Major fire and property losses in Estonia: counsel for insurers

A major fire rarely produces a single claim. The insurer usually faces a property claim and a business interruption claim, often a mortgagee with rights of its own, and a recovery question against a contractor, a tenant or a neighbour. Coverage decisions have to be taken early, on incomplete evidence, while statutory periods are running. In recent years I have advised and acted in many of the largest fire losses in Estonia. This page describes my work for insurers, reinsurers and loss adjusters in such losses and the rules of the Law of Obligations Act (võlaõigusseadus, VÕS) that usually decide the outcome.¹

1. The first weeks

• The fire scene. Until the loss has been established, the policyholder may not, without the insurer's consent, alter the damaged property in a way that hinders establishing the cause or the extent of the loss, unless the change is needed to reduce the loss or is in the public interest (VÕS § 488 lg 2). Safety demolition usually falls within the exception, so the scene must be documented and samples secured before it starts.
• Information and mitigation. The insurer may request the information it needs, and evidence as far as the policyholder can reasonably provide it (§ 448 lg 2). Mitigation costs are reimbursed even if unsuccessful, and costs incurred on the insurer's instructions even above the sum insured (§ 491 lg 2). See notification and post-loss duties.
• Payment on account. Once the insured event is established, the policyholder may demand the minimum amount due if the extent of performance is still open one month after notification (§ 450 lg 3).
• Mortgagees. If the insurer is released towards the policyholder for breach of an obligation, it must still perform to the mortgagee, unless the release results from unpaid premium or intentional causation (§ 501). Where the policy requires the indemnity to be used for reinstatement, payment for another purpose is not valid against the mortgagee without its consent (§ 500 lg 1).

2. Cause and origin

The cause of a fire is often disputed, and public authorities and the parties' experts may reach different conclusions. I coordinate fire investigators, engineers, loss adjusters and forensic accountants, and frame their instructions around the legal questions: which facts each side must prove, and what evidence an Estonian court is likely to accept.

The Supreme Court has held that an insurer relying on a breach of a duty of care must be able to prove what caused the specific loss, and that the policyholder, under the duty to cooperate and the principle of good faith, must allow the insurer's expert to examine the damaged item.² In my view the same applies to a fire scene and to the remains of equipment suspected as the source. An agreed expert determination binds only if the expert is appointed by a neutral third party or each side appoints the same number of experts, and not where it manifestly deviates substantially from the actual circumstances (§ 490 lg 1–2). In litigation the court may order an expert assessment on a party's application (Code of Civil Procedure (tsiviilkohtumenetluse seadustik, TsMS) § 293 lg 1).³

3. Coverage questions

• Fire-safety obligations. Requirements on fire compartments, hot work, alarms and sprinklers are, in substance, obligations of the policyholder. The insurer may rely on a release clause only within VÕS § 452 lg 2: a breach of a duty of care generally leads to a reduction to the extent that it increased the probability of the insured event, and full release is possible only if the risk materialised solely because of the breach.⁴ A clause is void to the extent that it ignores the effect of the breach.² An insurer that does not cancel within one month of learning of a material breach can no longer rely on the release clause (§ 470). See safety obligations and proportionality.
• Pre-contractual disclosure. Undisclosed reconstruction works, missing fire walls or a changed use of the premises may give a right of withdrawal (VÕS §§ 440–442) within one month of learning of the breach and never after three years from conclusion (§ 442 lg 1). After an insured event the insurer must still perform if the undisclosed circumstance did not affect the occurrence of the event and does not exclude or limit its obligation (§ 442 lg 2). See pre-contractual disclosure.
• Aggravation of risk and intent. Vacancy, a change of use or renovation works may engage VÕS §§ 443–447 (see aggravation of risk). Intentional causation releases the insurer (§ 452 lg 1).
• Under-insurance. If the sum insured is lower than the insurable value at the time of the loss, the insurer pays proportionately (§ 482); for a building, that value is its ordinary local construction value less a reasonable deduction for condition, age and depreciation (§ 479 lg 3), unless the wording provides otherwise. See under-, over- and double insurance.
• Large risks. For fire and natural forces and other damage to property (Insurance Activities Act (kindlustustegevuse seadus, KindlTS) § 12 lg 1 p 8–9), the semi-mandatory rules do not apply where the policyholder meets two of the three size criteria in VÕS § 427 lg 3.⁵

4. Business interruption and settlement

Indemnity insurance covers lost profit only where this has been agreed separately (VÕS § 476 lg 4), so business interruption cover is defined by the wording. Disputes typically concern the indemnity period where reinstatement is delayed by permits, demolition decisions or the coverage dispute itself, and under-insurance of the business interruption sum.

A settlement is a compromise agreement by mutual concessions (VÕS § 578) and does not affect the rights of third parties (§ 579), which matters for mortgagees and recovery. If the policyholder waives a claim against a third party, the insurer is released to the extent it could have recovered (§ 492 lg 2), so waivers belong in the settlement text.

5. Recovery from contractors and other third parties

On payment, the policyholder's claim against the person liable passes to the insurer to the extent of the indemnity (VÕS § 492 lg 1). Typical defendants are contractors carrying out hot work, roofing or electrical work, tenants, neighbours and manufacturers of defective equipment, with their liability insurers. The subrogated claim keeps its own limitation period, for example five years for defects of a building under a contract for work and three years from knowledge for tort claims (General Part of the Civil Code Act (tsiviilseadustiku üldosa seadus, TsÜS) § 146 lg 2, § 150 lg 1).⁶ Strict product liability covers property damage only where the property is of a kind ordinarily used, and was mainly used, outside business or professional activities and the loss exceeds EUR 500 (VÕS § 1061 lg 2), so a commercial fire caused by a defective product is normally pursued in fault or contract (§ 1061 lg 5). See subrogation.

6. A public example

A publicly reported example is the dispute that followed the fire of 7 April 2022 at the apartment building at Pae 25 in Tallinn, covered by ETV's "Impulss" in 2025, in which I appeared as counsel for the insurer. According to later media reports, the case was still pending in October 2026; see the summary of the media coverage. Other fire losses in which I have acted are confidential and are not described on this site.

Related pages

• Investigations and expert opinions
• D&O, cyber, crime, liability and war-risk claims
• Safety obligations and proportionality
• Subrogation and recovery
• Litigation and arbitration

References