In Denmark, there is no specific procedural regime that governs the resolution of insurance disputes. Instead, insurance disputes are resolved in the general regime of the civil procedure before the ordinary courts or through alternative dispute resolution bodies or the Insurance Complaints Board for non-commercial cases.

Denmark is a member of the EU, which means that it is obliged to legislate in accordance with EU treaties and conventions. However, when Denmark joined the EU in 1973, it required four derogations or “opt-outs” from EU co-operation – including a legal reservation regarding Justice and Home Affairs. This means that Denmark is not bound to follow EU legislation on civil law matters. However, Denmark has adopted the Brussels I Regulation and does therefore – to some extent – co-operate with the EU on civil law matters.

Insurance Disputes before the Danish Courts

The Danish Administration of Justice Act (the "Justice Act") regulates civil proceedings in the Danish courts, which comprise the Supreme Court, Eastern and Western High Court, the Maritime and Commercial Court, and 24 district courts. 

A civil case is initiated when the court receives a writ of summons from the plaintiff. The Justice Act regulates the requirements and timeframes that apply to the writ of summons and the defence, etc, and it also includes detailed provisions for the preparation of the case, the presentation of evidence, the presentation of witnesses and more. 

Insurance Disputes by Arbitration

Arbitration is a way of solving insurance disputes without involving the ordinary courts. Arbitration is governed by Danish legislation in the Danish Arbitration Act from 2005, which corresponds to the UNCITRAL Model Law on International Commercial Arbitration from 1985. 

The Arbitration Act has few mandatory provisions on arbitral procedure and leaves the parties to decide on the process of dispute resolution. For example, the parties are free to decide on the number of members of the arbitral tribunal, as well as the timeframes and limits on the statement of defence, etc.

In Denmark, arbitration outside of the construction sector is typically initiated in the Danish Institute of Arbitration (DIA) in Copenhagen. The DIA has its own set of rules which apply when parties commence arbitration there. Disputes in the field of building and construction are typically contractually bound to be initiated by the Danish Building and Construction Arbitration Board, which also has its own set of rules.

Insurance Disputes by Mediation

Denmark has no laws governing mediation. The DIA, however, has its own set of rules regarding mediation that falls under the institute. 

Insurance Disputes by the Insurance Complaints Board

The Insurance Complaints Board, authorised by the Danish Ministry of Industry, Business and Financial Affairs, deals with consumer insurance.

Complaints regarding legal issues arising from the relationship between the customer and the insurance company can be submitted to the Board, which will handle the complaint. The Board cannot, however, handle issues which have been settled by a final judgment, validly binding arbitration, or court settlement.

Civil Cases

The Danish court system is structured on three levels. The district courts are the ordinary first instance courts in civil disputes. In extraordinary situations, the district court can direct a case to the High Court in the first instance if the case is of general public importance or if the case could have a significant impact on others besides the parties involved. The Maritime and Commercial Court handles cases regarding commercial matters and intellectual property rights.

The Danish legal system is based on a two-tier system, which means that most cases can be appealed once to a higher court. A civil case is usually initiated in a district court and can normally be appealed thereafter in one of the High Courts. Some cases which are of general public importance can be appealed to the Supreme Court as a third instance. The right to appeal the case to the Supreme Court is given by the Appeals Permission Board (Procesbevillingsnævnet). 

Before the oral hearing (preparations)

The litigation process before the court is formally initiated when the plaintiff submits its writ of summons to the defendant’s home court (as the primary rule). If the requirements of the writ of summons are not fulfilled, the court will dismiss the case as unsuitable to serve as the basis for legal proceedings. If the statement of claim is suitable, the court then sets out a deadline of two weeks for the defendant to submit its statement of defence. If the defendant does not comply with the deadline for submission, the court may deliver a default judgment in favour of the plaintiff. 

After receiving the defendant’s statement of defence, and in some cases after further exchange of pleadings, the court conducts a preparatory meeting between the parties for the purpose of planning the events leading up to the oral hearing, etc.

In Denmark, all civil cases are almost exclusively processed using a digital portal, www.minretssag.dk, where all pleadings, evidence, court decisions and correspondence are uploaded by both parties and the court. The Danish civil procedure system follows the adversarial procedure, which means that the courts can only make decisions based on the claims and the evidence presented by the parties. 

