There are no official statistics available in Switzerland that would give an indication of the mechanism for resolving coverage disputes that insurance policies usually provide for. Insurance disputes, including complex matters with an international angle, are regularly tried before Swiss state courts.

While insurance contract disputes are subject to the same procedural rules as disputes on other contract or tort disputes, coverage disputes are often heard by the commercial courts (see question 3 for more details), giving the parties several (procedural) advantages, such as:

• the particular expertise of the judges handling the case;
• the tradition of court-led settlement negotiations that usually take place after the first round of submissions;
• the fact that claims can be filed directly with the commercial courts without the need to first apply for conciliation proceedings, which are usually conducted by lay judges;
• the fact that the commercial courts are the only courts at cantonal level and that, therefore, judgments rendered by the commercial courts can be appealed directly to the Federal Supreme Court, the highest court in Switzerland.

However, it is reasonable to assume that parties to commercial insurance programmes are equally likely to choose arbitration. There is a continuing trend for disputes relating to larger insurance programmes for companies with international operations to be referred to arbitration. As far as reinsurance contracts are concerned, it is probably fair to say that arbitration is the standard means of dispute resolution.

Swiss insurance law does not provide for a specific protocol governing pre-action conduct for insurance disputes.

Disputes relating to or arising out of insurance and reinsurance contracts are subject to civil proceedings before the civil courts, as are any other disputes relating to contracts, tort or unjust enrichment.

The Swiss Code of Civil Procedure (CPC), which came into force in 2011, provides for a unified set of rules governing the proceedings for all contentious and non-contentious civil matters. Before 2011, each of the 26 cantons had its own code of civil procedure.

In most contentious matters, plaintiffs must request conciliation proceedings, which have the purpose of facilitating a settlement or an early resolution of claims. However, there are certain exceptions. In cases with a value in dispute in excess of CHF 100,000, the parties can jointly waive the conciliation proceedings. Additionally, a plaintiff can unilaterally waive the proceedings if the defendant is domiciled outside of Switzerland or if his address is unknown (Article 197 et seqq., CPC). Furthermore, if the case is brought directly before a commercial court (see question no. 3), no conciliation procedure is required.

Parties to an insurance contract may agree on a mediation clause and some insurance policies, including policies pertaining to larger insurance programmes for companies with international commercial activities, provide for a pre-action mediation clause.

The parties are entirely free to agree on the format, style, and rules of a mediation. The Swiss Chamber of Commercial Mediation (SCCM), established in 1997, promotes development of mediation as an effective method for resolving business disputes. In 2007, the seven Swiss chambers of commerce adopted the first Swiss Rules of Commercial Mediation. Now revised and updated as the Rules of Mediation of the Swiss Arbitration Centre, these provide a formal framework and institutional assistance to parties and mediators in commencing and conducting fair and effective commercial mediations.

Moreover, there is case law of the Swiss Federal Supreme Court setting guidelines as to the conditions under which a mediation clause (in the context of arbitration also called a pre-arbitration clause) can become binding on the parties so that they have to adhere to it before launching a dispute with a court or arbitral tribunal. In essence, the common intention of the parties is relevant to determine whether those parties intended pre-adjudicatory tiers to be mandatory or only optional. According to the Supreme Court, the absence of any time limit for initiating or completing the conciliation or mediation process was an indication of a non-mandatory character.

If a pre-arbitration provision is considered binding/enforceable, the consequences in case of breach depend on the legal qualification of pre-arbitration clauses: (1) If it is of “procedural” nature, compliance with a pre-arbitration clause is a (procedural) condition precedent to arbitration. Therefore, filing a claim without first complying with the pre-arbitration clause is inadmissible, which in turn precludes the arbitral tribunal’s jurisdiction to hear the case. (2) By contrast, if a provision is considered to be of “substantive” nature, a violation of a pre-arbitration clause is (merely) treated as any other contractual breach of contract. This may result in a claim for damages if loss can be established, but with no adverse consequences for the arbitral tribunal’s jurisdiction.

