Insurance law and regulation in Norway

1. Introduction

According to the Norwegian Financial Institutions  Act  an Insurer must have a license to conduct insurance activities in Norway. An application for a license is sent to the Norwegian Financial Supervisory Authority, which either gives advice for decision to the Ministry of Finance, or grant a license by delegation.

To be granted a license, the company needs to meet specific requirements on owners’ suitability, initial capital and the management of the company. These requirements are based on provisions in EU an EEA directives in the financial field. Whether or not a license is given depends on an assessment of the company’s capital and solvency ratio and whether the company has a sound organizational and operational plan. Among other things, the necessary experience is required for board members, the managing director or another person who actually manages the business.

The insurance companies must take part in a guarantee system which is intended to help secure payments of claims. The objective is to prevent or reduce financial loss to consumers or small businesses if the insurance company is not able to meet its obligations. In order to conduct insurance activity in Norway, it is required that the company is a member of this guarantee system. This also applies to an insurance company with headquarters in another EEA country that operates through a branch establishment in Norway.

An insurance company that has permission to conduct insurance business in an EEA country may conduct such business in Norway provided the company has a license to conduct insurance activities in the home country and that a notification is sent to the supervisory authority in the home country.

The Norwegian Insurance Contract Act (“ICA”) has provisions concerning non-life insurance. For some insurance products these provisions are mandatory in favour of the Insured. The act is non-mandatory for instance for marine insurance and insurance for aircrafts etc.

2. Effect of misrepresentation and/or non-disclosure

For insurance agreements regulated by the ICA there is a general obligation on the insured to provide information to the insurance company before and during the policy period. 

Before a policy is issued, the insurer can ask for information which is relevant to evaluate the risk. The insured is obligated to provide the insurer with correct and complete answers upon questioning. These questions can be presented as a questionnaire or in other written form, but this is not a requirement. 

In principle the duty of disclosure does not include an obligation for the insured to disclose information unsolicited. However, the insured is obliged give unsolicited information about special circumstances which the insurer cannot be expected to ask about, if the insured understands that the information is significant for the Insurance company’s risk assessment. 

During the policy period there is no general duty of disclosure. The insured is, however, required to rectify any incorrect or incomplete information given at the formation of contract and to inform about new or changed conditions.  

If the Insured have breached the duty to disclose information of significance, the insurer can terminate the insurance contract with 14 days’ notice. This applies even if the insured cannot be blamed for the misinformation. If the insured has acted dishonest, the insurer is also entitled to terminate other contracts with the insured with immediate effect. If an insurance event has occurred, the misrepresentation or non-disclosure gives the insurer the opportunity to refuse the insured compensation under the insurance agreement. This must however be notified within specific time limits.

Also, when filing a claim, the insured is obligated to provide the insurer with all the available information and documents which is necessary to evaluate the claim. If the insured deliberately gives incorrect or incomplete information with the knowledge that this can lead to receiving insurance which is not entitled, the insured can lose any claim against the insurer related to the incident. The insurer is then also entitled to terminate the policy with one week’s notice. 

3. Effect of Breach of Warranty and condition precedent

The insurer can make reservations in three situations; Firstly, if the insurer is prevented from obtaining information about certain circumstances, reservations about discharge from liability related to these circumstances can be made. Secondly, reservations about discharge from liability can relate to specific conditions relevant to the risk. The reservation is not valid unless the insured either has a positive knowledge of the reservation, or the reservation is stated in the agreement. Thirdly, a reservation about reduction of liability can be made if the premium calculation is explicitly made depending on how the insurance object is used, and there has been a change which grant a higher premium. 

4. Consequence of late notification

The insured is obliged to notify the insurer without undue delay when an insurance event has occurred. If the insurer has not been notified of an insurance claim within one year after the insured became aware of the facts which substantiates the claim, the insured loses the right to compensation. There is no requirement that the notification must be given in writing, but the insured has the burden of proof that notification has been given. 

5. Entitlement to bring a claim against an insurer

According to ICA an injured third party is entitled to raise a claim directly against the liability insurer given that the insurance covers the insured’s liability. When asked, both the insurer and the insured are obliged to inform the injured party of the liability insurance. If an injured third party raises a claim directly against the insurer, the insurer must notify the insured without undue delay, and keep the insured informed about the claim proceedings. Where the ICA is non-mandatory, for example for large commercial companies and marine/aircraft insurance, this right to bring a claim directly against the insurer can be waivered.   

When a claim is brought directly, the insurer can invoke the same objections towards the claimant as the insured. The insurer is also entitled to invoke their objections concerning the insured, as long as these relate to circumstances occurring after the damage took place. The claimant has the same position towards the insurance which he would have towards the insured, thus the claimant does not get better terms or more payment when raising a claim directly. The insurance company is entitled to deduct the insured’s self-risk when paying damages to the claimant.   

6. Entitlement to damages from an insurer for late payment of claim

The insured is entitled to penalty interest for late payment of compensation two months after sending notification of the insurance event to the insurer. If the delay in payment is due to the insured not providing necessary information to consider the claim, the insured is not entitled to penalty interest for the period of which the insurance company is waiting for information/ documentation from the insured which the company needs to handle the claim. This two-month rule is not practical in large, complex claims. In many cases, there is often a considerable amount of information to review, and facts may only begin to emerge later in the claim handling process. It is however possible, to agree on more flexible solutions regarding penalty interest in policies where ICA is not made mandatory.

The Norwegian Delayed Interest Act regulates the calculation of the penalty interest. This act also regulates the situation where a third party raises a claim directly against the insurer. For third party claims the penalty interest starts running when notice requiring payment has been given by the third party. The insurer is obligated to pay penalty interests even if the sum insured is exceeded.

7. General rules concerning the limitation period for claims

The limitation period for claims is three years, normally starting from the end of the year when the insured got the necessary knowledge of the circumstances that substantiates the claim. However, there is an absolute limitation period of ten years from the year the insured event occurred. The limitation period for an injured third-party claiming compensation directly of the insurer, the rules on limitation are the same as the underlying claim between the claimant and the insured.  

Furthermore, the insured or an injured third party who have made a claim towards the insurer, must take legal steps within six months after the insurer has refused their claim to avoid limitation. A complaint to The Norwegian Financial Services Complaints Board (“Finansklagenemnda”) within this six-month period can also prevent the claim from becoming time barred.

8. Policy triggers with respect to third party liability insurance

ICA does not regulate policy triggers. Such triggers are subject to the individual insurance policy. In Norwegian third-party liability insurance, discovery basis is most common trigger. This requires that the damage is discovered during the policy period, either by the insured or the injured party. However, some policies have claims made or other triggers.

9. Recoverability od defence costs

The Norwegian Disputes Act states as a main rule that the losing party shall pay the winning party’s defence costs.

In most Norwegian liability policies, the insurer undertakes to investigate whether liability exist and pay the necessary defence costs, but only to the extent that the claim is covered by the insurance. If the claim only partly is covered, be it factual or regarding the amount insured, the defence costs are distributed proportionally between the insurer and the insured.

The insured’s own lawyer expenses are only covered by the insurance to the extent this is agreed with the insurer beforehand. 

10. Insurability of penalties and fines

The ICA does not contain any explicit rule that the interest to be insured must be legal. There are, however, general provisions which may invalidate clauses insuring penalties and fines. In addition, there is a section in the FUA which prohibits insurance companies from receiving payment for or making offers to customers to insure the risk of criminal sanctions, such as penalties and fines.