The oral hearing before the court

The main hearing begins with a presentation of the facts of the case by the plaintiff to the court. Afterwards the parties and witnesses are summoned to give their testimonies to the court. The party representative of the plaintiff will testify first followed by the defendant (if relevant). Thereafter the summoned witness(es) will testify before the court. Firstly, the plaintiff’s witness(es) will be interviewed and thereafter the defendant’s witness(es). It is a statutory duty to give evidence as a witness, with only a few exceptions, eg, doctors, priests or attorneys.

If experts have been appointed to give an opinion, the parties will in some cases go through and question the expert’s report during the oral hearing. 

Before the court renders its decision, each party must submit their oral, closing arguments before the court, followed by rebuttal and surrebuttal. 

In civil cases, it normally takes up to four weeks before the judgment is complete and published to the parties.

Small claims procedure

In Denmark, there is a special form of civil procedure if a claim has a value of maximum DKK50,000 (approximately USD6,918). The Justice Act has a separate chapter regarding the rules on small claims procedures, as the process is simplified compared to the ordinary process described above. In most of these cases, the parties do not need to engage an attorney as the court assists the parties in the preparation of the case. It is, however, possible for the court to decide a party must be represented by an attorney. 

Rules on Limitations

The Danish Limitation Act applies in general to all civil claims in Denmark, including insurance claims. There are only a few additions or regulations mentioned in Section 29 of the Insurance Contracts Act, including insurance claims regarding personal injury, as in these cases, the limitation period is extended to ten years.

The main rule for limitation of monetary claims is three years. This means that a case must be filed within three years, calculated from the earliest time a creditor could demand fulfilment of their claim. For tort claims the calculation begins from the date of injury. The beginning of the three-year period can be suspended if the creditor doesn’t have knowledge – and should have had knowledge – about the claim. The period is then suspended until the creditor has been made aware of the claim. The absolute limitation of claims is ten years, calculated from the moment the damage was caused or the creditor could demand its claim fulfilled.

If a case is brought before the Insurance Complaints Board before the limitation period, the case will not become statute-barred while the Board processes the case. When the Board’s decision is complete, there is an additional deadline of one year to file the claim to the courts if the claim has not been successful before the Board. The one-year deadline runs in parallel with the regular three-year limitation period.

In Denmark, the main ADR methods include arbitration, mediation and court-based mediation.

Arbitration

Arbitration is one of the preferred forms of ADR in Denmark when dealing with commercial claims, including insurance claims. It is however mandatory that the parties, ie, the insurer and the insured, have agreed on arbitration as their method of dispute resolution. 

Arbitration is often preferred in cases with professional parties on both sides. It is a more expensive resolution measure, but the process is normally quicker than before the national courts. In 2021 the average arbitration process at the Danish Institute of Arbitration was ten months for Danish cases and 13 months for international cases. See the statistics here. Professional parties usually have the financial capacity to go through with the arbitration process. Moreover, its rulings are not public, which means that the parties can arbitrate their dispute without public awareness. 

Arbitration is also preferred within the field of construction. It is typically agreed between the parties, as it follows from standard documents such as AB18 or AB92, which are commonly used in this field.

Mediation

Over the past few years there has been more focus on mediation in Denmark – both by the courts and ADR. However, mediation has still not become the preferred way of solving disputes.

Court-based mediation is offered when initiating cases, but it is not the general rule that both parties wish to proceed with court-based mediation. 

Mediation is also offered in the DIA, which made rules on mediation in 2015. Despite the effort to promote mediation as an alternative to arbitration, mediation only constituted 4% of the cases admitted to the DIA in 2021.

However, when dealing with cases in the field of construction, it is normal for the parties (the building owner and the contractor) to agree on a standard document where definite rules on construction are set out. According to the standard document AB18, it is mandatory to start a mediation process before the parties commence an arbitration process. Mediation is therefore regularly used in the field of construction.

The rules in the Justice Act, the Brussels I Regulation and the Lugano Convention are applicable when discussing applicable law on insurance disputes. If the parties have made special agreements on jurisdiction or choice of law in their insurance contract, these agreements are binding.

Jurisdiction

Rules on jurisdiction are stated in the Justice Act. The primary rule is that the defendant’s home court in one of the 24 district courts, or in special cases, one of the High Courts, will have territorial jurisdiction (Justice Act, Section 235). If the defendant is a legal entity, the home court is where the main office is located (Justice Act, Section 238). The rules that regulate the territorial jurisdiction of the national courts are set out in Chapter 22 of the Justice Act.

