Continental European Legal Update: Insurers Lost Important Personal Injury Case in Swedish Supreme Court
By a recent judgment, the Swedish Supreme Court overturned a longstanding insurance practice regarding the concurrent causes of loss of income.
A woman was severely injured in a traffic accident in 1992, and she lost her capacity to work completely. She was compensated i.a. for loss of income from the Motor Third-Party Liability Insurance (Trafikförsäkringen). In 2000, the woman had a cardiac arrest, resulting in additional severe injuries, which were sufficient to cause the loss of her ability to work. Both parties agreed that there was no causal link between the traffic accident in 1992 and the cardiac arrest in 2000.
Because of the cardiac arrest and its consequences, the insurer stopped compensating the woman for loss of income. The insurer’s decision was based on the view that, as long as the consequences of the cardiac arrest lasted, the insurer had no obligation to compensate for the loss of income caused by the traffic accident. The reasoning behind the decision was consistent with the then generally applied claims-handling practice in the Swedish insurance market and was also endorsed by the Traffic Injuries Board (Trafikskadenämnden), which is a consultative committee that reviews the more severe personal injuries caused by traffic accidents.
The woman, who did not accept the insurance company’s decision, initiated legal proceedings and claimed continued compensation for loss of income. The first court considered the matter to be of importance for guidance of application of the law. The court therefore used its power under the Swedish Procedural Code (Rättegångsbalken) to directly submit the matter to be decided by the Supreme Court.
The question to be answered by the Supreme Court was what impact does the cardiac arrest in 2000 and its consequences have on the insurer’s liability to pay compensation to the injured person for loss of income and total loss of pension benefits, due to the traffic accident in 1992, where the two events are unconnected and each event is sufficient to cause total incapacity for work.
According to a statement obtained from The Swedish Association of Insurers (Sveriges Försäkringsförbund) claims situations like the present, where concurrent causes (negligence/strict liability — here the traffic accident) and an occurrence for which nobody is liable (here the cardiac arrest) are not uncommon. Further, based on a court precedent dating back to 1950, it is well established practice in the Swedish insurance market that the subject liable to pay indemnity under the Traffic Damage Act (Trafikskadelagen) is relieved from its liability as long as the consequences of a cause for which nobody is liable (here, for the cardiac arrest) lasts.
Compensation for Personal Injuries
Under Swedish law, indemnity for personal injuries — including injuries suffered through a traffic accident - is in most cases assessed pursuant to the Tort Liability Act (Skadeståndslagen). It is a guiding principle that an injured person shall be fully compensated for his or her economic loss. The principle for calculating lost income, the so-called difference method (differensmetoden), is laid down in the Tort Liability Act. The method means that the compensation shall be equivalent to the difference between the income the injured person could have earned had the injury not happened and the income he or she earns or ought to be able to earn as injured.
The Supreme Court’s Decision
The Supreme Court found for the injured woman, for the following reasons: Legislation, inter alia the introduction of the Traffic Damage Act (Trafikskadelagen) in 1976, and other circumstances have changed considerably since the judgment of 1959, on which the insurance company relied. Furthermore, it can be perceived to be unreasonable if an injured individual should, due to illness, lose the right to indemnity from the traffic insurance in spite of the fact that his or her capacity for work has not changed, as in the present case due to the subsequent illness. The opposite view leads to evident disadvantages for an injured person and might even cause him or her to abstain from getting medical treatment out of fear of losing the insurance indemnity. And, it would not be particularly burdensome for the insurer to continue payments for loss of income and pension benefits.
Accordingly, the answer given by the Supreme Court is that the cardiac arrest and its consequences shall not affect the insurer’s obligation to indemnify the injured person under the traffic insurance.