Duty of care and proportionality: Supreme Court 2024–2026

One of the most frequent questions in Estonian coverage disputes is whether an insurer may decline because the policyholder breached a safety requirement in the wording: keys left in the car, a trailer not secured, an alarm not switched on, poor building maintenance. Wordings often phrase such requirements as exclusions ("loss is not covered if…"). Between 2024 and 2026 the Estonian Supreme Court developed clear and policyholder-friendly case law on this. This post summarises it for insurers, coverage counsel and claims teams.

The issue: exclusion or duty of care?

Estonian insurance law distinguishes two types of term.

A risk exclusion objectively delimits the perils against which the policy does not protect (war, nuclear risk, wear and tear). If it applies, there is no insured event and no obligation to pay.

A duty of care (safety requirement) requires the policyholder to behave in a certain way to prevent an insured event or reduce the risk. The consequences of breach are restricted by mandatory law: under § 452(2) of the Law of Obligations Act (võlaõigusseadus, VÕS), the insurer may not rely on a term releasing it for breach of a pre-loss duty aimed at reducing the risk or preventing its increase where the breach had no effect on the occurrence of the insured event or the insurer's obligation.¹ The provision is listed in VÕS § 427(1), so any agreement departing from it to the policyholder's detriment is void.¹

Insurers are therefore tempted to draft a duty of care as an exclusion to escape § 452(2). The Supreme Court noticed this long ago: before testing a term for validity one must determine whether in substance it is an exclusion or a duty of care.² For common law readers, the closest analogues are warranties and conditions precedent, but the Estonian outcome is far closer to proportional reduction.

The test: does the term depend on the policyholder's conduct?

In a judgment of 28 June 2024 concerning motor own-damage cover for a trailer, the Court clarified that, as a rule, the decisive question is whether the occurrence of the condition depends on the policyholder's fault and conduct.³ Where the insurer's release is tied mainly to what the policyholder did or failed to do, the term is as a rule a duty of care, whatever its heading or placement, and § 452(2) applies. The Court did not itself classify the trailer clause (coupling to a tractor unit or parking on guarded premises): it quashed the circuit court's judgment for inadequate reasoning and remitted the case.

The Court also indicated that a breach of a duty of care should not as a rule exclude the indemnity entirely. For the rehearing it explained that, if the clause is a duty of care that was breached, the insurer is released only to the extent that the breach increased the probability of the insured event, that it is for the insurer to prove that effect, and that full release is possible only if the risk materialised solely because of the breach.³

The same thinking appears in earlier case law. In a 2017 judgment on tractor insurance, the Court held that storage conditions had become part of the contract, but the insurer had to prove their breach and could reduce payment only to the extent of the breach's effect.⁴ In 2006 the Court explained that the insurer bears the burden of proving the ground for refusal.⁵

2026: a term is void insofar as it ignores causation

In a judgment of 25 March 2026 on motor own-damage cover, the Court went a step further.⁶ It held that a term imposing a duty of care is void insofar as it provides for the insurer's full release irrespective of the effect of the breach. The insurer cannot rely on a term that ties release solely to the fact of breach. The legal consequence is not automatic release but, primarily, reduction to the extent that the breach increased the probability of the insured event. The Court set aside the circuit court's judgment and sent the case back, so the reduction in that case is still to be assessed.

The allocation of the burden of proof is also important. The insurer bears the burden of proving the breach and its effect. The policyholder, however, has a duty to cooperate: under the contractual duty of cooperation and good faith it must allow the insurer to establish the facts, for example by letting an expert dismantle the failed engine to find the technical cause, because otherwise the insurer could not discharge its burden of proof.⁶

Proportionality in contracts for the benefit of third parties

In a judgment of 27 June 2025 on accident insurance, the Court addressed the purpose of VÕS § 452(1).⁷ It explained that subsection 1 excludes cover for intentionally caused insured events but does not prevent the parties from agreeing on release for other degrees of fault, though only within the limits of § 452(2). The general provisions apply also to accident insurance taken out for the protection of a third party.

