# Direct action against liability insurers in Estonia URL: https://insurancelawestonia.ee/guides/direct-action-liability-insurers-estonia/ Author: Dr Olavi-Jüri Luik, Partner, Head of Insurance Law, attorney at law (Advokaadibüroo WIDEN OÜ) Last updated: 2026-11-09 > When can an injured party sue an Estonian or foreign liability insurer directly? VÕS §§ 517–525, motor insurance, Rome II art 18. Foreign liability insurers covering Estonian policyholders are frequently surprised by letters from Estonian claimants addressed directly to them. Whether such a claim is legally enforceable depends on a distinction that Estonian law draws sharply: **compulsory** liability insurance gives the injured party a direct claim; **voluntary** liability insurance does not, although it protects the injured party in other ways. This guide explains both regimes, the defences available to the insurer and the cross-border rules. ## 1. The starting point: no general direct action The Law of Obligations Act (*võlaõigusseadus*, VÕS) defines liability insurance as the insurer's undertaking to perform, in place of the policyholder, the policyholder's obligation to compensate damage caused to a third party (the injured party, *kahjustatud isik*) and to bear legal costs (VÕS § 510).[^1] The obligation is owed to the policyholder. The injured party is not a party to the contract and, outside compulsory insurance, acquires no own claim against the insurer. This is a deliberate choice. Estonian law protects injured parties in voluntary liability insurance through three mechanisms that stop short of a direct claim (section 3 below) and reserves the direct claim for compulsory insurance, where the legislature has imposed insurance precisely to protect potential victims. ## 2. Compulsory liability insurance: the direct claim under VÕS § 521 ### 2.1 When does § 521 apply? The second sub-chapter on liability insurance (§§ 520–525) applies to liability insurance which a person is required by law to take out (*kohustuslik vastutuskindlustus*, § 520).[^1] The insurer is obliged to contract with any applicant who meets the conditions of its standard terms (§ 520). Examples of compulsory liability insurance in Estonia include motor third-party liability insurance (which has its own act, see section 4), and the professional liability insurance of certain regulated professions and activities, such as bankruptcy trustees. Whether a given insurance is compulsory must be established from the statute that imposes the obligation; a contractual requirement (for example in a public procurement contract) does not make insurance "compulsory" in the sense of § 520. ### 2.2 Content of the direct claim - The injured party may claim compensation from both the policyholder and the insurer; from the insurer only in money (§ 521 lg 1). - If both are sued, they are **jointly and severally liable**. Internally, only the insurer is liable; if the insurer is released from its obligation, only the policyholder is (§ 521 lg 2). - The insurer may raise **the same defences as the policyholder** against the injured party's claim (§ 521 lg 3): absence of liability, contributory negligence, limitation, quantum. - The claim against the insurer is subject to the **same limitation period** as the claim against the policyholder, and suspension or interruption against one applies to the other (§ 521 lg 4). - The insurer **may not refuse** the injured party's claim on the ground that it has been wholly or partly released from liability towards the policyholder (§ 521 lg 5). - A **deductible** does not reduce the injured party's compensation; the insurer pays in full and recovers the deductible from the policyholder (§ 521 lg 8).[^1] Where the insurer has had to pay despite its release, it may claim reimbursement from the policyholder (see § 525 lg 2 for the analogous rule where a third party's risk is insured).[^1] ### 2.3 The injured party's duties The injured party must notify the insurer, in a form reproducible in writing, of the insured event and of the claim against the policyholder within **two weeks** of learning the insurer's identity, and must notify without delay the filing of an action against the policyholder (§ 522 lg 1). It must also provide information reasonably obtainable for establishing the cause and amount of the damage (§ 522 lg 2). If it fails to notify in time, the insurer is not liable beyond what it would have paid with timely notice; for breach of the information duty this consequence applies only if the injured party was expressly warned in advance (§ 523 lg 1–2). The same limitation applies where the policyholder settles with or acknowledges the claim of the injured party without the insurer's consent, unless refusing to settle or acknowledge would have been manifestly contrary to good faith (§ 523 lg 3).