This page is part of the overview of international insurance case law. It collects 17 decisions of foreign courts on this topic, in chronological order, with a short synthesis. Foreign decisions are not binding in Estonia. Citation conventions and links are explained on the overview page.
Synthesis
In common law jurisdictions the central institution of liability insurance is the duty to defend, which is broader than the duty to indemnify: the insurer must defend where the claim may be covered (Gray, Montrose 1993, Progressive Homes) and, in a mixed action, may recover, if it has reserved the right, only defence costs attributable solely to claims not even potentially covered (Buss). In D&O and professional indemnity insurance, the timing of dishonesty exclusions (Wilkie, McCann), known circumstances exclusions (Porthouse) and penalty exclusions (J.P. Morgan) are key. Estonian law has no duty to defend in that form; VÕS § 511 requires the insurer to bear justified legal costs, and exclusions are interpreted under VÕS § 39 and the review of standard terms.
Decisions
Gray v. Zurich Insurance Co., 65 Cal.2d 263 (1966)
Supreme Court of California, 25.10.1966 · United States, California · pp 273-277, 280 · duty to defend; reasonable expectations; intentional injury exclusion; ambiguity
The insured was sued for intentionally causing bodily injury but claimed self-defence; the insurer refused to defend. The Supreme Court of California held that the broad promise to defend created a reasonable expectation, that the intentional injury exclusion was not sufficiently plain and conspicuous and that ambiguity had to be resolved for the insured (pp 273-274); the duty to defend turns on potential liability, not on the claimant's legal labels (pp 276-277). The judgment was reversed. A leading case on reasonable expectations and the duty to defend.
Text of the decision: law.justia.com (reprint)
Voorhees v. Preferred Mutual Insurance Co., 128 N.J. 165 (1992)
Supreme Court of New Jersey, 17.06.1992 · United States, New Jersey · homeowner's liability cover; emotional distress; occurrence; duty to defend
A third party sued for emotional distress caused by the insured's statements, and the insurer refused to defend. The Supreme Court of New Jersey held that emotional distress accompanied by physical manifestations is bodily injury within the policy, and that intentional statements may be an accidental occurrence if the injury was neither intended nor expected, assessed as a rule subjectively; since negligence was also pleaded, the insurer had to defend. One justice dissented. Relevance: the content of intent exclusions (VÕS § 452(1) and policy terms).
Text of the decision: law.justia.com (reprint)
Montrose Chemical Corp. v. Superior Court, 6 Cal.4th 287 (1993)
Supreme Court of California, 22.11.1993 · United States, California · pp 295, 298-300, 305 · duty to defend; potential for coverage; extrinsic facts; burden of proof
Environmental damage claims were brought against a pesticide manufacturer, and its insurers disputed the duty to defend. The Supreme Court of California held that the duty to defend is determined by comparing the complaint with the policy, taking into account extrinsic facts known to the insurer (pp 295, 298); the insured need only show that the claim may fall within coverage, while the insurer must show that it cannot (p 300). Extrinsic evidence defeats the duty only where undisputed facts conclusively eliminate potential liability (pp 298-299).
Text of the decision: law.justia.com (reprint)
Buss v. Superior Court (Transamerica Insurance Co.), 16 Cal.4th 35 (1997)
Supreme Court of California, 24.07.1997 · United States, California · pp 48-54, 61-62 · mixed action; reimbursement of defence costs; burden of proof
The action against the insured contained several claims, only one of which was potentially covered. The Supreme Court of California held that the insurer must defend the entire action immediately (pp 48-49) but may later seek reimbursement from the insured of defence costs attributable solely to claims not even potentially covered (pp 49-53), provided that it has reserved that right (fn 27; a unilateral reservation suffices), which the insurer must prove by a preponderance of the evidence (pp 53-54). Relevance: bearing and allocating legal costs under VÕS § 511.
Text of the decision: scocal.stanford.edu (reprint)
Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24
Supreme Court of Canada, 03.05.2000 · Canada · paras 26-45, 50-52, 94, 130 · duty to defend; intentional injury exclusion; derivative claims; analysis of pleadings
The insured was sued for sexual battery and, on the same facts, for negligence and breach of fiduciary duty. The Supreme Court of Canada held that there was no duty to defend, since the negligence claims derived from the intentional tort and could not trigger cover in view of the intentional injury exclusion. The Court set out a three-step analysis: properly characterising the claims, identifying derivative claims and assessing whether any non-derivative claims could trigger cover (paras 50-52). Relevance: intent exclusions and identifying the true basis of a claim.