The rules on jurisdiction in the Brussels I Regulation and the Lugano Convention are also applicable law in Denmark. These rules are used when one or more of the parties have a connection to an EU or EEA country.

Choice of Law

As Denmark does not co-operate with the EU on Justice and Home Affairs, it is only bound by the Rome I Regulation from 2008. When dealing with insurance disputes, the Rome I Regulation has some special rules regarding insurance contracts set out in Article 7. If the applicable law has not been chosen by the parties, it follows from Article 7 that the insurance contract will be governed by the law of the country where the insurer is habitually resident, unless it is clear from all the circumstances of the case that the contract is manifestly more closely connected with another country, in which case the law of that other country will apply. 

The Insurance Contract Act Section 34 implements Article 12(2) of the Financial Distance Selling Directive, which regulates free choice of law to the consumer’s advantage. The rules on choice of law in the Rome I Regulation are not changed or affected by this rule. 

The Danish enforcement court – a subdivision of the district courts – handles the enforcement of foreign judgments. 

Judgments from courts within the EU or the EEA are recognised and enforced in Denmark in accordance with the Brussels I Regulations and the Lugano Convention.

Back in 2017 it was decided in the Danish parliament that the Hague Convention of 30 June 2005 on Choice of Court Agreements was to be implemented in Danish law. By this change, every judgment handed down in the Hague Convention states should be recognised and enforced in Denmark and the other way around. 

Denmark is internationally recognised by the World Justice Project as having one of the best rules of law in the world. This means that a fair trial is expected and also given in all cases. The procedural rules in the Justice Act, the Brussels I Regulations, the Lugano Convention, etc, all support this perception. 

As a rule, once the parties have agreed on arbitration procedure, the authority of the ordinary courts is limited. If the parties have agreed on arbitration, and the agreement is valid, the ordinary courts are obliged to dismiss the case. 

Only a few situations give the ordinary courts authority to intervene in arbitration proceedings. For example, if the parties request the ordinary courts to appoint the arbitrators (Arbitration Act, Section 11(3)) or assess an arbitrator’s impartiality (Arbitration Act, Section 13(3)). 

If the insured is a consumer, stricter rules apply to the arbitration agreement. Arbitration agreements between a professional company and a consumer, entered into before a dispute arises, are not necessarily binding on the consumer. 

Denmark is subject to the New York Convention from 1958 and this is implemented in the Danish Arbitration Act. The New York Convention’s rules on recognition and enforcement in Article V appear in the Arbitration Act in Sections 38 and 39.

According to Section 38, an arbitral award, whether issued in Denmark or abroad, can be enforced according to the rules in the Justice Act. However, Section 38 also refers to the limitations set out in Section 39, which regulate situations where an arbitral award can be refused recognition and therefore cannot be enforced according to Section 38. 

The dispositive reasons to refuse enforcement and recognition in Section 39 are:

• the arbitration agreement was invalid or one of the contracting parties lacked legal capacity under the law of the country in which they were domiciled at the time of the conclusion of the agreement;
• one of the parties was not properly notified of the appointment of an arbitrator or of the arbitration proceedings, or the party was not able to present its case;
• the arbitration concerns a dispute not included in the arbitration agreement, or that is beyond the scope of the agreement;
• the composition of the arbitral tribunal or the arbitration proceedings were not in accordance with the arbitration agreement or with the law of the country where the arbitration took place; or
• the arbitral award is not yet binding on the parties or has been disregarded or suspended by the court in the country in which it was given, or under the law of which it was given.

It is also stated that a ruling under any circumstance must be refused recognition by the court if:

• the dispute lacks arbitrability; or
• recognition and enforcement are incompatible with the legal order of the country (ordre public).

The reason for refusal is consistent with the New York Convention’s Article V and both sections are to be interpreted in accordance with this. The two rules are mandatory and cannot be deviated from in the parties’ agreement. 

As arbitration rulings are not published by the DIA, it is unfortunately difficult to answer whether arbitration is a significant form of insurance dispute resolution. In general, arbitration is commonly used in commercial matters and there is a good chance that it will be used in an insurance dispute of significant value between professional parties.

In general, the advantage of using arbitration as the dispute resolution mechanism is that the Arbitration Act gives the parties authority to “design” their process. For example, it is possible for the parties to appoint an insurance specialist as a member of the arbitral tribunal or to appoint an insurance specialist as an expert to provide an expert report. 

The Danish Insurance Contract Act regulates the formation of insurance contracts and the rights or duties of insurance companies and policyholders. It does not contain specific terms.

