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Damages of storm or flood?

16.01.2005

In conjunction with the storm in Pärnu and Läänemaa on January 8th-9th, 2005, Äripäev covered in detail subjects related to compensation of damages resulting from the storm in its 14.01.2005 issue. Attorney at law from Tark & Co also gave a commentary.

Refusal to compensate damages arising from a flood resulting from a storm to property owners, who have taken out insurance on natural disaster or storm, may not be always reasonable.

Many insurance agencies have declared they will not cover damages arising from the flood that resulted from the storm last weekend if the complainant has not taken out a special insurance policy on flood.

Many complainants have coverage against damages arising from a natural disaster or a storm, but have not taken out additional insurance on flood. Derived from this, some insurers have referred that insurance does not compensate damage arising from the flood that resulted from the storm last weekend. In cases where insurance contract on natural disaster or storm does not exclude directly compensating damages arising from a flood that resulted from a storm, it is arguable whether the insurer can refuse to pay insurance indemnity only because the insured has not taken out another insurance against partly overlapping risks (flood insurance).

Depending on the wording of insurance contract, it should be viewed whether or not the damage arising from a flood that resulted from a storm can be considered under natural disaster or storm insurance. When there is a doubt about the meaning of the condition, the most beneficial interpretation to the consumer should be applied and the insurer may not have the right to refuse to pay the indemnity.

In cases where insurance contract on natural disaster or storm excludes damage arising from a flood that resulted from a storm, a question about the legitimacy of such exclusion may arise. Pursuant to law, a standard condition is inconsiderable when it is unreasonably harmful to the other party, including a condition that restricts the rights and obligations derived from the contract of the other party in the way, which makes the object of the contract questionable. Thus, if storm insurance does not cover water damages resulted from a storm, it can be argued whether such a restriction of responsibility of the insurer is allowed considering the object of the contract. However, it cannot be ruled out that in the light of European Union law any restrictions of insured risk are allowed by the insurer, if such restrictions are taken into account in calculating the insurance premium. According to the Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, terms which clearly define or circumscribe the insured risk and the insurer's liability shall not be subject to such assessment since these restrictions are taken into account in calculating the premium paid by the consumer. Although respective principle is not in Estonian law, the European Court of Justice has found in many decisions that in interpreting of law the wording and objectives of directive must taken into account, therefore, respective exception can also apply in this case.

Thus, the insurer's liability to compensate to the complainant damage arising from a flood that resulted from a storm based on insurance contract on natural disaster or storm depends on whether or not respective damages can be considered as insured risks taking into account the wording and objectives of the insurance contract.

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