With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

GC Podcast 01 — July 1 Renewals (Chris Klein): Guy Carpenter Global Head of Business Intelligence Christopher Klein discusses the July 1, 2009 reinsurance renewal in this new GC Capital Ideas podcast. Click the audio player below to listen to the interview, or download the interview in a file that will work with your iPod.

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GC Podcast 03 — Casualty Catastrophe (David Lewin): David Lewin, Head of the European Casualty Specialty, discusses casualty catastrophes and Guy Carpenter’s innovative Casualty Cat model, developed in conjunction with Arium, Ltd., in this new GC Capital Ideas podcast. Click the audio player below to listen to the interview, or download the interview in a file that will work with your iPod.

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Indications of an economic recovery and fairly flat renewal are already beginning to obscure the experience of the past year. For professional liability insurers, this is particularly disconcerting, for even as balance sheets grow stronger, the implications of the largest casualty catastrophe in more than 70 years are still unfolding. The lawsuits and claims may take years to resolve, suggesting that the effects of September 2008 will be with us for quite a while. As the situation develops, professional liability insurers should use what they learn to revisit accumulations in their portfolios and take action to protect their capital — and shareholder value — from future worldwide chain reactions of liability exposure.

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This latest issue of our legal update continues to expand our coverage of key legislative and judicial developments in Continental Europe. A variety of developments in insurance legislation are charted in this latest issue, from the introduction of mandatory self-insured deductibles in D&O liability insurance in Germany to the introduction of rights of direct access against liability insurers in Switzerland.

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The Legal Situation

The Swiss Insurance Contract Act, dated April 2, 1908 (Versicherungsvertragsgesetz — VVG; SR 221.229.1), governs the contractual relationship between policyholders and insurers. The VVG proved its worth for many years, but over the last decade it has come under criticism. As a result, a partial revision of the VVG was made and entered into force on January 1, 2006, with the goal of strengthening the position of the policyholder. The Insurance Supervising Act (Versicherungsaufsichtsgesetz — VAG) and the attendant Supervising Regulation (Aufsichtsverordnung — AVO) have also been revised.

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General Principles

Damages to individuals who have suffered personal injury are regulated by the Tort Liability Act (Skadeståndslagen). Compensation is payable for costs, loss of income, pain and suffering, disfigurement, and other permanent conditions. The overall guiding principle is that an injured person shall be compensated fully for his or her loss.

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By a recent judgment, the Swedish Supreme Court overturned a longstanding insurance practice regarding the concurrent causes of loss of income.

Facts

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.

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In the previous issue of Recent Legislative and Judicial Developments in Continental Europe Affecting the Casualty Insurance Industry (Fall 2008), we dealt with the punitive interest that insurers must pay if a delay in settling claims is unjustified. At the time, we said that the Supreme Court had fixed certain guidelines for ascertaining when an insurer’s delay may be deemed justified. Since then, the Supreme Court has had the chance to address the issue on various occasions, the last in April 2009, and the guidelines may now be regarded as consistent doctrine.

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David Lewin, Managing Director
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For a claimant to successfully file a claim under Norwegian law, three cumulative criteria must be fulfilled:

• Basis of liability
• Causation
• Economic loss

Overview

Basis of Liability

For liability to be established under Norwegian law, it must be shown that the injuring party acted negligently (culpa). Either an act or the omission of performing an act may form the basis for liability, and whether either can be regarded as negligent must be evaluated based upon the prevailing facts. The injuring party will be liable if the actions or lack of actions by the injuring party are of a lower standard than objectively is to be expected by the bonus pater familias under similar conditions.

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In January 2006, the new Dutch insurance law came into effect. Even though the stipulations contained in it are relatively recent, the Dutch government is already contemplating a new article on the period of limitation. In July 2008, a legislative proposal concerning the procedures for extrajudicial settlement of personal injury and untimely death claims was submitted to the House of Representatives. This proposal is now under debate in the Senate, and it is expected to pass in the near future.

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Formerly, D&O insurance seldom included deductibles borne personally by the members of a company’s Management Board (Vorstand). The Act on the Adequacy of Management Board Compensation (Gesetz zur Angemessenheit der Vorstandsvergütung — “VorstAG”), adopted on June 18, 2009 by the German Parliament, now makes this mandatory.¹

The Legal Situation

VorstAG modifies the legal regime governing the compensation of members of the Management Board of German stock corporations and introduces a mandatory deductible for D&O insurance policies.

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