[^1] ### 2.4 The limits of § 521 lg 5: the 2025 Supreme Court judgment The most important recent authority is the Supreme Court's judgment of 15 October 2025 in case 2-21-16822, concerning the compulsory liability insurance of a bankruptcy trustee.[^2] The creditor of a bankruptcy estate claimed directly against the trustee's insurer for losses caused by transfers of estate funds that the trustee had made, without legal basis, to himself and related persons over almost two years. The Civil Chamber held: - A creditor may suffer loss within the meaning of the trustee liability provision where its claim remains unsatisfied in the bankruptcy because the trustee culpably diminished the estate (p 12). - **Avoidance** of an insurance contract is not merely a matter between insurer and policyholder: an avoided transaction is invalid, and third parties cannot base claims on it either. Section 521 lg 5 protects the injured party where the contract is valid but the insurer is released because of the policyholder's breaches; it does not create liability where there is no valid contract or the contract has ended (p 13). - Section 521 lg 5 does not oblige the insurer to pay where there is **no insured event** under the contract at all. Where the wording lawfully provides that intentional breach of duty by the trustee is not an insured event (the relevant insolvency legislation expressly allows the trustee and insurer to agree that liability for intentional breach is not insured), the insurer may rely on that term against the injured party. The absence of an obligation to perform where the policyholder intentionally caused the insured event is a general principle of insurance law (p 14–15). - On the facts, the first-instance court had found that the trustee had transferred estate funds to himself and related persons without legal basis for almost two years. The Chamber held that, once such breaches of official duties in making the transfers were established, the transfers could be regarded as intentional unless it was shown that they were made by mistake, and no such circumstances had been presented (p 15). This is a finding tied to those transfers and to the burden of proof in that case; it is not a general presumption that every breach of a professional's duties is intentional. The finding concerned the trustee's own intentional breach and the wording of the compulsory policy, which the Bankruptcy Act (*pankrotiseadus*, PankrS) § 64 lg 2 expressly allowed. Under other covers, for example crime or fidelity insurance, where the dishonest act of an employee or a third party is often the very risk insured, whose intentional act is covered and whose is excluded must be established separately from the policy wording. The judgment draws a clear line between **release** (*täitmiskohustusest vabanemine*), which § 521 lg 5 neutralises in favour of the injured party, and **absence of cover** (*katte puudumine*), which it does not. For foreign liability insurers, it confirms that carefully drafted risk exclusions remain effective against direct claimants in compulsory insurance, provided the exclusion is permitted by the statute imposing the insurance obligation. **Author's view.** *The following is the author's critical assessment, not a statement of current case law.* In the author's view the Supreme Court erred on intent in 2-21-16822/84. Compulsory liability insurance exists to protect the injured party, not the policyholder: its purpose is to give the victim a solvent debtor where the wrongdoer cannot pay, and that purpose does not disappear where the loss was caused intentionally. Misappropriation by a trustee, advocate or notary is precisely the risk against which clients and creditors most need protection. The coherent model is Estonian motor insurance: under the Motor Insurance Act (liikluskindlustuse seadus, LKindlS) § 8(1) the insured event is causing damage to a third party in the use of a vehicle, with no carve-out for intent, and intent operates only internally through the insurer's right of recourse against a driver who caused the insured event intentionally (LKindlS § 53(1) point 1).