Recourse between insurers pursuant to the Norwegian Automobile Liability Act – the relationship between Norwegian and EU law

In a judgement pronounced in November 2019 (case LB-2018-168981), the Norwegian Court of Appeal held that damages caused by a vehicle which had not been in use for the past 24 hours was encompassed by the Norwegian Automobile Liability Act. This allowed the injured party’s insurance company to claim recourse from the insurance company which had insured the vehicle in question. The judgement has been appealed to the Norwegian Supreme Court, which has decided to hear the appeal. The final word on the matter is therefore yet to be said in a ruling important to a large segment of the insurance industry.
Monday, June 29, 2020

The Case

A fire which started in a private vehicle caused damage to two domestic buildings. The vehicle had not been in use for more than 24 hours, and was not in motion nor was it ignited when the fire started. Investigations concluded that the fire was caused by a technical failure in the vehicle. The property owner had taken out insurance against loss or damage, and therefore received compensation from their insurer. On these grounds, the injured party’s insurer claimed recourse from the insurance company which had insured the vehicle. The dispute is connected to whether the case is encompassed by the Automobile Liability Act section 4 cf. section 2 (1) b.

The Norwegian Automobile Liability Act and related recourse claims

In the event that a vehicle causes damage, the injured party has a right to claim damages from the insurance company where the vehicle is insured, irrespective of whether anyone is at fault with regards to the damage, cf. the Automobile Liability Act section 4. This section implements article 3 of Directive 2009/103/EC (relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability), in accordance with Norway’s obligations under the EEA-agreement.

This provides the basis of liability, which gives the injured party’s insurance company right to claim recourse from the insurance company where the vehicle is insured. This is of course subject to there being a causal link between the liability basis and the economic loss.

However, the Automobile Liability Act does not apply in all events. For instance, it does not apply where the damage is caused by a vehicle which is safely placed outside any street, road or other place open for public traffic, cf. section 2 (1) b. As such, the question was whether this section precluded a recourse claim.

In particular, much space in the Court of Appeal’s judgement is dedicated to what it entails for a motor vehicle be “placed” somewhere, including whether it is sufficient for the vehicle to simply be parked or if this must be interpreted as a more prolonged placement of the vehicle.

The Court of Appeal’s ruling

The Court of Appeal noted that the parties disagreed on whether the requirements in section 2 (1) b were satisfied, and commented that the Automobile Liability Act has a wide-reaching scope which is in particular due to risk elements typically associated with a vehicle. As such, the limitation in section 2 (1) b had to be construed in light of this. However, the preparatory works could support both a more restrictive and a more liberal interpretation of the wording. The limitation could for instance be understood to encompass a situation where the vehicle is merely parked in between regular usage. This would to a greater extent limit the right to recourse.

As section 4 of the Automobile Liability Act implements article 3 of Directive 2009/103/EC, the Court of Appeal considered it necessary to also look to EU law on the matter. It should be noted that it is a principle under Norwegian law that Norwegian legislation should, to the extent possible, be interpreted in accordance with international commitments. Only in the event that there is a clear inconsistency between Norwegian law and international commitments should the court decide on the interpretation alternative which does not align with international commitments.

In this regard, the Court of Appeal noted that there have been EU case law developments subsequent to the last amendment of the wording of the limitation contained in the Automobile Liability Act. The court cited case C-100/18 (“Linea Directa”) as particularly relevant to the case. In Linea Directa, a vehicle had started burning and this caused to damage to the building it was parked in. The fire started in the electrical circuit of the vehicle and the vehicle had not been moved for more than 24 hours before the fire occurred. The Court of Justice of the European Union held that this was encompassed by EU Directive 2009/103/EC, as this fell within the concept of “use of vehicles”. 

Based on an overall assessment, the Court of Appeal held that the limitation provided by the Automobile Liability Act should be interpreted in a manner which did not conflict with EU law. As such, a parking of the vehicle which lasted for more than 24 hours did not entail that the vehicle had been “placed” somewhere. The case was therefore decided in favour of the injured party’s insurer. 

What now?

If the Norwegian Supreme Court upholds the judgement, an insurance company may not avoid liability by reference to a vehicle being parked in between regular usage. This will allow an injured party’s insurer to claim recourse to a greater extent. It will also ensure that Norwegian law is aligned with EU law. A different outcome may force legislators to amend the Automobile Liability Act, as this would result in inconsistencies between Norwegian and EU law.

We will be following the case closely and will provide an update once the Norwegian Supreme Court pronounces their judgement. If you are interested in reading more about recourse between insurers, see our previously issued newsletter on recourse in relation to real estate acquisitions.

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Christian Kjellby Nesset
Christian Kjellby Nesset
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