Marine Insurance | Clarification on limitation of an assured’s claim following rejection of cover by the insurer

The case in brief

The case concerned the question of whether a claim for compensation from the insurer was time barred. The key consideration being if the time limitation in the ICA section 8-5 second paragraph was a statute of limitation, a time limit for bringing suit or another type of limitation.

The facts giving rise to the question relates to a (non-marine) property insurance:

In brief, the home of the assured had been totally damaged by fire in January 2017. The insurer compensated the assured (however most of the total was paid to mortgagees), but later found it probable that the assured had caused the fire and denied any further compensation. At the same time the insurer gave notice that they would demand recourse for all payments already made.

On the deadline for commencing legal action before the conciliation board on 7 January 2018, the assured filed its claim for compensation. The case was discontinued from the conciliation board a month later, on 8 February. The assured then filed a statement of claim with the district court on 31 December 2021, more than one year and 10 months after the discontinuance by the conciliation board. As is known, according to the Dispute Act section 18-3 any interruption of the time limitation by complaint to the conciliation board ceases if no statement of claim has been filed with the district court at the latest one year from the time the case was discontinued by the conciliation board.

The district court concluded that the assured likely had caused the insurance event and had provided incorrect information in the claims settlement, in any case the claim was time barred. The decision was appealed to Frostating Appeal Court which held that the special rule in section 8-5 second paragraph was not a statute of limitation, but an individual deadline to bring legal action, independent from the rules on statute of limitations in section 8-6 of the ICA. The insurer then appealed the decision to the Supreme Court.

The decision of the Supreme Court

The Supreme Court found that in cases where the insurer had given notice to the assured (subject to the notice being sufficiently completed with information on the time limit, i.e. how to intercept it and the consequences of not adhering to it), the regular statute of limitations in section 8-6 first paragraph does not apply. The question remaining was then whether the 6-month time limit in section 8-5 second paragraph was to be construed as a statutory limitation.

The wording of the section in itself, the references to the Norwegian act relating to limitation thereunder and the wording in section 8-6 concerning claim limitation and giving reference to section 8-5, previous Supreme Court decisions (Rt-1997-168, Rt-2001-1457 and HR-2018-1612-A) and the legislative history, provided clear arguments to understanding section 8-5 second paragraph as a statute of limitation. As the assured had not brought legal action before the district court within the limit in the Dispute Act section 18-3, following the discontinuance from the conciliation board, the claim for compensation was therefore time barred.

Our remarks

The case underlines the importance of ensuring that claims rejected by the insurer is pursued within the applicable time period. As found by the Supreme Court, where a claim subject to ICA is rejected by the insurer, the statute of limitations turns from the regular limitation of three years to a much shorter time limitation of 6-months.

From a marine insurance perspective, we note for Hull & Machinery that whilst the Nordic Marine Insurance Plan (the “Plan”) is written with the ICA as background law, the rule in the ICA section 8-5 second paragraph is not found in the current version (the Plan of 2013 version 2019). Instead, clause 5-24 provides for a primary limitation period similar to that in ICA section 8-6 of three years, commencing at the end of the calendar year during which the assured acquired the necessary knowledge of the facts on which the claim is based.

Norwegian P&I Clubs have all opted out of the ICA. Section 8-5 does not directly apply. The Clubs differ however in having included a similar Rule to section 8-5. Both Assuranceforeningen Gard – Gjensidig and Norwegian Hull Club have Rules in line with the regulation in the Plan, whereas Assuranceforeningen Skuld (Gjensidig) has a Rule similar to that of section 8-5 and its understanding now ultimately affirmed by the Supreme Court.