[^8] VÕS § 521(2), third sentence, and § 521(5) follow the same logic: the insurer pays the injured party and the loss ends up with the policyholder in the internal relationship. The author considers such recourse-based allocation acceptable for the legal professions as well. The regulation of intent across the compulsory professional liability insurances for advocates, notaries, bailiffs and trustees in bankruptcy is moreover inconsistent and ambiguous, as analysed in Luik and Haavasalu's Juridica article.[^9] The strongest counter-argument is that the insurer's freedom from performance for intent is a general principle (VÕS § 452(1), § 513) and that the Bankruptcy Act (pankrotiseadus, PankrS) § 64(2) expressly provides that a trustee need not insure liability for intentional breach, so the legislator deliberately left intentional loss outside the compulsory cover. The author's answer is that § 64(2) relieves the trustee of a duty to insure but does not shift the risk of the wrongdoer's insolvency onto the victim, and that moral hazard is neutralised by full recourse. Until the Supreme Court revisits the point or the legislator intervenes, practitioners must work on the basis of the 2025 judgment. ## 3. Voluntary liability insurance: protection without a direct claim In voluntary liability insurance the injured party's position is protected as follows: 1. **Payment to the injured party.** The insurer may pay the injured party directly if the amount payable by the policyholder has been established by judgment or settlement and the insurer gave the policyholder prior notice (§ 517 lg 1). The insurer must pay the injured party directly if the policyholder so requests (§ 517 lg 2).[^1] 2. **Protection against dispositions.** Any disposition of the policyholder's claim against the insurer (assignment, waiver, set-off arrangements) is void in relation to the injured party, including dispositions in enforcement proceedings or by way of interim measures (§ 517 lg 3). 3. **Preference in bankruptcy.** In the policyholder's bankruptcy, the injured party is entitled to satisfy its claim against the policyholder from the policyholder's claim against the insurer in priority to other creditors (§ 518).[^1] 4. **Multiple claimants.** If several injured parties claim from the same event and their claims exceed the sum insured, the insurer satisfies them proportionally (§ 517 lg 4). In practice, an injured party obtains a judgment against the insured and then attaches the insured's claim against the insurer in enforcement proceedings. The insurer may then raise against the injured party the defences it has against its policyholder, since there is no equivalent of § 521 lg 5 in voluntary insurance. Another protective element applies to both regimes: where a liability insurance contract is cancelled after an insured event (either party may cancel within one month after the insurer acknowledged or refused the claim, § 519), the cancellation does not affect claims from events already occurred. ## 4. Motor third-party liability insurance The Motor Insurance Act (*liikluskindlustuse seadus*, LKindlS) contains a complete regime. The injured party may claim compensation from the insurer if the insured person is liable to the injured party (LKindlS § 23 lg 1). The injured party may choose whether to claim under MTPL or under a voluntary policy (§ 34 lg 1), and may still sue the person causing the damage as a joint debtor (§ 34 lg 2).[^3] Property damage may also be claimed from the injured party's own MTPL insurer within 30 days (§ 35). Agreements deviating from LKindlS or VÕS to the detriment of the policyholder, the insured or the injured party are void (§ 2).[^3] The motor regime is explained in the [motor claims guide](https://insurancelawestonia.ee/guides/motor-claims-estonia-foreign-insurers). ## 5. Cross-border direct actions **Applicable law.** Under art 18 of the Rome II Regulation, the injured party may bring its claim directly against the insurer of the person liable if either the law applicable to the non-contractual obligation **or** the law applicable to the insurance contract so provides.[^4] The Estonian Private International Law Act (*rahvusvahelise eraõiguse seadus*, REÕS) § 51 contains a parallel rule.[^5] Consequences for foreign insurers: - An Estonian injured party harmed by an insured whose policy is governed by a law that grants a general direct action (for example French or Belgian law) may rely on that law even though Estonian tort law would not grant a direct claim in voluntary insurance. - Conversely, a foreign injured party harmed in Estonia (so that Estonian tort law applies under Rome II art 4) by an insured under an Estonian-law voluntary policy has no direct claim, because neither law provides one. - In compulsory insurance, the Estonian rules apply where Estonian law imposes the insurance obligation (Rome I art 7(4); REÕS § 46).