Verzekering

In a recent case,[1] the Dutch Supreme Court handed down a judgement regarding a liability claim on behalf of an infant against his father for bodily harm caused as a result of “shaken baby syndrome”.

The claimant was severely shaken by his father as a baby. As a result he suffered severe physical injuries. The father was prosecuted for attempted manslaughter, aggravated assault and causing severe physical injuries due to fault. In appeal the father was only convicted for causing severe physical injuries due to fault. The court of appeal concluded that there was no evidence for (conditional) criminal intent as required for a conviction on the count of attempted manslaughter and/or aggravated assault. However, the court did find that the father had been significantly careless. Furthermore, the court ruled that it is common knowledge that severely shaking a baby can lead to serious injuries, hence the conviction for causing severe physical injury. The court also took in account that the father has severely diminished capacity – and thus diminished responsibility – due to Asperger’s syndrome.

The father and his liability insurer are sued in civil court for damages suffered by the son.[2] The case against the father is straightforward but without insurance coverage it is unlikely the damages can be recovered. The insurer denies coverage based on the exclusion for expected or intended injury by the insured. The clause states:

“The liability of an insured person for damage caused by and / or resulting from his / her intentional and unlawful act against an individual or object is not covered.”

The lower courts

The liability insurer argues that the required intent refers to the unlawful. In this case, the “unlawful action” is the shaking of the baby. It’s not in question that the father intentionally shaked his son. Whether he intended the consequences as they occurred is therefore not relevant.

Both the court of first instance and the appeal court reject this view. Decisive in their ruling is the fact that in the criminal case the court ruled that the father did not act with intent or conditional intent but that he was (merely) significantly careless. In both instances the courts rule that the exclusion for expected or intended injury only applies to intent or conditional intent. According to the Court of Appeal neither the wording of the clause nor the explanatory notes provided by the Union of Insurers (Verbond van Verzekeraars) at the time of the introduction of the clause, support the view of the liability insurer.

The Supreme Court

The Supreme Court first determines that provisions such as the one in contention are (usually) not negotiated by the parties to the contract of insurance. Therefore, the provision should be interpreted relying on (mostly) objective factors such as the wording of the provision itself, placed in the context of the applicable terms and conditions as a whole and in accordance with the explanatory notes (if there are any).

Applying this standard, the Supreme Court finds that the insurer rightly argues that the wording of the clause stipulate that the required intent refers to the unlawful action and not whether the occurrence of the consequences were intended. However, the Supreme Court also notes that the examples set out in the explanatory notes, illustrate that in practice it can be difficult to distinguish between intent regarding the (unlawful) action and intent regarding the occurrence of the consequences of the action. Considering that the provision in question is widely used in Dutch general liability policies, the Supreme Court finds it prudent to offer the following viewpoints how to distinguish between the two.

The Supreme Court notes that injuries and/or damages of a kind and seriousness on which the intent of the insured was not aimed, can fall under the exclusion of expected or intended injury. This is the case if, taking the nature of the conduct and the circumstances under which it was carried out in consideration, the actual injuries or damages to property can be regarded, according to objective standards, as an expected or normal consequence of the relevant conduct. In such a case, it must be assumed that the behaviour of the insured person was aimed at causing the actual injuries or property damage, even if this type or severity of injury or property damage was not intended by the insured.

On the other hand, it cannot be said that the action of the insured was aimed at the occurrence of injury or property damage of a kind or seriousness which, according to objective standards, cannot be regarded as an expected or normal consequence of the conduct in question.

So the Supreme Court comes to the interim conclusion that in principle, the exclusion for expected or intended injury is applicable in case of a deliberate and unlawful conduct on the part of the insured that is objectively aimed at causing injury or property damage, and in which the injuries actually caused or the loss of property by objective standards can be regarded as an expected or normal consequence of the conduct in question.

Based on the finding of the lower courts – that it is common knowledge that the severe shaking of babies can lead to serious injury – this does not bode well for the claimant.

However, the Supreme Court then considers the pivotal social (public) function of the general liability insurance regarding the protection it offers victims; without insurance coverage the damages are usually unrecoverable and victims would remain empty handed. The Supreme Court emphasizes that the goal of protection of victims is expressly mentioned in the explanatory notes provided by the Union of Insurers. However the explanatory notes also state explicitly that it is highly undesirable that criminal behaviour is covered under the general liability insurance policy. The Supreme Court concludes that the explanatory notes thus require the balancing of these two conflicting principles in a tailored approach in order to reach “reasonable and socially acceptable results”.

This leads the Supreme Court to consider that even in cases where prima facie the exclusion for expected or intended injury clause seems applicable, the clause can be set aside due to the special circumstances of the case in order to reach “reasonable and socially acceptable results”. The special circumstances to be taken in to account are (amongst others):

(i) the nature of the unlawful conduct of the insured;
(ii) the circumstances in which it was performed;
(iii) the extent to which the insured can be blamed for his conduct or other subjective circumstances on his part;
(iv) and the nature and seriousness of the harmful consequences;
(v) as well as the scope and social significance of the general liability insurance.