If a settlement agreement is reached, this agreement will be a binding contract that is enforceable like any other contract. If the settlement is reached in mediation after court proceedings have started, the parties may request that the settlement be placed in the record, making it enforceable as a binding court decision. If no proceedings are pending, a settlement can be recorded in a notarial deed (provided that the applicable legal requirements are met), which allows enforcement in the same manner as a court judgment.

While Switzerland continues to attract a large number of international arbitration cases, state-court litigation is and remains a common means to resolve domestic and international commercial disputes, including complex insurance disputes. Cantons may designate a special court that has jurisdiction as sole cantonal instance for commercial disputes (commercial court). Currently, four cantons, namely Zurich, Bern, Aargau and St. Gallen, have a commercial court. Commercial courts are part of the high court of the respective canton.

Commercial courts are composed of professional judges and commercial judges. The specific composition of commercial courts is subject to the laws of each canton that has established a commercial court. In the canton of Zurich, for example, the commercial court comprises two professional judges, who are members of the high court, and three commercial judges. The three commercial judges are selected from a list of experts from different industries, for example insurance and banking. The selection of the commercial courts is made case-by-case to make sure that the needs of each case are best met and that those commercial judges with the industry expertise required in a given case are on the bench. Commercial courts are thus recognised for their expertise in commercial matters due to the high level of qualification of their members.

Commercial courts can help settle even large and complex disputes at an early stage at relatively low costs. At any stage of the proceedings, including the first stage (in which the parties plead their case), the court may call the parties to a so-called “instruction hearing” aimed at holding settlement discussions and/or taking specific evidence. In particular, commercial courts tend to hold court-led settlement discussions after the first round of written submissions, in which the presiding judge gives the parties a preliminary (without prejudice) assessment of the claim (i.e., a chance/risk-assessment) and puts forward a settlement proposal.

Another feature that can help keep proceedings less costly and burdensome than in other jurisdictions is the fact that US-style discovery or extensive exchange or production of documents is alien to the Swiss civil procedure system.

A dispute qualifies as “commercial” and, thus, falls within the sole jurisdiction of the competent commercial court, if (Article 6, CPC):

• the dispute concerns the commercial activity of at least one party;
• the decision is subject to an appeal in civil matters to the Swiss Federal Supreme Court, which is generally the case if the value in dispute is at least CHF 30,000; and
• the parties are registered in the Swiss Commercial Registry or in an equivalent foreign registry.

If only the defendant is registered in the Swiss Commercial Register or in an equivalent foreign register, but all the other conditions are met, the plaintiff may choose between the commercial court and the ordinary court.

As set out in the answer to question 2 above, according to the Swiss Code of Civil Procedure (CPC), in most contentious cases, including insurance disputes, plaintiffs must apply for conciliation proceedings, which have the purpose of facilitating a settlement or an early disposal of claims. The parties may replace the mandatory conciliation proceedings by mediation (Article 213 CPC).

However, there are several exceptions. In cases with a value in dispute in excess of CHF 100,000, the parties can jointly waive the conciliation proceedings. Also, a plaintiff can unilaterally waive the proceedings if the defendant is domiciled outside of Switzerland or his address is unknown (Article 197 et seqq., CPC). Furthermore, if the case is lodged directly with a commercial court (see question no. 3), no conciliation proceedings are required.

Besides the mandatory conciliation proceedings, there is no requirement or expectation that the parties engage in alternative dispute resolution before filing their claim with a court.

Furthermore, as also set out in the answer to question 2 above, parties to an insurance contract may agree on alternative dispute resolution at a pre-action stage, such as a mediation clause.

The most important form of alternative dispute resolution is arbitration. Since Switzerland is one of the leading places for arbitration worldwide, with its hubs in Zurich and Geneva, arbitration is also often chosen for disputes arising from insurance contracts, particularly in the realm of commercial insurance in an international context.

Switzerland has a long tradition of international and domestic arbitration, with two sets of arbitration laws: the uniquely liberal Chapter 12 of the Swiss Private International Law Act (PILA) for international arbitration, and Part 3 of the Civil Procedure Code (CPC) for domestic arbitration.