Text of the decision: decisions.scc-csc.ca
KKO 2000:67
Supreme Court of Finland (Korkein oikeus), 29.05.2000 · Finland · reasons; operative part · legal expenses insurance; private life matters; objective interpretation of standard terms
A home insurance policy's legal expenses cover applied to matters relating to the insured's private life. The insured had given a personal guarantee for a company loan and received as counter-security notes secured by a mortgage over real property; the later dispute concerned the collateral. The Supreme Court held that a standard term drafted for a wide group of insureds must be interpreted objectively and uniformly: private life matters are those that by general experience belong to anyone's private life, as opposed to business or professional activity. The dispute was a private matter and the insurer had to pay. Relevance: uniform interpretation of standard terms (VÕS § 39).
Text of the decision: finlex.fi
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65
High Court of Australia, 14.12.2000 · Australia · paras 3, 18-24, 89 · solicitors' PI; dishonesty exclusion; misappropriation of client funds
A partner of a law firm used client money without authority, and the PI insurer relied on the dishonesty exclusion. The High Court held that the exclusion applied to the partner's conduct (paras 18-19) and did not require that the partner intended to cause the client ultimate loss (paras 20-23); one justice dissented. The appeal was dismissed (para 24). Relevance: intent and dishonesty exclusions in PI insurance and the protection of co-insureds.
Text of the decision: hcourt.gov.au
Wilkie v Gordian Runoff Ltd [2005] HCA 17
High Court of Australia, 07.04.2005 · Australia · paras 27, 36-37, 41-42, 47 · D&O insurance; dishonesty exclusion; advancement of defence costs
Criminal proceedings were brought against directors, and the D&O insurer stopped advancing defence costs, relying on the dishonesty and criminal acts exclusion. The High Court held that the exclusion operates only upon admission by the insured or an adjudication in fact (paras 27, 42), so the insurer cannot anticipate it and stop advancing defence costs (para 41); the laying of charges is insufficient (para 37). The appeal was allowed (para 47). Relevance: advancement of defence costs and the timing of exclusions in D&O insurance.
Text of the decision: hcourt.gov.au
CGU Insurance Ltd v Porthouse [2008] HCA 30
High Court of Australia, 30.07.2008 · Australia · paras 56, 64, 66, 74-77 · professional indemnity; known circumstances exclusion; objective test
A solicitor's PI policy excluded claims arising from circumstances known to the insured before the policy period which a reasonable person in his position would have thought might give rise to a claim. The High Court held that the second limb is objective: the question is whether a reasonable professional with the insured's knowledge would have seen a real, not remote, possibility of a claim (paras 56, 64, 75); the insured's subjective view is not decisive (para 66). The appeal was allowed and the insurer was not liable (paras 76-77). Relevance: known circumstances terms in claims-made policies.
Text of the decision: hcourt.gov.au
Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33
Supreme Court of Canada, 23.09.2010 · Canada · paras 1, 70, 72-73 · CGL; duty to defend; contractor's work; interpretation of exclusions
Claims were brought against a builder for water damage caused by subcontractors' defects, and the insurer refused to defend. The Supreme Court of Canada held that the duty to defend arises where the alleged facts, if proven, would require indemnity; a mere possibility suffices, and the true nature of the claim matters, not its label. Interpretation proceeds in sequence: coverage, exclusions, exceptions to exclusions. The 'work performed' exclusions did not clearly exclude the claims (para 70), and the insurer had to defend (paras 72-73).
Text of the decision: decisions.scc-csc.ca
Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37
High Court of Australia, 03.11.2010 · Australia · paras 12, 21-22, 35, 42 · product liability; failure to perform exclusion; damage to third-party property
A seed supplier sold contaminated seed to a farmer, and a weed grew instead of the intended pasture grass. The liability policy excluded loss arising from a product's failure to fulfil its intended function. The High Court held that the exclusion did not apply because the liability arose not from failure to achieve the intended benefit but from positive harm to the land, which was infested with the weed (paras 21-22, 35). The appeal was allowed (para 42). Relevance: product liability exclusions and the type of loss.
