Dismissal of case due to lack of jurisdiction in Denmark

On 20 December 2017, the Guarantee Fund instituted legal proceedings against the Swedish insurance broker Howden Insurance Brokers, the British Barbican Speciality Insurance and the estate of the Lichtenstein-based insurance company Gable Insurance.

The case which, being a case of fundamental legal importance, was transferred to the High Court in the first instance under section 226 of the Danish Administration of Justice Act concerned a financial matter relating to the bankruptcy of the Lichtenstein insurance company Gable with whom Danish homeowners had taken out change of ownership insurance through Husejernes Forsikring A/S.

The Guarantee Fund had provided cover for uncovered claims due to the bankruptcy, and consequently raised claims of up to DKK 96 million against the three parties.

Background

As an insurance broker, Howden had entered into a cooperation agreement with Husejernes Forsikring on the provision of insurance products, including change of ownership insurance, which Husejernes Forsikring could facilitate in the Danish market. Howden identified Gable as an insurance company which was willing to enter into an agreement to that effect with Husejernes Forsikring but Howden disclaimed any responsibility for the solvency of Gable. Husejernes Forsikring entered into an agreement with Gable that it would act as cover holder for Gable’s change of ownership insurance in Denmark. 

Howden later procured that Gable and Barbican entered into an agreement according to which Barbican provided proportional reinsurance for 20% of claims covered by change of ownership insurance in Gable taken out through Husejernes  Forsikring during a specified period. Howden also issued a statement confirming that it had taken out reinsurance with Barbican on behalf of Gable with respect to change of ownership insurance taken out through Husejernes Forsikring. Howden further confirmed in the statement that the reinsurance agreement, which set out that English courts would have jurisdiction to determine any disputes, included a cut-through clause under which, in case of the bankruptcy of Gable, Barbican would pay a part of claims covered by the reinsurance agreement and remaining premiums directly to the insured through Husejernes Forsikring. Howden also mentioned in the statement that the cut-through clause provided protection corresponding to that which Garantifonden would be able to offer for the reinsured part. The statement had not been discussed or agreed with Barbican.

On 17 November 2016, bankruptcy proceedings were commenced against Gable in Liechtenstein. 
When Gable was declared bankrupt, 26,000 Danish consumers were directly affected by the financial consequences of having purchased for instance change of ownership insurance with Husejernes Forsikring, which was Gable’s sales office in Denmark and was declared bankrupt on 8 December 2016. Following the bankruptcies, the Danish Parliament passed new regulation ensuring that the Danish insurance customers would be able to notify their losses to the Guarantee Fund even if Gable was not a member of the Fund because it was a foreign company. As laid down by the law, Garantifonden adopted “the policy holder's, the insured’s or a third party’s claims against Gable ... and any reinsurance companies".

The issue of jurisdiction  

In the case before the High Court, the three defendants, Howden, Barbican and the estate of Gable, claimed dismissal of the case, pleading that the Danish courts did not have jurisdiction. These claims for dismissal were separately heard and adjudicated. 

As for the Guarantee Fund's claim against Howden, the High Court found that under the jurisdiction provision in Article 7(2) of the Brussels I Regulation it was proved by a preponderance of the evidence that Howden had engaged in actionable conduct towards policy holders who had taken out change of ownership insurance with Gable through Husejernes Forsikring. In addition, the High Court found that the Guarantee Fund to the extent that it had provided coverage had adopted the claims the policy holders and the insureds might have had against Howden. Accordingly, the jurisdiction for the claim against Howden was in Denmark. 

As for Garantifonden's claim against Barbican, the High Court found that due to its nature the claim had to be characterised as a monetary claim and that accordingly there was no jurisdiction for the claim under section 246(1), first sentence, see section 242 (1) and (2) of the Danish Administration of Justice Act on contractual relationships. Nor did the High Court find that there was jurisdiction under section 246(1), second sentence, of the Danish  Administration of Justice Act on consumer agreements, or that it had been proved by a preponderance of the evidence that Barbican had engaged in actionable conduct towards policy holders who had taken out change of ownership insurance in Gable through Husejernes Forsikring, and that accordingly there was no jurisdiction for the claim in section 246(1), first sentence, of the Danish Administration of Justice Act, see section 243. Consequently, Barbican’s claim for dismissal was allowed. 

The estate’s claim for dismissal was also allowed, as the High Court found that there was no jurisdiction for the claim under the rules of the Danish Administration of Justice Act on jurisdiction agreement, contractual relationships or consumer agreements.

The High Court thus dismissed both contractual and consumer jurisdiction based on a provisional assessment of the material elements of the case. In addition, the High Court dismissed a claim of tort jurisdiction on the grounds that it had not been proved by a preponderance of the evidence that actionable conduct had been committed.