What this means in practice

What a policyholder will argue. Where an insurer declines for breach of a safety requirement, the policyholder and its advisers can be expected to raise three questions, and the claims file should answer them before the declination is sent:

1. Is the term in substance a duty of care (dependent on the policyholder's conduct), even if phrased as an exclusion?
2. Has the insurer proved that the policyholder breached the duty and that the breach affected the occurrence or size of the loss?
3. If the effect was partial, has the payment been reduced proportionally rather than refused altogether?

For example, if a vehicle is stolen and the insurer relies on a set of keys left in the car, it must prove that the theft occurred because of that key. If the car was stolen by other means, the breach had no effect.

For insurers. Terms linking full release to formal breach of a safety requirement are likely to be held void. Claims files should document causation: how and to what extent the breach affected the loss. The insurer may in court rely on defences not mentioned in the declinature letter, but the burden of proof stays with it.⁸

Large risks. Where the contract falls under VÕS § 427(2) or (3), the semi-mandatory character of § 452(2) does not apply (see Large risks under Estonian law). Review of standard terms and contra proferentem interpretation still apply.

Academic background

The proportionality principle has been developed at length in the Principles of European Insurance Contract Law (PEICL) and in several national laws (e.g. § 28 of the German Insurance Contract Act, VVG). I have addressed policyholder duties and proportionality in my doctoral thesis (Tartu 2016) and in articles in Juridica and the Baltic Journal of Law & Politics, including on safety requirements and on distinguishing risk exclusions from safety requirements (see publications). The Supreme Court's 2024–2026 case law confirms the position defended there: under Estonian law, the consequence of breaching a safety requirement is not "all or nothing".

Example: how proportionality works

Suppose a motor own-damage wording states: "The insurer does not cover theft if the original key was left in the vehicle." The car is stolen on a night when the owner had forgotten the spare key in the glovebox.

The first question is classification. The term depends on the policyholder's conduct (whether a key was left in the car), so it is a duty of care, not an exclusion, despite the words "does not cover".

The second question is effect. If the thieves opened the car by relay attack and started it via the keyless system, the key in the glovebox had no effect on the theft and the insurer is not released. If they entered an unlocked car and used that very key, the effect was direct and the insurer may be released in full or to a large extent.

The third question is proof. The insurer must prove that the key was in the car and that it affected the theft. The policyholder must, as part of the duty to cooperate, provide information: where the keys were, how many there were, whether the car was locked. A failure to do so may count against the policyholder in the evaluation of evidence.

The same logic applies in buildings insurance (alarms, heating maintenance), cargo insurance (guarded parking) and cyber insurance (multi-factor authentication).

Implications for insurers and policyholders

For insurers, claims handling must focus on causation from the outset. The fact of breach alone is not enough. Adjusters should gather evidence on how the breach affected the occurrence or size of the loss and, where needed, involve an expert. The declinature letter should state clearly whether the insurer relies on an exclusion (no insured event) or on breach of a duty of care (release to the extent of the effect).

For policyholders, the case law means that a declinature based only on the words "not covered" is open to challenge. Insurers should expect a reasoned objection citing this Supreme Court practice, and a declination that already addresses classification, breach and causation is far less likely to end in litigation. Cost and duration of proceedings remain real factors on both sides.

Conclusion

Estonian Supreme Court practice in 2024–2026 is consistent: the label of a term is irrelevant; what matters is whether it depends on the policyholder's conduct. For breach of a duty of care the insurer is released only to the extent of the breach's effect; the insurer proves breach and effect; and a term providing for full release regardless of effect is void to that extent.

Related pages

• Safety obligations and proportionality
• Exclusions vs obligations
• Supreme Court: safety requirements and proportionality
• Policy wording review under Estonian law

References