Contents of Contract
- 476. Insurer’s obligation to compensate
(1) In the case of non-life insurance and upon the occurrence of an insured event, the insurer shall, pursuant to the contract, compensate the insured person for any damage sustained by the insured person due to the insured event. If a thing is insured, the insurer shall, among other things, compensate for damage sustained as a result of eliminating the consequences of the insured event and for damage sustained if insured things are lost in the course of the insured event.
(2) If a body of things is insured, the insurance shall cover all the things which constitute the body of things upon the occurrence of the insured event.
(3) The insurer shall compensate for damage in money, unless the contract prescribes compensation for damage in another manner.
(4) Non-life insurance shall cover loss of income due to the occurrence of the insured event only if so agreed separately.
- 477. Restriction of liability of insurer
The performance obligation of the insurer to a policyholder is limited to the actual extent of the damage even if the sum insured exceeds the insurable value at the time the insured event occurs.
- 478. Lack of insurable interest
(1) Insurable interest is the interest of the policyholder in being insured against a certain insured risk.
(2) If there is no insurable interest upon the commencement of insurance cover or no insurable interest arises upon the insurance of future insured risk, the policyholder shall be released from the obligation to pay insurance premiums. In this case, the insurer may demand compensation for reasonable administrative expenses from the policyholder.
(3) If insurable interest ceases to exist after the commencement of insurance cover, the insurer shall be entitled to the insurance premiums which the insurer could have claimed had insurance been taken out only until the time when the insurer became aware of the cessation of insurable interest.
(4) If insurable interest ceases to exist due to the occurrence of the insured event, the insurer shall be entitled to the insurance premium for the current period of insurance.
- 479. Insurable value
(1) Insurable value is the value of insurable interest at the time an insured event occurs.
(2) The insurable value of a fungible movable is the sum of money needed to obtain a similar thing, taking reasonably into account the decrease in the value of the thing caused by depreciation.
(3) The insurable value of a structure is its ordinary local construction value from which a reasonable amount reflecting the condition, and in particular the age and depreciation, of the structure has been deducted.
- 480. Agreed value
(1) Insurable value may be determined in advance as a fixed amount (agreed value).
(2) Agreed value shall not be determined upon the insurance of loss of income due to the occurrence of the insured event.
(3) Agreed value shall not be deemed to be insurable value if, at the time of the occurrence of the insured event, it differs significantly from the actual insured value. In this case, the actual insured value applies.
(4) If a structure is insured, the parties may agree on using the cost of restoring the insured structure as the insurable value of the structure.
- 481. Over-insurance
If it becomes evident that the sum insured exceeds the insurable value to a significant extent (over-insurance), both the insurer and the policyholder may reduce the sum insured, together with a corresponding reduction of the insurance premium, in order to eliminate over-insurance. The sum insured and the insurance premium shall be reduced by making a corresponding declaration of intent to the other party to the contract.
- 482. Under-insurance
If the sum insured is less than the insurable value at the time of the occurrence of the insured event (under-insurance), the insurer shall be liable for the damage in proportion to the relation of the sum insured to the insurable value at the time of the insured event.
Multitude of Insurers
- 483. Notification of entry into new insurance contract
A policyholder shall notify the insurer immediately if the same insured risk is insured by another insurer, including cases where loss of income is insured by one insurer and other damage by another insurer. The name of the other insurer and the sum insured shall be indicated in the notice.
- 484. Co-insurance
If one and the same insurance or the insurance of insured risks relating to the same assets is divided in fixed parts between several insurers (co-insurance), each insurer is required to pay indemnities only in proportion to the part which it insures.
- 485. Leading insurer in co-insurance
(1) In the case of co-insurance, the leading insurer, which is deemed to be the representative of the other insurers, shall be designated in the contract.
(2) The leading insurer shall forward declarations of intent prescribed by the contract and the policyholder shall forward such declarations the leading insurer. The leading insurer shall also organise the satisfaction of claims arising from the insurance contract.
