NOVE represented the insurer (ADB Gjensidige Estonian Branch) in a dispute with policyholder, insurance broker and its professional liability insurer regarding the question who shall bear the responsibility for underinsurance (and shall compensate respective amount of indemnity which left unpaid by the insurer) in property insurance.
The Supreme Court held in its judgment No 3-2-1-57-16 that a policyholder as the most informed person of the insurable object is responsible for expressing the value of the insurable interest of the object. Insurance broker may rely on the experience and expertise of the policyholder, but as a rule, the broker must explain to the customer the significance of the value of insurable interest, the amortization, and their impact to the indemnity as well the check of relevance of the insurable value of the specific object to be insured.
Brokers cannot base their advice merely on indicative or average insurable values used by the insurers.
The judgment therefore clarifies how in practice “know your customer” principle shall be followed in the insurance mediation and specifies the duties of insurance companies and brokers also in the light of the new Insurance Activities Act, which entered into force on 1.1.2016.
Case was handled by attorney-at-law Andrus Kattel.