To Örebro University

The dissertation examines the extent of an insurer's obligation to pay property insurance compensation as a function of causality. Its point of departure is the policy terms under which the present question is primarily governed (the obligation-activating causation terms). The purpose of the study is a) to determine the state of the law regarding interpretation of obligation-activating causation terms; and b) to assess critically and to discuss what the study has found to be the state of the law.

Obligation-activating causation terms are essentially of two types. Firstly, there are terms that merely require factual causality between the underwritten event and the damage. Secondly, there are terms that require direct causality between both events. It is shown that neither of the above types of terms are interpreted strictly in accordance with their wording. Instead of these terms' requirement of factual and direct causality, a requirement of adequate causality is applied.

Application of the doctrine of adequacy in the present context appears to be due to an influence from the law of damages. Applying adequacy in insurance law, where the insurer's indispensable need to calculate premiums corresponding to assumed risks is a central element, appears generally justified. This holds however only in cases where the insurance policy does not state otherwise. Against this background, the result of the examination may seem surprising. It is however evident that the wording of the terms in question is not considered sufficiently clear to be the sole determinant of interpretation.

Giving the terms a content that deviates from what rather clearly appears from their wording, is liable to frustrate the parties' expectations as to the outcome of a dispute. The interpretation applied thus seems troublesome from the standpoint of legal certainty. It is apt to result in disputes between insurers and policy holders and thus in increased transaction costs.

Against the stated background, a more literal term interpretation appears desirable. The causation terms relevant here should therefore be made clearer. They should expressly state whether the underwritten event s adequate, direct or factual consequences are covered by the insurance. Moreover, concepts difficult to understand or which could be misleading concerning the scope of protection should be accompanied by an explanation. Under such guidelines, it would seem reasonable to interpret the terms according to their wording. Unreasonable requirements as to clarity could, in effect, restrict freedom of contract. Freedom of contract should only be restricted if economically justified. How far one can go in this regard is a political question. An interpretation that restricts freedom of contract without legislative support would thus be dubious.