(3) If no leading insurer is specified in the contract, the policyholder may select one of the co-insurers to be the leading insurer. The selection is deemed to have been made when the selected insurer is informed thereof.
- 486. Multiple insurance
(1) If a policyholder insures the same insured risk with several insurers and the total amount of indemnities payable by the insurers would exceed the extent of the damage or the total of the sums insured would exceed the insurable value (multiple insurance), the insurers shall be liable as solidary obligors.
(2) In the case specified in subsection (1) of this section, each insurer shall be liable to the policyholder to the extent of the sum insured to be paid by the insurer pursuant to the contract, but the policyholder shall not claim more in total than the extent of damage.
(3) In the case specified in subsection (1) of this section, insurers shall be liable between themselves in proportion to the amount each of them has to pay the policyholder pursuant to the insurance contract.
(4) Contracts entered into by a policyholder who takes out multiple insurance with the intention of acquiring an unlawful patrimonial advantage shall be void. If the insurer was unaware of the invalidity of the contract at the time of entry into the contract, the insurer shall be entitled to insurance premiums until the end of the period of insurance during which the insurer became or should have become aware of the invalidity of the contract.
(5) Any agreement which derogates from the provisions of subsections (1) to (4) of this section is void.
- 487. Elimination of multiple insurance
(1) If a policyholder unknowingly entered into a contract resulting in multiple insurance or if multiple insurance occurred later due to a decrease in insurable value, the policyholder may cancel the contract which was entered into later or reduce the sum insured to the amount not covered by earlier insurance. Together with a reduction of the sum insured, the policyholder may also reduce the insurance premium.
(2) In the case specified in subsection (1) of this section, the policyholder may only cancel the contract or reduce the sum insured immediately after becoming aware of multiple insurance.
(3) A contract shall be deemed to have been cancelled under the circumstances specified in subsection (1) of this section or the sum insured and the insurance premium shall be deemed to have been reduced by the end of the period of insurance during which the policyholder cancelled the contract or notified the insurer of the reduction of the sum insured and the insurance premium.
- 488. Obligation to prevent and reduce damage and to ensure possibility of establishing damage
(1) Upon the occurrence of an insured event, the policyholder shall, insofar as is possible, attempt to prevent and reduce any damage and, in so doing, observe the instructions given by the insurer. If circumstances permit, the policyholder shall ask the insurer for such instructions.
(2) Prior to damage being established, the policyholder shall not make any changes with respect to the damaged thing without the permission of the insurer if such changes would hinder or render impossible establishment of the cause or extent of the damage, unless the change is necessary to reduce the damage or in the public interest.
(3) If the policyholder violates the obligation specified in subsection (1) or (2) of this section and the insurer sustains damage as the result thereof, the insurer shall have the right to reduce the indemnity by the extent of the damage sustained.
- 489. Establishment of damage
(1) The insurer shall immediately establish the extent of damage to be compensated for.
(2) If one of the parties to the contract refuses to participate in establishing the extent of the damage or if the parties are unable to agree on the extent of the damage, they may turn to a court for the extent of the damage to be established.
(3) An insurer shall not lose the right to contest the policyholder’s claim for compensation if the insurer participates in establishing the extent of damage.
(4) Any agreement which restricts the policyholder’s right to be assisted by a representative in establishing the extent of damage is void.
- 490. Expert assessment
(1) An agreement between an insurer and a policyholder pursuant to which the insurer’s obligation to pay an indemnity or the extent of damage is to be determined by an expert shall be valid only if the expert is appointed by a third party not involved in the matter or if the insurer and the policyholder both appoint an equal number of experts.
(2) Neither the insurer nor the policyholder shall rely on the insurer’s obligation to pay the indemnity or the extent of damage being established by an expert, if this is obviously significantly different from the actual circumstances. Any agreement which derogates from this requirement is void.
