Aansprakelijkheid

In March this year, the Supreme Court ruled (again) on this question and this time in a case involving a detainee who was placed under a too strict detention regime by the Dutch government. It was already legally established that the state had acted unlawfully. But does that also mean that there is a right to compensation for immaterial damage claimed by the detainee?

This article discusses how compensation for immaterial damage is regulated by Dutch law and what kind of development you see at the Supreme Court.

The case

In 2013, the claimant was sentenced to life imprisonment. During his pre-trial detention, the claimant was placed in the so-called “Extra Secure Institution” (ESI). After the claimant objected to this at the Council for the Administration of Criminal Justice and Protection of Juveniles, it considered that his stay there was unjustified. He was then transferred to another institution.

For this unjustified stay (of 350 days) the State paid a fixed compensation based on the ground of fairness of €1.375,00. However, the detainee believed he was entitled to higher compensation. He claimed he had suffered immaterial damage and that he had been affected in his person by the unlawful stay. He had never felt safe there. This was due to the many physical examinations and the intimate, body searches. He also had experienced his stay as social isolation.

Mental injury

Under Dutch law, one can only claim compensation for immaterial damage if the law provides for this. This because of the legislator’s idea that a claim is only justified in serious cases. One of the legal bases can be found in Article 6:106 of the Dutch Civil Code, paragraph 1, sub b. According to that article, a right to compensation is foreseen if the injured person (i) has sustained a physical injury, (ii) has been compromised in his honor or good name or (iii) has been affected otherwise in his person.

In this case, there was no physical injury nor a compromising in his honor or good name, so the question here is whether or not the detainee had been affected otherwise in his person.

The Supreme Court already judged on this topic in other cases a few times earlier. According to the Supreme Court in 2002, it is not enough to speak of personal harm when there has been more or less strong mental discomfort or feeling hurt. The starting principle is that the existence of mental injury is established in court, which in general will only be the case if there is a disease recognized in psychiatry. A year later, the Supreme Court considers that in any case, the injured party must provide sufficient and specific information that shows that psychological damage has occurred in connection with the circumstances of the case, which requires that the existence of mental injury be established by objective standards.

Almost ten years later, in 2012, the Supreme Court ruled that an exception can be made to the principle that mental injury must be established in court, in connection with the serious severity of the violation of standards and the consequences thereof for the injured party.

Consequences for the injured party

Both the court of the first instance and the appeal court rejected the view of the claimant. The Court of Appeal considers if the exception to the principle that there must be mental injury occurred here. But in this case – according to the court – there were no grounds for accepting such an exception since the claimant had not furnished sufficient facts about the consequences that the stay in the ESI had for him.

Immaterial compensation for violation of a fundamental right?

In the appeal in cassation, the claimant complains, among other things, that there has been a violation of a fundamental right and that the Court of Appeal has misunderstood that in the event of a violation of certain rights, it must be assumed that immaterial harm has been suffered. After all, the unlawful deprivation of liberty is a serious (fundamental) violation of his privacy.

The Supreme Court does not agree with that. First, the Supreme Court repeats its earlier judgments. The Supreme Court then rules that when someone takes the position that he has been affected in his person, he must substantiate that with specific facts. However, the nature and seriousness of the violation of standards may – where appropriate – mean that the adverse consequences for the injured person are so obvious that an impairment in his person can be assumed.

However, impairment in his person as referred to in art. 6: 106 (1) (b) of the Dutch Civil Code, can not be assumed with only a violation of a fundamental right. Even then, there must be sufficient certainty about the consequences of that violation. Therefore, the above-mentioned complaint is unsuccessful.

In addition, the Supreme Court finds the Court of Appeal’s opinion that the claimant’s consequences of the breach of standards have not been established legally, not incomprehensible. The claimant must, therefore, be satisfied with the compensation of € 1.375,00.

Bron: Insurance Law Global

Central notions in CAR policies: material damage and inclusion of inherent defects

In the Netherlands, the central notion in the description of coverage of a Construction All Risk (CAR) policy is material damage. Without material damage there is no coverage under the CAR policy.

If, for example, it comes to light during the building period that the balconies in an apartment building would collapse in case of heavy load, the damage resulting from the necessary replacements of those balconies is not covered under CAR insurance. If the lacking strength of the balconies has led to cracks in the balconies, however, the cracks would be regarded as material damage. As a result, the cracks and all damage resulting from them would be covered under CAR insurance.