The essence of the Insurance Contract Act is the parties’ right to contractual freedom. However, this contractual freedom is limited in certain respects. Many of the provisions in the Insurance Contract Act are mandatory and cannot therefore be deviated from to the policyholder’s disadvantage. Also, stricter rules apply when regulating consumer relations.   

The Insurance Contract Act Sections 4–10 regulate the insurer’s rights concerning the presentation of the risk prior to the inception of the policy. Deviation from these rules is not permitted. 

It is fundamental that there is honesty between the contracting parties. The policyholder has a formal obligation to give all risk information – this means that it has a duty to respond and a duty of disclosure. The duty to respond is relevant in situations where the policyholder is required to submit an insurance claim or if the insurance company is asking specific questions relating to entering an insurance contract. Under any of these circumstances, the policyholder has a duty of disclosure. This duty is explained in Section 7 of the Insurance Contract Act, which states that any information not disclosed to the insurance company is at the policyholder’s own risk. In practice, it is problematic to delimit the scale of the duty to respond. Normally it would be sufficient for the policyholder to answer the questions asked by the insurance company, without making a detailed assessment of the issues. However, when dealing with personal insurance such as life or accident insurance there might be a stricter duty for the policy holder to respond.

According to Section 4 of the Insurance Contract Act, a contract is not valid if the policyholder fraudulently gives wrong information or withholds information which is of importance to the insurance company (bad faith). However, Section 5 of the Act states that the insurance company is liable if, at the time of effecting the contract, the policyholder did not know or could not have known that the information was incorrect (good faith). 

During the past 12 months there have been two judgments from the Supreme Court regarding subrogation into the injured party’s legal position. 

One of the cases is from August 2021 and determined that a liability insurance company could not subrogate into the injured party’s claim on occupational injury regulated in the Insurance Contract Act Section 29(2). The majority of the Supreme Court stated that there was no legal basis for the liability insurance company to enter into the injured party’s claim. It was emphasised that a provision on such right to subrogate had previously been contained in a bill submitted to the Danish parliament and that the provision was eliminated from the bill during parliament’s deliberation. 

The other case is from February 2022 and determines that the injured party can subrogate into the statute of limitations effect of a notice made by the insured person causing the loss to their insurance company. The Supreme Court noticed that the injured party subrogated into the secured person’s right against the insurance company, if the injured party’s claim is included in the secured person’s bankruptcy (Insurance Contract Act, Section 95(2)). Therefore, the injured party also subrogated into the secured person’s position under the statute of limitations against the insurance company (Insurance Contract Act, Section 29(5)).

There are different ways of resolving insurance coverage disputes depending on the type of dispute.

The Insurance Complaint Board handles disputes involving consumers where a dispute concerns insurance taken out by a private individual (consumer insurance). The decision made by the Insurance Complaint Board does not have the same legal status as a judgment from the courts. It is, however, normally respected by the insurance companies. If not, the decision does not prevent the parties from going to the ordinary courts.

If both parties are professionals, disputes will normally be resolved by court proceedings, ADR or through internal negotiations. 

The Danish Insurance Contract Act generally does not distinguish between consumers and non-consumers. As stated in 4.4 Resolution of Insurance Coverage Disputes, it is possible for consumers to resolve their disputes via the Insurance Complaint Board. If the dispute is brought before the ordinary courts, the courts may seek to protect the consumer as they are the “weaker” party compared to the insurance company. 

Under the Insurance Contract Act, it is only possible for a third party to enforce an insurance contract after Section 95, which states that when the insured's liability towards the injured person (third party) has been proved and the amount of the damages assessed, the third party shall be subrogated into the assured's rights against the company if the third party has not obtained satisfaction for their own claim.

The concept of bad faith applies in contractual relations where a party acts intentionally or is to a certain extent negligent towards the other party.

As mentioned in 4.2 Right of Insurers, it follows from Section 4 of the Insurance Contract Act that if a policyholder fraudulently withholds information or gives incorrect information to the insurance company, then the insurance company is not liable. In Section 18 of the Insurance Contract Act it is also stated that the policyholder does not have a claim against the insurance company if they intentionally provoke the insurance event.

These rules reflect the general rule on bad faith as in the Law of Contracts. 