(3) In the case specified in subsection (2) of this section and also if the expert cannot or will not establish the extent of damage or delays so doing, the parties may turn to a court for the extent of the damage to be established.
- 491. Compensation for expenditure to policyholder
(1) If an insurer has to compensate for damage sustained, the insurer shall also compensate for the expenses incurred by the policyholder in connection with establishment of the extent of the damage. The insurer need not compensate the policyholder for the expenses of hiring an expert or advisor if the policyholder was not required to hire an expert or advisor pursuant to the contract.
(2) In addition to the provisions of subsection (1) of this section, the insurer shall compensate the policyholder for expenses incurred in connection with the prevention or reduction of damage pursuant to the provisions of subsection 488 (1) of this Act which the policyholder deemed necessary under the circumstances even if these expenses failed to produce the desired result. The insurer shall compensate for expenses incurred according to the insurer’s instructions even if such expenses in combination with the other indemnities exceed the sum insured. If the policyholder so requests, the insurer shall, pursuant to the instructions of the insurer, make an advance payment of the expenses to be incurred.
(3) In the case of under-insurance, the insurer shall compensate for expenses only in the proportion provided for in § 482 of this Act.
- 492. Transfer of claim
(1) A claim for the compensation of damage against a third party which belongs to a policyholder or the insured person shall transfer to the insurer to the extent of damage to be compensated by the insurer.
(2) If the policyholder waives a claim against a third party or waives the right which secures such claim, the insurer shall be released from its performance obligation with respect to the policyholder insofar as the policyholder could have claimed compensation on the basis of the claim or right.
(3) If the policyholder has a claim against his or her ascendant, descendant or spouse or another family member who lives with the policyholder, the insurer shall have the rights provided for in subsections (1) and (2) of this section only insofar as the liability of the relevant person is insured or if the person caused damage intentionally.
- 493. Performance of contract after occurrence of insured event
(1) After the occurrence of an insured event, the insurer shall be liable for damage caused by a later insured event only to the extent of the sum insured remaining after compensating the earlier damage. For future periods of insurance, the insurer is entitled to insurance premiums which are smaller than the previous insurance premiums in the same proportion as the residual sum insured is smaller than the initial sum insured.
(2) After the occurrence of the insured event, either party to the contract may cancel the contract within one month as of completion of the process of establishing the extent of damage. The insurer shall give one month’s notice of cancellation of the contract. The policyholder may cancel the contract on these grounds such that the contract terminates not later than by the end of the current period of insurance.
(3) An agreement which derogates from the provisions of subsection (2) of this section shall only be valid if the right to cancel is the same for both parties.
Transfer of Insured Thing
- 494. Continuation of insurance upon transfer of thing
(1) If a policyholder transfers an insured thing, all the policyholder’s rights and obligations arising from the insurance contract transfer to the acquirer of the thing.
(2) The transferor and acquirer of the thing shall be jointly and severally liable to the insurer for payment of the insurance premium for the period of insurance during which the transfer takes place.
(3) The policyholder’s rights and obligations arising from the insurance contract shall not be deemed to have been transferred with respect to the insurer until the insurer becomes aware of the transfer of the insured thing.
- 495. Cancellation of insurance contract upon transfer of thing
(1) An insurer may, upon the transfer of an insured thing, cancel the insurance contract with respect to the acquirer of the thing within one month as of becoming aware of the transfer of the thing if the insurer gives at least one month’s notice of the cancellation.
(2) The acquirer of an insured thing may cancel the insurance contract by the end of the current period of insurance within one month as of acquiring the thing. If the acquirer did not know that the thing is insured, the right to cancel expires one month after the time of becoming aware of the insurance.
(3) If an insurance contract is cancelled on the grounds provided for in subsection (1) or (2) of this section, the transferor of the thing shall pay the insurer insurance premiums, but not for longer than for the period of insurance during which the insurance contract terminates. In such case, the acquirer shall not be liable for the payment of insurance premiums.
