages). In addition, there is no prohibition against enrichment of the insured. However, a further question is whether the insurance policy should be interpreted as providing cover capable of giving rise to such enrichment.

iii Dispute resolution forums and mechanisms

The ICA does not contain any provisions regarding disputes and disputes. Instead, disputes relating to the determination and settlement of insurance claims are governed by the rules of procedure for civil law cases set out in the Swedish Code of Judicial Procedure.

The losing party can appeal the judgments of the Swedish courts in insurance disputes in the same way as in other civil proceedings. A judgment rendered by the district court (i.e. the court of first instance) may be appealed to the court of appeal within three weeks of the judgment being pronounced. Leave to appeal is required if the case is to be tried on the merits by the court of appeal. Leave to appeal is granted if, among other things, there is reason to believe that the court of appeal would come to a different conclusion than the judgment rendered by the district court. Certain applicable limitations prevent parties from relying on new facts or evidence in proceedings before the court of appeal.

A judgment rendered by the Court of Appeal is subject to appeal to the Supreme Court. Leave to appeal should only be granted if a Supreme Court judgment could provide guidance for similar cases (i.e. if there is a need for precedent). Thus, the conditions for leave to appeal to the Supreme Court are high and, in practice, the court of appeal is the highest court in the majority of cases.

An insurance policy may provide that disputes between the insurer and the insured will be settled by arbitration, depending on the type of insurance involved. In Sweden, merger and acquisition (M&A) insurance and reinsurance policies are mainly subject to arbitration. Subrogation disputes (that is, when the insurer has indemnified the insured and exercises subrogated rights against a third party) are sometimes settled by arbitration. This is often the case, among other things, in disputes between the insurer and the insured’s contractor in the field of construction. In principle, an arbitration clause between the insured and a contractor is also applicable to the insurer in the event of subrogation.


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