Penalties for late payment of claims are regulated in the Insurance Act Section 24, according to which payment can be demanded 14 days after the insurance company has collected the necessary information about the insurance event for the assessment of the payable amount. If it is certain that the insurance company must pay a part of the total amount, this amount can be demanded. Payments carries interest from the time when the amount could be demanded according to Section 24, with an annual interest rate. The annual interest rate is set out in the Danish Interest Act Section 5 and is currently around 8% per annum. 

Representations made by a broker are normally legally binding for the insured. The basis of the broker’s work relies on the agreement of representation between the insured and the broker. The broker carries out its work on the basis of a power of attorney and a co-operation agreement, and the agreement between the parties regulates the broker’s mandate, fee, liability, etc.

Insurance brokers are subject to the Danish Financial Supervisory Authority. This means that brokers must always maintain liability insurance in case of incorrect advice to clients and brokers can therefore be liable for damages as a consequence of the advice. 

Delegated underwriting and claims-handling authority agreements are common in the insurance field. However, rulings on these claims are not often seen or are handled internally without resorting to dispute resolution. 

In general, when the insured is covered by liability insurance, insurance companies will fund the defence of the insured if the insured is met by a claim. This also follows from the Insurance Contract Act Section 92 regarding liability insurance. 

If the insured is a private person with contents insurance, boat insurance, insurance covering loss of or damage to their car, etc, the person also has legal expenses insurance, which means that the insurance company will cover the cost of a lawsuit on private matters. The terms for legal expenses insurance may vary in each insurance policy.

For some years, a growing number of companies have had special insurance needs or have required tailor-made insurance products for their insurance coverage. Therefore, it is expected that the market for such insurance products will continue to grow over the next couple of years. This is also the case with professional indemnity insurances. It is expected that the need for this type of insurance will increase and therefore, also the number of disputes in this regard. 

Litigation disputes in Denmark appear to have become larger and more complex in recent years, which has had the consequence of increasing costs. This trend will most likely continue.

It is possible to buy protection against costs risks in Denmark, but this is not widely distributed. 

The insurers’ right of action to recover sums from third parties is not regulated in the Insurance Contract Act. It is however common that insurance contracts include terms in which the policyholder’s claim against a third party is transported to the insurance company. This is also a general principle of law. 

As stated in 6.1 Right of Action to Recover Sums from Third Parties, the Insurance Contract Act does not contain rules on the insurers’ right to pursue third parties, and this therefore follows from general principles of law. 

There have been surprisingly few insurance-related litigations before the ordinary courts regarding the COVID-19 pandemic. Most COVID-19 related cases have been handled by the Insurance Complaints Board and this has resulted in more than 75 decisions during the last two years under the pandemic. Most of the cases are related to travel insurance where the policyholder made an insurance claim as a result of cancellation of a trip due to COVID-19. Also, cases regarding evacuation, self-isolation, gross negligence by travelling to red zone countries, etc, have been brought before the Board. The disputes show that the terms of coverage are interpreted with emphasis on the wording of the terms and that special consideration is generally not given to COVID-19 related damages.

A notable Scandinavian case is the Norwegian case between Noreell Ski and Spa and the Danish insurance company Codan. The insurance policy between the parties provided a pandemic clause under which Noreell had the right to be covered for its loss of income. Codan, however, has refused to cover this loss. It is expected that there will be other cases in Scandinavia revolving around the same question.

No major changes in types of cases are expected within the next 12 months, but this depends on a variety of factors. 

As stated in 7.1 Type and Amount of Litigation there have so far been no major public cases before the ordinary courts regarding coverage issues or test cases of real importance. There have however been numerous cases regarding the impact of COVID-19 before the Insurance Complaints Board.

COVID-19 has, however, affected the scope of insurance cover. A new market for insurance against COVID-19 related events has been created both in commercial matters but also directed at consumers. Moreover, private consumers have become more informed about the need for travel insurance when travelling abroad.

From 2 August 2022, new EU rules on the implementation of sustainability (ESG) will apply as a factor when insurance companies develop new insurance products in Denmark. The rules will also impose ongoing supervision of these products through product oversight and governance (POG) requirements. The purpose of the new rules on ESG is that insurance companies and other insurance facilitators that develop insurance products will have to consider sustainability factors in the product approval process, etc, for each individual insurance product distributed to clients seeking insurance products with a sustainability profile. It is therefore no longer sufficient for an insurance company to generally declare an insurance product sustainable. The new rules will apply to damage and life insurance companies and facilitators.

As stated in 8.1 Impact on Underwriting and Litigating Insurance Risks, the new EU rules on the implementation of sustainability (ESG) are a significant new regulatory development.