- 496. Notification of transfer
(1) Upon the transfer of an insured thing, the transferor or acquirer of the thing shall notify the insurer of the transfer immediately.
(2) If the insurer is not notified of the transfer of a thing in time, the insurer shall be released from its performance obligation if the insured event occurs more than a month after the time when the insurer should have received the corresponding notice.
(3) The provisions of subsection (2) of this section shall not apply if:
1) the insurer was aware of the transfer at the time when the insurer should have been notified;
2) at the time of the occurrence of the insured event, the insurer’s right to cancel the contract has expired and the insurer has not exercised the right.
- 497. Agreement which derogates to detriment of acquirer
(1) Any agreement which derogates from the provisions of §§ 494 to 496 of this Act to the detriment of the acquirer is void.
(2) A contract may prescribe that the notice regarding the transfer of a thing and the cancellation of a contract on these grounds shall be in a particular format.
- 498. Application of provisions
The provisions of §§ 494-497 of this Act shall also apply to the transfer of insured things in execution proceedings and bankruptcy proceedings.
Liability of Insurer to Mortgagee upon Insurance of Structures
- 499. Notification obligation of insurer and policyholder
(1) A policyholder shall immediately notify the insurer who insured a structure of any encumbrance of the registered immovable under the structure with a mortgage.
(2) If, upon the insurance of a structure, the immovable on which the structure is located is encumbered with a mortgage, the insurer shall immediately notify the mortgagee known to the insurer in a format which can be reproduced in writing of the setting of a term for the policyholder to pay the insurance premium if the policyholder has failed to pay the premium and of the cancellation of the contract.
(3) The insurer shall notify the mortgagee known to the insurer of the occurrence of an insured event within one week as of becoming aware of the occurrence of the insured event, unless the damage is insignificant to the mortgagee.
(4) The insurer shall inform the mortgagee of the existence of insurance cover and the size of the sum insured immediately at the request of the mortgagee.
[RT I 2002, 53, 336 – entry into force 01.07.2002]
- 500. Validity of payment of indemnity with respect to mortgagee
(1) If the insurance contract of a structure prescribes that the policyholder is required to use the insurance indemnity to restore the structure, the payment of the insurance indemnity for other purposes or without ensuring restoration of the structure shall not be valid with respect to the mortgagee and the mortgagee may request another payment from the insurer, unless the mortgagee consents to payment of the insurance indemnity in such manner.
(2) The consent specified in subsection (1) of this section shall be deemed to have been granted by the mortgagee if the mortgagee has been informed, in a format which can be reproduced in writing, of the intention to pay the indemnity but has not responded thereto within one month.
[RT I 2002, 53, 336 – entry into force 01.07.2002]
- 501. Rights of mortgagee upon violation of obligations by policyholder
If a policyholder violates an obligation arising from the insurance contract and, as a result thereof, the insurer is released from its performance obligation with respect to the policyholder, the insurer shall still perform the obligation to the mortgagee, unless the insurer is released from its performance obligation with respect to the policyholder because the policyholder has failed to pay the insurance premiums or intentionally caused the insured event.
- 502. Transfer of mortgage
If an insurer satisfied a claim to the mortgagee of a policyholder pursuant to § 501 of this Act, the mortgage shall transfer to the insurer to the extent that the insurer satisfied the claim. The insurer shall not exercise rights arising from the mortgage to the disadvantage of a mortgagee of the same or lower ranking with respect to whom the insurer’s performance obligation still remains.
- 503. Application of provisions to real encumbrance
The provisions of §§ 500-502 of this Act shall apply correspondingly if an immovable is encumbered with a real encumbrance.
- 504. Inapplicability of mortgagee’s rights to policyholder
The rights of mortgagees provided for in §§ 500-503 of this Act shall not be exercised on the basis of mortgages where the mortgagee is a policyholder.