Text of the decision: hcourt.gov.au
Impact Funding Solutions Ltd v AIG Europe Insurance Ltd [2016] UKSC 57
UK Supreme Court, 26.10.2016 · United Kingdom (English law) · paras 30-33, 46-47, 56-59 · solicitors' PI; minimum terms; exclusion; litigation funder
A litigation funder lent money through a law firm to clients to cover disbursements and, after the firm's breaches, claimed directly against the firm's professional indemnity insurer. The majority of the Supreme Court held that liability to the funder fell within an exclusion permitted by the minimum terms for liability arising from breach of a contract for the supply of services to the insured (paras 30-32), so the insurer was not liable (paras 33, 47); Lord Carnwath dissented (paras 56-59). Relevance: scope of PI exclusions and the injured party's direct claim.
Text of the decision: supremecourt.uk
KKO 2017:44
Supreme Court of Finland (Korkein oikeus), 22.06.2017 · Finland · paras 26-33 · liability insurance; contractual liability exclusion; carrier; duty to inform
A carrier's employee did not clean a tank properly and the cargo was contaminated by residues of the previous load; the carrier had to reimburse the damages paid by its customer. The liability policy excluded loss insofar as liability was based on a contract, warranty or other undertaking, unless such liability would exist without it. The Supreme Court held that the duty to keep the tank clean was based solely on the contract between the carrier and its customer and no liability in tort would have arisen (paras 31-32); the loss was not covered and the claim was dismissed (para 33). Two justices dissented on the insurer's duty to draw attention to the term. Relevance: contractual liability exclusions in liability insurance (VÕS § 510).
Text of the decision: finlex.fi
Centriq Insurance Company Ltd v Oosthuizen [2019] ZASCA 11
Supreme Court of Appeal of South Africa, 14.03.2019 · South Africa · paras 19, 25, 33 · financial adviser PI; narrow construction of exclusions; burden of proof
A financial adviser recommended an investment and the client lost money; the PI insurer relied on an exclusion for depreciation in the value of investments. The Supreme Court of Appeal held that the policy must be construed in light of its purpose and commercial efficacy and that exclusions may be read narrowly where they would deprive cover of substance (para 19); the insurer bore the burden of bringing the claim within the exclusion and failed to do so (para 25). The appeal was dismissed (para 33). Relevance: exclusions that hollow out cover (VÕS § 42).
Text of the decision: saflii.org
J.P. Morgan Securities Inc. v. Vigilant Insurance Co., 37 N.Y.3d 552 (2021)
New York Court of Appeals, 23.11.2021 · United States, New York · 37 N.Y.3d pp 557-566 · professional liability; disgorgement; penalties imposed by law exclusion
A securities broker paid USD 140 million described as disgorgement under a settlement with the SEC and claimed it from its liability insurers. The New York Court of Appeals held that the payment, measured by its customers' gains, was not a penalty within the 'penalties imposed by law' exclusion; the Appellate Division was reversed. There was a dissent. Relevance: insurability of fines and regulatory payments and the interpretation of exclusions.
Text of the decision: nycourts.gov
BGH 18.12.2024, IV ZR 151/23
Federal Court of Justice (BGH), IV Civil Senate, 18.12.2024 · Germany · headnotes; Rn 13 · D&O insurance; insolvency; automatic termination; extended reporting period · verified from the official headnote and reprints
Under D&O terms the contract ended automatically at the end of the insurance period in which an insolvency petition was filed against the policyholder. The BGH held that such a term is invalid because it deprives the policyholder of the statutory minimum one-month notice period (§ 11(1) and (3) VVG, semi-mandatory under § 18 VVG) and unreasonably disadvantages it (§ 307 BGB); an average policyholder would also not read the exclusion of the extended reporting period as triggered by the insolvency petition alone. The judgment was set aside and the case remanded. Relevance: termination for the policyholder's insolvency (VÕS § 473) and D&O extended reporting periods.
Decision details and text: dejure.org
Cass. 2e civ., 17.09.2026, nº 25-12.441
French Court of Cassation, Second Civil Chamber, 17.09.2026 · France · paras 6-9, 12-15, 18 · exclusion clause; formality; partial ineffectiveness; pandemic exclusion; change of case law
The Court of Cassation departed from its 2021 position (2nd civ. 17.06.2021, no 19-24.467) under which a clause containing several exclusions was void in its entirety if one of them lacked formality (paras 8-9). Under the new approach, the formality of each exclusion is assessed separately and only non-compliant exclusions are set aside (paras 12-15); the epidemic and pandemic exclusion was formal and limited and therefore valid (para 18). The appeal was dismissed. Relevance: partial nullity of standard terms under VÕS § 42.