[^5] **Jurisdiction.** Under the Brussels I bis Regulation, the jurisdiction rules for insurance matters (arts 10–12) also apply to direct actions by the injured party where such actions are permitted (art 13(2)). An injured party may therefore sue an EU insurer in the courts of its own domicile (art 11(1)(b) read with art 13(2)), and in liability insurance also in the courts of the place where the harmful event occurred (art 12). If the injured party sues the insured, the insurer may be joined if the law of the court permits it (art 13(1)).[^6] ## 6. Practical guidance for foreign liability insurers 1. **Classify the insurance.** Is the cover compulsory under an Estonian statute? If not, a direct claim under Estonian law will fail, but check whether the law of the policy grants one (Rome II art 18). 2. **Distinguish release from absence of cover.** In compulsory insurance, defences based on the policyholder's breach of obligations (late notification, breach of cooperation) do not defeat the injured party (§ 521 lg 5), but exclusions defining the insured event do, if they are permitted by the statute imposing the insurance.[^2] 3. **Use the injured party's notification duties.** Late notification by the injured party limits the insurer's liability to what it would have paid with timely notice (§ 523 lg 1); for the information duty, warn the claimant expressly in writing (§ 523 lg 2). 4. **Control settlements.** The policyholder's unauthorised settlement limits the insurer's exposure to the injured party (§ 523 lg 3), subject to the good-faith exception. 5. **Keep the recourse.** After paying a direct claim despite release, the insurer may seek reimbursement from its policyholder. 6. **Limitation.** The direct claim is time-barred within the same period as the claim against the policyholder (§ 521 lg 4). Identify whether that underlying claim is tortious, contractual or governed by a special act. For a tort claim the period is typically three years from knowledge, with a ten-year long-stop (General Part of the Civil Code Act, *tsiviilseadustiku üldosa seadus*, TsÜS, § 150); claims for death, bodily injury or damage to health are subject to TsÜS § 153 regardless of their legal basis (three years from knowledge, with a 30-year long-stop); contractual claims follow TsÜS § 146; and in patient insurance TOKVS § 26 provides a special rule.[^7] ## Related pages - [Liability insurance and direct action (VÕS §§ 510–525)](https://insurancelawestonia.ee/estonian-insurance-contract-law/liability-insurance-and-direct-action) - [Supreme Court: liability insurance and direct claims](https://insurancelawestonia.ee/supreme-court/liability-insurance-and-direct-claim) - [Choice of law and jurisdiction for insurance contracts in Estonia](https://insurancelawestonia.ee/guides/choice-of-law-jurisdiction-insurance-estonia) - [Professional indemnity insurance and claims in Estonia](https://insurancelawestonia.ee/guides/professional-indemnity-estonia) - [MTPL and Green Card claims in Estonia](https://insurancelawestonia.ee/guides/mtpl-green-card-claims) - [Research article: direct claims in voluntary liability insurance](https://insurancelawestonia.ee/blog/2024-07-01-research-direct-claim-voluntary-liability-insurance) ## References [^1]: Law of Obligations Act (võlaõigusseadus, VÕS) §§ 510, 517–525. RT I, 20.06.2026, 18 (in force 01.09.2026). Estonian: ; English: . [^2]: RKTKo 15.10.2025, 2-21-16822/84, p 10–15. . [^3]: Motor Insurance Act (liikluskindlustuse seadus, LKindlS) §§ 2, 23, 34, 35. RT I, 29.06.2024, 12 (in force 01.01.2025). Estonian: ; English: . [^4]: Regulation (EC) No 864/2007 (Rome II), art 18. . [^5]: Private International Law Act (rahvusvahelise eraõiguse seadus, REÕS) §§ 46, 51. RT I, 07.05.2025, 16. Estonian: ; English: ; Regulation (EC) No 593/2008 (Rome I), art 7(4). . [^6]: Regulation (EU) No 1215/2012 (Brussels I bis), arts 10–13. . [^7]: General Part of the Civil Code Act (tsiviilseadustiku üldosa seadus, TsÜS) §§ 150, 153. RT I, 31.12.2024, 48 (in force 01.01.2025). Estonian: ; English: . [^8]: Motor Insurance Act (liikluskindlustuse seadus, LKindlS) § 8(1), § 53(1) point 1 (RT I, 29.06.2024, 12; in force 01.01.2025). [^9]: O.-J. Luik, K. Haavasalu, "Õigusvaldkonna ametikindlustuse probleemid Eestis" (Problems of professional liability insurance in the Estonian legal sector), Juridica 2022/7, pp 517–528.