The Norwegian Supreme Court clarifies the right to proceed directly against Norwegian insurers – HR-2020-1328-A

On 24 June 2020, the Norwegian Supreme Court rendered a decision which confirms that Norwegian courts have jurisdiction to try direct action claims against Norwegian liability insurers. The Supreme Court held that it is not necessary to consider whether the material conditions of the direct action claim are satisfied for the Norwegian Courts to have jurisdiction. The question had previously not been tried by Norwegian or foreign courts, but is now finally decided by the Supreme Court.

 Background of the case

The case relates to a collision between the vessels “Thorco Cloud” and “Stolt Commitment” in Indonesian waters. Following the collision, “Thorco Cloud” sank and six crewmembers lost their lives. After the collision, the owners of the “Thorco Cloud” commenced proceedings in Norway against “Stolt Commitment’s” liability (P&I) insurer Gard.  None of the vessels were registered in Norway.

The case has raised several complex legal questions. Before the Supreme Court, the trial scope was confined to the specific interpretation of the wording “when such direct actions are permitted” in the Lugano Convention Article 11 no. 2.

In particular, there were two alternative ways to interpret the Article wording: (i) so that direct actions generally must be permitted in the jurisdiction, or (ii) so that the substance of the direct action claim, in this case insolvency, must be considered to determine whether “such direct actions are permitted“.

The Supreme Court’s clarification

The Supreme Court confirmed that the term “permitted” in the Lugano Convention Article 11 no. 2 must be understood so that it is sufficient that direct actions are generally permitted in the jurisdiction. It is thus not necessary to consider whether the specific direct action would fail or succeed in the particular case in order to establish jurisdiction.

In Norway, an injured party is generally permitted to pursue a claim against the tort feasor’s liability insurer by way of direct action pursuant to the Norwegian Insurance Act Section 7-6.

Kvale’s comments

The Supreme Court decision implies that an injured party may always commence direct action proceedings under liability insurance in Norway, provided that the liability insurer is domiciled here, and the direct action is subject to Norwegian law.

The rule of law established by the Supreme Court decision is in line with the purpose of the Lugano Convention’s rules on jurisdiction in cases related to insurance and support the principle that proceedings may always be brought in the member state the defendant is domiciled.

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Kvale regularly assists clients in relation to direct action proceedings against liability insurers and other matters relating to insurance.