In force since 1989 and updated in 2021, Chapter 12 of the PILA provides a framework to support parties and arbitral tribunals in efficiently resolving disputes, with minimal interference except to ensure the essential integrity of the process. Chapter 12 of the PILA, because of its characteristics (in particular its flexibility and autonomy in how proceedings are structured), can be used – and is often used – for very different types of arbitration proceedings, including insurance and reinsurance disputes.

The arbitration institutions and rules most chosen in Swiss international arbitration are the rules of the International Chamber of Commerce (ICC Rules) and the Swiss Arbitration Centre (Swiss Rules), the latter being the successor of the Swiss Chambers’ Arbitration Institution.

The legal framework and its institutions provide for proceedings tailored to the parties’ needs, with an efficient administration of all types and sizes of disputes. For instance, under the Swiss Rules of International Arbitration, disputes with a value up to CHF 1 million are subject to expedited proceedings which are dealt with within a period of six months only. The parties may opt for expedited proceedings also for larger disputes.

Furthermore, arbitration in Switzerland provides, if opted for by the parties, for multi-party arbitration. This is a feature that can be of interest in the context of large commercial insurance programmes involving multiple insured entities and/or insurance carriers.

Challenges of arbitral awards are decided directly by the Swiss Federal Supreme Court (see question 6 below for more details).

In disputes between a policyholder or an insured and an insurer, the latter can also be bound by the court to pay the policyholder’s or insured’s cost of litigation, depending on the outcome the dispute.

Swiss civil procedure law follows the “the costs follow the event principle” (also called “the loser pays the winner’s costs principle”), like England and most continental European jurisdictions do. Thus, the general rule is that the losing party must (1) pay the court fees and (2) reimburse the winning party’s legal costs (attorneys’ fees and necessary expenses) (Article 106 of the Swiss Civil Procedure Code, CPC). However, the reimbursement of the winning party’s defence costs is allocated by the court on the basis of a tariff issued by each Swiss canton. The calculation depends on the amount in dispute and additional factors, such as time spent, necessary procedural steps and complexity. Therefore, the reimbursement awarded by a court may well vary from the successful party’s actual legal costs.

Challenges of arbitral awards are decided directly by the Swiss Federal Supreme Court (Article 191, PILA), and in only six months on average. In about 93% of the cases, the Federal Supreme Court upholds the award, only sanctioning serious irregularities, such as violations of due process or lack of jurisdiction. More specifically, the grounds of appeal are very limited, as an arbitral award may be set aside only (Article 190, PILA):

• where the sole member of the arbitral tribunal was improperly appointed or the arbitral tribunal was improperly constituted;
• where the arbitral tribunal wrongly accepted or denied jurisdiction;
• where the arbitral tribunal ruled beyond the claims submitted to it, or failed to decide one of the claims;
• where the principle of equal treatment of the parties or their right to be heard in an adversary procedure were violated;
• where the award is incompatible with public policy.

Since 2021, submissions filed with the Swiss Federal Supreme Court in the context of setting aside proceedings can be filed in English, making such proceedings more accessible for foreign parties (Article 77, SFTA).

Swiss insurance contract law is codified. Insurance contracts and thus the relationship between insurance companies, policyholders and insureds are governed by the Swiss Federal Act on Insurance Contracts (Insurance Contracts Act ‒ ICA).

Articles 4–8 ICA contain specific rules on the duty to disclose information to insurers before the inception of the policy and the misrepresentation in the realm of insurance contracts. Prior to the conclusion of an insurance contract, the insurer has the right to enquire about all material facts.

The purpose of the applicant’s pre-contractual duty to disclose material risk factors is to provide all information known to the applicant that is relevant for the appraisal of the risk to be insured. It helps the insurer to ensure a correct and reliable risk assessment through an accurate classification of the individual risk and thus to balance performance and consideration. Therefore, the applicant’s pre-contractual duty to disclose material risk factors serves to tackle the phenome of adverse selection, a situation where the insurer cannot distinguish bad from good risks and the policyholders with good risks leaving the pool of risks and consequently the premiums going up.

