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Insurers Beware – Are You Covering Risks Unknowingly and Unpaid?

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On 11 June 2015, the Swedish Supreme Court issued a judgment that clarifies the legal effects of premium payment provisions at yearly renewals of business insurance policies – and insurers may not like the clarification.

Most Swedish business insurance policies contain suspensive provisions with respect to premium payment. Such provisions safeguard insurers from staying on risk after the expiry of the policy period in cases where the policy holder does not pay a renewal premium.

The Swedish Supreme Court has now ruled that insurers must give policy holders seven days’ written notice in order to rely on suspensive provisions. However, the Supreme Court also clarified that such written notice may be given in the form of a premium invoice, and that the written notice may also be given before the expiry of the policy period.

Most domestic insurers likely have routines in place in order to avoid staying on risk at the expiry of a policy period. For international insurers covering risks in Sweden however, the Supreme Court judgment underscores the importance of acting diligently ahead of renewals in order to avoid covering risks unknowingly.