Recourse possibilities of insurers are limited in the Netherlands, also in the case of non-Dutch subrogation

In a recent case, Amsterdam Court of Appeal 26 May 2015 (ECLI:NL:GHAMS:2015:2043), the Court held that the Dutch prohibition on the subrogation of an insured’s right of recourse against a party that is strictly liable applies to insurers that subrogate under, not only, Dutch law but also the laws of other jurisdictions. It is important to note that this limitation on subrogation applies only to cases involving strict liability (risicoaansprakelijkheid) and does not limit the possibility of subrogation when liability is based on culpability.

The facts

In this particular case, a leak in a dishwasher of a restaurant had twice caused considerable damage to the inventory of the clothing store located below the restaurant. The clothing store is part of an international chain and the damage was covered under an insurance policy governed by English law. Although the insurer subrogated based on article 79 of the Marine Insurance Act 1906, the Amsterdam Court of Appeal prevented the insurers from bringing recourse against the restaurant under Dutch Civil Code. The Court found that the prohibition was not intended to be limited to insurers that subrogate under Dutch law.

Additionally, the Court denied recourse under the sectorial regulations of fire insurers (Bedrijfsregeling Brandregres (BBR)). For decades, fire (property) insurers in the Netherlands have agreed not to use their right of recourse against private parties (and their insurers). Until 2014, these self-imposed restrictions also applied to the market of business insurance, as in this case. The insurer claimed that the BBR only applied to insurance taken out with its Dutch branch office. The policy was non-Dutch but was taken out with the same legal entity as the Dutch branch office that was party to the BBR. The Court rejected the insurer’s argument and found that BBR’s application is not limited to insurance taken out from a Dutch branch office.

Background

In order to fully understand the significance of the Amsterdam Court of Appeal’s ruling, it is helpful to understand the background. The Dutch Civil Code precludes insurers from subrogating the insured’s rights of recourse against a party that is liable on grounds of strict liability (Article 6:197 DCC). For example, if a warehouse burns to the ground due to a defective heating system, recourse by the property insurer against the producer of the heating system is not possible. Similarly, the insurer indemnifying an insured who stored goods in this warehouse will not be able to have recourse against the owner of the warehouse. According to the plain language of the law, Article 6:197 DCC’s limitation applies to subrogation under Dutch insurance law (as per article 7:962 DCC).

Click here for a link to the Amsterdam Court of Appeal’s judgment (in Dutch).

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