Insurance company can claim compensation from the municipality after a fire

Rana municipality in Nordland leased a detached house to use for the settlement of refugees. A sublessor caused a fire in the house, which was completely damaged. The house insurance company paid compensation to the owner and then claimed the same amount from the municipality in a so-called recourse claim. The municipality acknowledged liability under the House Rent Act, but argued that the insurance company's claim had to be precluded.

The District Court ordered the municipality to pay around NOK 7.2 million in compensation, while the Court of Appeal found that the insurance company could not claim its payments from the municipality. The Supreme Court reached a different conclusion than the Court of Appeal.

The Supreme Court stated that the claim against the municipality was based on the lease agreement that the municipality entered into with the lessor. The rules on recourse claims in the Compensatory Damages Act do not apply to such liability in a contract, nor can the claim be precluded on any other basis. The Court of Appeal's judgment was set aside.

The judgment provides guidance on insurance companies' right to recover their payments from the liable tortfeasor when the liability is based on a contract.

Read the whole judgment (Norwegian only) (PDF)

Area of law: Tort law. Sections 4-2 and 4-3 of the Compensatory Damages Act. 

Key paragraphs: 35, 42–44, 49−51

Justices: Falkanger, Bergsjø, Ringnes, Berg, Sæther