Defendant’s rights widened in recent Supreme Court verdict – of strategic importance for insurers

In a recent case for the Supreme Court, HR-2020-35-A, it was made clear that the defendant may demand assessment of the extent of liability (i.e. measurement of damages), in cases where the plaintiff has only asked the courts to pronounce a declaratory judgment to affirm that the defendant is liable for damages.

The plaintiff is free to limit the scope of a claim for damages to a declaratory judgment affirming that the defendant is liable for damages. Consequently, measurement of damages will not be included in the lawsuit. This is often utilized by the plaintiff as a way to keep down the costs but can also have significant strategic value. HR-2020-35-A raised the question if the defendants could successfully claim that the Court must assess the extent of damages the defendants would be liable for, even though this question was deliberately left out of the claim by the plaintiffs.

In the present case, the plaintiffs’ claimed a declaratory judgment that a travel arrangement company was liable for damages following the death of a participant of a guided tour to Kilimanjaro. Principally, the defendants claimed to be acquitted. Subsidiary, if held liable, they claimed an assessment of the extent of their liability through a measurement of damages at the Court’s discretion. The Supreme Court came, as the lower level courts did, to the conclusion that the defendants had the right to bring forward the question of assessment of the extent of their liability.

The plaintiffs argued that the defendants’ subsidiary claim of measurement of the damages, was not a “claim” in the sense of § 15-1 of the Norwegian Dispute Act (nw. Tvisteloven), and consequently did not fulfil the requirements of the law to be brought forward by the defendants. The Supreme Court, however, could not see that the wording of the law or the preparatory work supported the rejection of the defendants' subsidiary claim. The defendants', but also the plaintiffs', need to clarify their legal position was emphasized as the crucial element of the question. With that in mind, the majority concluded that the measurement of damages was an independent “claim” separate from the question of liability, that could be brought forward by the defendants. One judge dissented, arguing that measurement of the damages you want a judgment passed on is the plaintiff’s duty, and therefore cannot be seen as a “claim” of the defendants. As such, the wording of the law did support a rejection of the defendants' subsidiary claim. Nevertheless, the majority of four judges voted for the defendants' right to advance this claim.

As a consequence of the Supreme Court’s judgment, some of the control over a lawsuit previously awarded to the plaintiff is now more equally split between both sides. This can lead to legal cases becoming more comprehensive and complex. Nonetheless, addressing all sides of an action for damages in a single law suit, could on average be beneficial from a socio-economic perspective in terms of more efficient and cost-effective procedure, resulting in lower total litigation costs for all parties involved.