In terms of CAR coverage in the Netherlands, it is not relevant whether or not the cracks are the result of an inherent defect. As long as one can point to any material damage as a result of the inherent defect that has occurred during the building period, the defect and all damage resulting from the defect is covered under CAR insurance. However, there are exceptions to said principle. The notion of material damage in CAR policies includes a concealed exclusion of coverage for a certain group of inherent defects.

Concealed exclusion for objects which were damaged from the beginning

The idea is that the requirement of material damage cannot be met if an object has never been flawless, i.e. if the object was damaged from the beginning. This idea is regularly seen in Dutch case law and Dutch legal literature. The underlying reasoning is that an object which has never been flawless cannot be (materially) damaged as it was never a proper object in the first place. This idea has developed into a central tenet in Dutch CAR cover cases.

The question then arises: when can an object be qualified as being damaged from the beginning? How do we make a distinction between an object with an inherent defect and an object which was damaged from the beginning? Is it not that every object with an inherent defect can be regarded as an object which was damaged from the beginning?

Case law from 2018

In general, Dutch courts set high requirements in CAR cover cases for the argument of insurers that the object in question has never been flawless. Such is understandable given the aforementioned fact that CAR policies – explicitly – provide coverage for inherent defects.

Two decisions by lower courts given last year show that there is a fine line between coverage and no coverage in cases of inherent defects.

In the first case[1], a coating layer had been applied onto an ice skating track. After two weeks the layer showed blisters. Research showed that the coating layer had been applied too thick, as a result of which the solvent in the coating layer had not been able to evaporate causing blisters on the coating layer. The CAR insurer took the position that the coating layer had never been flawless and denied coverage for the damaged coating layer and all damage resulting from it. In assessing the question whether the coating layer had been materially damaged, the court considered that the deciding factor is whether the coating layer had been flawless at the time it was applied onto the track. The court specified that if the coating layer met all characteristics and requirements to become a coating layer without any defects at the time it was applied, the blisters on the coating layer could be regarded as material damage. The court considered that correct application is a precondition for a coating layer to become a flawless one. As the coating layer in question had not been applied correctly there was never a moment in time at which the coating layer had been flawless. Thus, the court concluded that there was no material damage, resulting in the claim not being covered under CAR insurance.

In the second case[2], the result was different. In this case, several welds had been applied to steel structures creating so-called skid beams, used in offshore industry. After application, the welds were examined by ultrasonic testing to ensure the absence of flaws. After two skid beams had been approved for delivery, they were examined again by ultrasonic testing after they had been delivered to their purchaser. During the second examination, indications were found for the presence of flaws. The skid beams were cut open and ruptures were found. They were repaired swiftly given the time pressure of the whole project. Insurers did not get the chance to observe the ruptures themselves. During the proceedings, insurers queried the results of the ultrasonic testing by pointing to the unreliability of the method and argued that the welds had never been flawless. Furthermore, insurers pointed to the fact that the flaws had been the result of a design fault combined with faults made during welding. According to insurers, the chosen method of welding could never have led to proper welds. The court assumed on the basis of the statements given by the experts who performed the ultrasonic testing that the welds had ruptured after they had been flawless. The court also found that CAR policies providing coverage for all damage no matter what cause, also provide coverage for design faults if the object does not show any flaws at first, as a result of good workmanship, but only at a later stage. Based on these considerations, the court granted the insured’s claim for coverage.

Conclusion

It can be difficult to divide between covered and uncovered claims in cases of inherent defects. Taking into consideration the aforementioned case law, it seems that as long as the insured can point to a moment in time at which the built object has been flawless, there is coverage under CAR insurance. This can be a quite difficult and very factual discussion.

Material damage as a result of design faults seems to be covered most of the time. Material damage as a result of faults during the construction phase can also be covered, but more often the aforementioned exception seems to apply. Especially faults which occur during the making of a specific component run the risk of falling outside the scope of CAR coverage.

[1] Judgment of the Rotterdam court of 7 November 2018, ECLI:NL:RBROT:2018:9314.
[2] Judgment of the Amsterdam court of 11 July 2018, ECLI:NL:RBAMS:2018:6603.

Bron: Insurance Law Global