Evidentiary issues are often central in civil cases, especially when it comes to insurance disputes. Indeed, the parties to an insurance dispute often allege different facts, and while the course of events can sometimes be investigated retrospectively, often this is not the case. When the course of events cannot be sufficiently investigated and the versions of the parties differ, a court must decide which party (the insurer or the insured) must bear the burden of proof for a particular question of fact (this is i.e. bear the risk that a certain question of fact cannot be sufficiently established).
Under Swedish law, the common view is that the insured bears the burden of proof that an event covered by the insurance policy has occurred, while the insurer bears the burden of proof that an exclusion insurance coverage is applicable. Nevertheless, this generally accepted assumption has now been challenged in a recent Supreme Court decision.
In the case that led to the Court’s decision, dated December 2, 2021(1), the insurer had refused compensation on the grounds that the insured had not satisfied his burden of proof, namely prove that an event covered by the insurance policy had taken place. In its decision, the Court provided guidance on the principles of allocation of the burden of proof in insurance compensation cases. This article describes the Court’s decision and discusses its possible implications.
In this case, an insured presented his insurer with a claim for insurance compensation for a vehicle destroyed by fire. The terms and conditions of the applicable motor vehicle insurance policy stated that damage to a motor vehicle caused by fire was only covered by the policy if the fire was started by a third party (i.e. only if the fire was intentionally caused by someone other than the insured or a person acting with the consent of the insured). In particular, this provision was mainly designed as a hedging provision; however, the provision essentially functioned more like an exclusion in that it implied a caveat to the general scope of coverage.
The insurer argued that the insured had the burden of proof that the fire had been started by a third party and, after concluding that the insured had failed to satisfy its burden of proof, the insurer declined insurance coverage and refused insurance compensation. The insured then takes legal action against the insurer.
The case was tried first by the district court and then by the court of appeal. The insured was subsequently granted leave to appeal by the Supreme Court. The main issue that the Supreme Court considered was who would bear the burden of proof that the fire was started by a third party or, on the contrary, caused intentionally by the insured or by someone who acted with the consent of the insured.( 2)
The Supreme Court began by referring to what has sometimes been considered the starting point for deciding the burden of proof in insurance indemnity cases: the insured bears the burden of proof for the circumstances relating to the insurance cover in the terms and conditions, while, on the other hand, the insurer bears the burden of proof for the facts implying that the exclusions of the general conditions apply to the insurance cover. According to the Court, a starting point for this will often align with how the burden of proof is generally decided in civil proceedings under Swedish civil procedural law, and will often lead to a satisfactory result. The Court also noted that this starting point has been assumed by some to derive from the Court’s own prior jurisprudence.
However, according to the Court, no clear rule to this effect can be deduced from the Court’s previous case-law. Rather, the Court said it simply decided the burden of proof for certain types of cases, applying general principles of the law of evidence and taking into account the circumstances of each case. The Court further stated that it would raise concerns if the burden of proof depended on whether a specific provision of the terms and conditions related to cover or constituted an exclusion from cover. In addition to the difficulties in categorizing a specific provision as a coverage provision or an exclusion, the Court pointed out that an insurer, in formulating the terms and conditions, is often able to decide unilaterally whether a certain provision should be designed to relate either to coverage or an exclusion.
The Court then provided guidance on how the burden of proof should be determined: the same considerations that apply to civil proceedings in general should also apply when determining the burden of proof in cases insurance compensation; for example, the respective capacities of the parties to obtain evidence and the interest of the effectiveness of the relevant substantive law. With respect to the case at issue (i.e. a consumer non-life insurance policy), the Court concluded that the insurer should normally bear the burden of proof that the insured intentionally caused the damage to which the insurance claim related, regardless of the wording of the applicable terms and conditions.
In reaching this conclusion, the Court seems to have considered that an insurer will generally be in a much better position than the insured to investigate the damage caused to an insured vehicle. The Court also noted that its conclusion would be consistent with the features of Swedish insurance contract law, an important objective of which is to protect policyholders in general and insured consumers. Finally, the Court noted that in a similar situation where the insurer seeks to prematurely terminate an insurance contract on the grounds that the insured intentionally caused the insured event, current case law provides that the insurer is responsible for proof that the insured intentionally caused the insured event.
In this case, the Supreme Court held that the insurer had to provide sufficient evidence to prove that the fire in question was caused intentionally by the insured or by any other person who may be relevantly associated with the insured. . Since the Court of Appeal had not judged the case from this starting point, the Court returned the case to the Court of Appeal of Svea, which reversed the judgment of the District Court.
This decision sheds some light on the distribution of the burden of proof in certain insurance cases; in particular, cases which concern the question whether the insured intentionally caused the damage to which the insurance claim relates. However, since the issue considered by the Supreme Court was explicitly limited to a consumer insurance policy, other considerations may apply to commercial insurance policy cases. Some of the Court’s remarks reflected above also seem to apply primarily to commercial insurance cases.
In most other cases, however, and despite any justified concerns associated with leaving the burden of proof to be governed by a schematic rule, the Court’s decision is likely to lead to less certainty and may even prompt the parties to regulate explicitly the burden of proof in the terms and conditions.
Until this decision, most parties assumed that the burden of proof was allocated between the insured and the insurer according to which type of provision of the general conditions relates to which question of fact. Therefore, this decision will likely change the way both parties argue and position themselves in insurance compensation disputes, perhaps already in the claims process.
In most insurance indemnity cases, however, the general principles of the law of evidence are likely to lead to results similar to those of the schematic rule refuted by the Court. In this context, it seems unlikely that the Court’s decision will radically change the way parties to an insurance contract and lower courts approach the question of the burden of proof in practice.
For more information on this subject, please contact Erik Schultz, Gustav Feldt or Felix Nyberg at Mannheimer Swartling by telephone (+46 8 5950 6499) or email ([email protected], [email protected] Where [email protected]). Mannheimer Swartling’s website can be accessed at www.mannheimerswartling.se.
(1) T 3982-20.
(2) The Supreme Court also considered the evidentiary requirements that should apply in insurance cases, which is outside the scope of this article.