In the end, the Supreme Court rules in favour of the claimant. It finds that in itself the shaking of the baby is deliberate behaviour, which was directed against a person with the expected consequence severe physical injuries. So the application of the exclusion for expected or intended injuries clause seems indicated. On the other hand the Supreme Court notes that, according to the appeal court findings, the father only had the intention to stop the baby’s crying and did not realize the improper or unlawful nature of his actions. Furthermore, the Supreme Court finds it relevant that the father has severely reduced accountability due to Asperger Syndrome. These circumstances – seen in the light of the social function of the general liability insurance –, lead the Supreme Court to conclude that the expected or intended injury exclusion in this particular case must remain inapplicable.

The Supreme Court thus comes to its desired reasonable and socially acceptable result. In doing so, the Supreme Court opens the door to new procedures to test the boundaries of the special circumstances exception on the applicability of the clause. Presumably other victims of criminal behaviour who, in the absence of coverage under a general liability insurance cannot (fully) recover their substantial damages, will try to rely on this case to try and circumvent the expected or intended injuries exclusion.

It will be interesting to see if the Union of Insurers will try to rephrase the clause and/or the explanatory notes to try to counter the victim-friendly interpretation favoured by the Supreme Court.

[1] Dutch Supreme Court, 13 April 2018, ECLI:NL:HR:2018:601
[2] Under Dutch law, a liability insurer can be sued directly by the victim in case of bodily injury.

Bron: Insurance Law Global

Legal literature and case law were divided on this question. Some considered the lack of a contractual relationship uberrimae fidei (“of utmost good faith”) as an obstacle for analogous application of the statutory sanction to the relationship between a third party victim and the insurer. Others argued that the insurer is just as dependent on the claimant for the provision of reliable information in case of a third party claim as in case of a claim by the insured.

Direct claim against the insurer

In the Netherlands, as in other EU member states, drivers are obliged to have motor liability insurance. Victims of car accidents do not have to claim damages with the liable driver but have a direct claim against his/her motor liability insurer. This direct claim has its basis in EU regulation and is therefore also seen in other EU member states.

Facts of the case: was the alleged victim in the car?

In the case before the Supreme Court the victim also aimed its claim for damages directly at the motor liability insurer of the liable party. The case concerns a car accident that took place in the fall of 2001.

The victim was the mother of one of the drivers involved. She claimed to be a passenger at the time of the accident. The mother, who already suffered from health problems before the accident, had visited her doctor the day after the accident with whiplash symptoms. As from 2002, a few months after the incident, she was declared fully unfit for work.

The motor liability insurer of the liable driver refused to pay damages to the mother as the liable driver contested that the mother was in the car at the moment of the accident. In response to the insurer’s refusal of the claim, the mother produced several false witness statements. During the proceedings before the court of first instance the falseness of the witness statements came to light. The mother and some of the witnesses were convicted by the criminal court for forgery of documents, fraud and/or perjury.

Lower courts

The court of first instance dealing with the mother’s claim for damages denied the claim. The court of appeal however, granted the claim.

The court of appeal disregarded the false witness statements but found on the basis of other means of proof that the mother was a passenger at the time of the accident. These means of proof were all derived from the mother’s own assertion that she was a passenger.

The insurer brought the case before the Supreme Court, claiming that the court of appeal had wrongly denied the legal principle that a claim is denied if the third party has misled the insurer in order to obtain payment. Alternatively, the insurer claimed that the court of appeal did not give a proper ruling on the evidence of the case.

Relevant provision(s)

With its claim for a total loss of claim by the victim, the insurer refers to article 7:941 paragraph 5 of the Dutch Civil Code. This provision denies insureds the right to payment if they fail to timely notify their insurer of a claim and/or fail to provide (proper) information to the insurer in a deliberate attempt to mislead said insurer. Strictly speaking, the provision only applies in the contractual relationship between the insurer and the insured. However, the insurer in this case claimed, in line with case law of the Dutch Financial Services Complaints Tribunal and several legal authors, that the provision should be analogously applied to the relationship with a third party.

Supreme Court judgment

The Supreme Court does not concur with the position taken by the insurer. The Supreme Court rules that there is no room for analogous application of the sanction outside the relationship between the insurer and the insured, i.e. in the relationship between the insurer and a third party victim. The sanction of article 7:941 paragraph 5 DCC is justified by the character of confidence of the insurance agreement. The Supreme Court finds that said sanction does not distinguish between severe fraud cases and less severe fraud cases which makes the sanction a drastic one. Therefore, said sanction cannot be accepted in other relationships without a statutory basis.

Nevertheless, the Supreme Court rules the judgment of the court of appeal to be incomprehensible. The Supreme Court has difficulties with the finding of the court that the mother has succeeded in proving that she was a passenger at the time of the accident. Therefore, the judgment of the court of appeal is set aside. The Supreme Court refers the case back to another court of appeal for further handling.

Take away: fraud is never without consequence

The latter findings of the Supreme Court show that fraud by a third party victim also comes with consequences, however less drastic ones. In line with the opponents of analogous application of the aforementioned sanction, the Supreme Court deals with fraud committed by third parties by setting higher requirements for the evidence produced by the fraudster.