LEGO successful in insurance case of general public importance

With assistance from Plesner LEGO A/S has won a case of general public importance before the Danish High Court about wrongful termination of indemnity insurance covering LEGO factories all over the world. The judgment stipulates that If Skadeforsikring is to pay damages in the amount of DKK 5.6 million plus interest to LEGO.

The High Court case was about termination of special indemnity insurance that LEGO A/S had taken out with If Skadeforsikring. The insurance covered great damage to LEGO factories exceeding DKK 5 billion and up to DKK 17 billion. If Skadeforsikring had terminated the insurance because the insurance company believed that LEGO had given incorrect information in connection with taking out the insurance.

The District Court had referred the case to the High Court as the case was of general public importance.

During the proceedings LEGO claimed that the company had not provided incorrect information to If Skadeforsikring, which was why the termination was wrongful. LEGO claimed that If Skadeforsikring was to compensate the additional costs that LEGO had incurred in connection with taking out new insurance with another insurance company.

Against this If Skadeforsikring pleaded that it had been entitled to terminate the insurance and the insurance company also claimed that LEGO was to compensate the expenses that the insurance company had had after the termination in relation to taking out sufficient reinsurance. If Skadeforsikring had assessed that the reinsurance was necessary because LEGO did not accept the termination of the insurance.

Changed risk scenario
The judgment passed by the High Court shows that it could not be proved or rendered probable that LEGO had provided incorrect information, but that the risk scenario relating to the LEGO factories had changed due to a number of factors. Witnesses stated in court that some of the reasons for the changed risk scenario were the establishment of a new factory in Monterrey, an extension of the factory in Kladno, a marked increase in LEGO's activities and turnover and the almost 100% exploitation of LEGO's production facilities as well as a large and increased interdependence between the LEGO factories and changes in demand.

The High Court found in favour of LEGO
The High Court largely followed LEGO's points of view. If Skadeforsikring had not proved or rendered it probable that LEGO's information in connection with taking out the insurance was incorrect and as a consequence the insurance company was not entitled to terminate the insurance.

As a result of the judgment If Skadeforsikring is to pay compensation for the expenses that LEGO incurred in connection with the wrongful termination. The High Court assessed such expenses to amount to DKK 5,673,496.22 plus interest.

The High Court also found that If Skadeforsikring was not entitled to compensation for the costs that the insurance company incurred in connection with taking out reinsurance. Such cover of the risk cannot be claimed compensated by the winning party.

Attorney-at-law, partner Torben Bondrop conducted the case on behalf of LEGO.

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