LAW OF OBLIGATION ACT, PART 4, CHAPTER 23, DIVISION 6 & 7

Division 6

Insurance of Insured Risk of Third Party 

  • 463. Rights of third party and policyholder with respect to insurer

(1) If insured risk relating to a third party is insured, the third party has the right to demand performance and all the rights related thereto from the insurer. The third party shall not dispose of such rights without the consent of the policyholder.

(2) The policyholder may dispose of the rights arising from the insurance contract for a third party in the policyholder’s own name, including collecting the claim of the insured person against the insurer, waiving the claim or entering into transactions involving the claim.

(3) The insurer shall perform its obligation to the policyholder only if the policyholder proves that the third party had granted its consent for the insurance contract to be entered into.

  • 464. Preferential right of policyholder to have claims satisfied

A policyholder has a preferential right to satisfy the policyholder’s claim against a third party and related to the insured object at the expense of a claim against the insurer to perform the insurance contract before the third party and obligees of the third party.

  • 465. Knowledge and conduct of insured person serving as that of policyholder

(1) If the knowledge and conduct of a policyholder have legal effect according to this Act, the knowledge and conduct of a third party shall be deemed equal to the knowledge and conduct of the policyholder upon insurance of an insured risk relating to the third party.

(2) Knowledge of the third party regarding a fact shall not be deemed equal to the knowledge of the policyholder if the contract was entered into without the knowledge or against the will of the third party.

Division 7

Termination of Insurance Contract and Expiry of Claims 

  • 466. Withdrawal from insurance contract

Withdrawal from an insurance contract is permitted only in the cases provided by law.

  • 467. Invalidity of agreement to extend insurance contract

Any agreement under which an insurance contract which is not cancelled prior to expiry thereof is deemed to be extended for longer than one year is void.

  • 468. Ordinary cancellation of insurance contract entered into for indefinite period

(1) If an insurance contract has been entered into for an indefinite period of time, it may be cancelled by either party at the end of the current insurance period.

(2) The term for giving notice of cancellation shall be the same for both parties and may not be less than one month or longer than three months.

(3) Both parties may, by mutual agreement, waive their rights to cancel the contract for up to two years.

  • 469. Cancellation of long-term insurance contract

A policyholder may cancel an insurance contract entered into for a period of more than five years at the end of the fifth year or any subsequent year by giving at least three months’ notice thereof, unless otherwise provided by law.

  • 470. Cancellation of contract due to violation of obligations of policyholder

(1) If a policyholder materially violates an obligation prescribed by the contract due to circumstances arising from the policyholder, the insurer may cancel the contract without prior notice within one month as of becoming aware of the violation, unless otherwise provided by law.

(2) If the insurer does not cancel the contract within the term specified in subsection (1) of this section, the insurer shall not rely on the agreement of being released from the performance obligation later in the event the policyholder violates an obligation.

  • 471. Cancellation of contract upon withdrawal of activity licence of insurer

A policyholder may cancel an insurance contract if the activity licence of the insurer is withdrawn or suspended, unless otherwise provided by law.

  • 472. Expiry of contract due to bankruptcy of insurer

An insurance contract shall terminate upon the declaration of bankruptcy of an insurance undertaking or upon the abatement of bankruptcy proceedings without declaring bankruptcy.

[RT I, 07.07.2015, 1 – entry into force 01.01.2016]

  • 473. Cancellation of contract due to insolvency of policyholder

If a policyholder is declared bankrupt or compulsory administration is ordered for an insured immovable, the insurer may cancel the insurance contract by giving at least one month’s notice.

  • 474. Partial termination of contract

(1) If an insurer has the right to withdraw from a contract or cancel the contract only with respect to certain insured objects or persons, the insurer may do so with respect to the remaining objects or persons only if, under the circumstances, it can be presumed that the insurer would not have entered into the contract on the same terms solely for such objects or persons.

(2) If an insurer withdraws from a contract or cancels the contract with respect to certain objects or persons only, the policyholder has the right to cancel the entire contract by the end of the period of insurance during which the insurer’s withdrawal or cancellation is effected at the latest.

  • 475. Expiry of claims arising from insurance contract

(1) The limitation period for claims arising from an insurance contract is three years. The limitation period commences from the end of the calendar year during which the claim falls due.

(2) If an insurer has been informed of a claim arising from an insurance contract, the running of the limitation period shall be suspended until the policyholder receives the decision made by the insurer concerning the claim. In this case, the claim expires ten years after the end of the calendar year during which the claim fell due.

(3) If a policyholder submits an application to an insurer for the performance of an obligation of the insurer arising from the insurance contract and the insurer notifies the policyholder in writing of the denial of the application, the insurer shall be released from the performance obligation if the policyholder does not file an action for compulsory performance of the obligation within one year as of the receipt of the response denying the application. The insurer shall not be released from the performance obligation if the insurer does not inform the policyholder of the legal consequences of the expiry of the one year term in its response.

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