Academic article: Insurance Exclusions That Violate Fair Business Practice – Are Policyholders’ Rights Protected in Estonia and Russia?

1 sausio, 2019 Naujienos

In 2019, the Journal of Foreign Legislation and Comparative Law published a scholarly article titled “Insurance Exclusions Contrary to the Requirement of Fair Business Practice: Perspectives for Protection of Policyholder’s Rights in Russia and Estonia as a Member of the European Union.” The authors are Dr. Olavi-Jüri Luik, an insurance law attorney and lecturer at the University of Tartu, and Dr. Maksim Kratenko, Associate Professor at the Siberian Federal University. 

The article addresses a highly practical yet often overlooked issue: which types of exclusions in insurance contracts (i.e., clauses under which the insurer is not obliged to pay compensation) comply with fair business practice and consumer protection—and which do not. The authors provide a comparative analysis of the legal frameworks and court practices in Estonia and Russia. 

What makes an insurance exclusion unfair? 

The authors categorize exclusions into two primary types: 

• Classic or “pure” exclusion clauses – These exclude specific insured risks regardless of the policyholder’s behavior (e.g., war, natural disasters). 
• Discharge clauses – These exclude coverage when the policyholder has breached contractual obligations (e.g., failure to install an anti-theft system). 

While these exclusions may appear reasonable at first glance, the article highlights the risks that arise when they are poorly worded or hidden within the contract in ways that the average consumer cannot reasonably foresee. In Estonian law, such exclusions must not be surprising or incomprehensible—otherwise, they may be deemed not part of the contract at all. 

Estonia’s legal framework offers stronger protection 

Estonia provides a multi-layered mechanism to protect policyholders: 

• Three-stage control of standard terms (based on the Law of Obligations Act): courts verify whether the clause was standard, whether the policyholder was properly informed, and whether the clause is fair. 
• Mandatory pre-contractual disclosure, including a clear list of exclusions. 
• The contra proferentem principle: unclear terms are interpreted against the insurer. 

Estonian courts have repeatedly ruled in favor of policyholders in cases where exclusions were hidden or ambiguously formulated. For example, courts invalidated exclusions that denied theft coverage when a thief simply found keys during a party at the policyholder’s home. 

Russian practice tends to favor insurers 

In contrast to Estonia, Russian courts increasingly affirm insurers’ freedom to define “non-insured events.” Although the Russian Consumer Protection Act allows for challenging unfair terms, courts rarely apply it, citing the freedom of contract under Article 421 of the Russian Civil Code. 

The enforceability of unfair exclusions in Russia often hinges solely on whether the policyholder “agreed”—typically by signing the contract. Russian law lacks specific rules for exclusions and does not provide blacklists or grey lists of suspect terms, as is common in EU member states. 

What does an insurance law attorney recommend? 

Dr. Olavi-Jüri Luik offers several suggestions to improve policyholder protection: 

• Insurers should be legally required to individually negotiate all exclusions not mandated by law. 
• A model list of unfair terms—similar to a “blacklist” system—should be established. 
• Clear differentiation should be made between exclusions arising from objective risks and those related to the policyholder’s conduct. 
• A mandatory product information document should be introduced, listing exclusions in a clear and comprehensible format. 

Conclusion: Why is this article important? 

This article provides a valuable overview of how certain insurance exclusions may conflict with fair business practices and how legal mechanisms can ensure meaningful protection for policyholders. The comparative approach between Estonia and Russia underscores the crucial role of national regulation and judicial oversight in maintaining contractual balance. 

As an experienced insurance law attorney, Olavi-Jüri Luik emphasizes that clear and transparent contractual terms are essential for a trustworthy insurance market. That’s why this issue deserves attention—not only in legal scholarship and policy debates, but also in everyday practice. 

If you’re entering into an insurance contract or want to assess the exclusions in your current policy, it’s highly advisable to consult with an expert in insurance law—such as Olavi-Jüri Luik.