Article (in Russian): M. Kratenko, O.-J. Luik, "The precautionary measures clauses in indemnity insurance contract", Vestnik of Saint Petersburg University. Law 2022 (13) 3, pp. 740–758. DOI: 10.21638/spbu14.2022.310 (published 22 September 2022)
Date note: the date of this post (22 September 2022) is the date of the original publication. This introduction was written for this website in 2026.
Co-author: Maksim Kratenko.
Research question
How do precautionary measures clauses work in indemnity insurance, and can they address careless conduct by policyholders? Such a clause requires the policyholder to do or refrain from something until a loss occurs. It cannot be enforced directly, but breach allows the insurer to reduce the payment.
Main arguments
Moral hazard is traditionally controlled through rules on increase of risk and policyholder fault. Where these fall short, insurers tend to exclude negligent conduct altogether, and disputes end in an all-or-nothing result. The Principles of European Insurance Contract Law (PEICL) and Nordic legislation offer a middle path: negligence counts only to the extent it affected the occurrence or size of the loss. The authors consider this better aligned with proportionality and propose introducing a precautionary measures institute based on PEICL into the civil code of the legal system compared.
Relevance for Estonian law
Estonian law already takes a proportional approach. Law of Obligations Act (võlaõigusseadus, VÕS) § 452(2) points 1 and 2 bar an insurer from relying on a release clause where the breach was not culpable or did not affect the occurrence or extent of the loss, and the Supreme Court has derived a principle of proportionality from this.