Although there is no general duty for a policyholder to provide the insurer with information before entering into an insurance contract, statutory law provides that the applicant (i.e., the prospective policyholder) must inform the insurer in writing of all facts material to the assessment of the risk, insofar as and in such a way as they are known or must be known to them at the time of disclosing the information, by means of an insurer’s questionnaire or upon other written questioning by the insurer.

However, there are several limitations. Pursuant to Article 4 ICA, only if the insurer puts to the (designated) insured person a question in the first place, may the facts of the risk to which such question is directed be considered to be “material” to the assessment of the risk. Put differently, without a question, there can be no violation of a policyholder or insured of Articles 4–8 ICA in the first place. And a question by itself is not sufficient. Instead, it is required that an insurer’s questions be in writing, specific and in unambiguous terms (Article 4, ICA). Thus, verbal questions from the insurance company do not trigger the duty of disclosure.

Furthermore, the policyholder’s personal rights limit the insurer’s right of information. If the insurer attempts to enquire about the applicant’s personal circumstances that are not objectively relevant to the insurer’s risk assessment, the request for information is an abuse of rights and inadmissible.

If the policyholder has unduly disclosed or concealed a material fact of risk of which the policyholder was aware or should have been aware and about which the policyholder was asked in writing, the insurer is entitled to terminate the insurance contract by written declaration within a deadline of four weeks after the insurer has become aware of the breach of the duty of disclosure (Article 6, ICA).

If the contract is terminated by notice of cancellation, the insurer’s obligation to pay benefits for losses that have already occurred and whose occurrence or extent was influenced by the non-disclosed or incorrectly disclosed material fact of risk shall also cease. As far as the obligation to pay has already been fulfilled, the insurer is entitled to reimbursement (Article 6, ICA).

Despite the breach of the duty of disclosure (Articles 4 and 6, ICA), the insurer may not terminate the contract (Article 8, ICA):

• if the concealed or incorrectly disclosed fact ceased to exist before the feared event occurred;
• if the insurer has caused the concealment or incorrect disclosure;
• if the insurer knew or must have known of the concealed fact;
• if the insurer was or must have been aware of the incorrectly disclosed fact;
• if the insurer has waived the right of termination;
• if the person obliged to notify fails to answer a question submitted by the insurer, and the insurer has nevertheless concluded the insurance contract.

The policyholder’s or insured’s state of mind at the time of answering the insurer’s questions is not relevant insofar as it is no prerequisite for invoking the remedies in case of a breach of the duty of disclosure that the policyholder or insured acted with intent or gross negligence. The only prerequisite is that the undisclosed facts are known or must be known to the policyholder or insured at the time of answering the insurer’s questions.

The policyholders’ and insureds’ duty to disclose information to insurers prior to inception of the policy pursuant to Articles 4 ICA does not continue beyond the inception of the policy.

After the inception of the policy, policyholders and insureds are subject to other duties to provide information. On the one hand, parties to an insurance contract may agree on provisions contained in insurance contracts under which a policyholder and/or an insured has to provide certain information. On the other hand, statutory insurance law provides for duties to inform which arise upon the occurrence of the insured event. Firstly, there is a statutory provision under which the insured entitled to claim coverage must, as soon as it becomes aware of this event and its claim under the insurance contract, give notice to the insurer (Article 38(1) ICA). Secondly, at the request of the insurer, the insured must provide any information about such facts known to it that are useful for determining the circumstances under which the insured event occurred or for determining the consequences of the event (Article 38(2) ICA).

Swiss insurance contract law – like Swiss contract law in general – provides parties with maximum autonomy, a high degree of flexibility and, thus, control over their contract, more than almost any other jurisdiction. The content of insurance contracts is not subject to EU law or complicated rules about general terms and conditions. Swiss law on insurance contracts provides for.

Unless explicitly stated otherwise in the ICA, parties to a policy can agree freely on provisions that deviate from the statutory law provisions. Articles 97 and 98 of the ICA contain exhaustive lists of certain statutory law provisions defined as either “mandatory” (which means that the parties to an insurance contract must not contract around these provisions) or “half-mandatory” (which means that the parties can only agree on a provision that is more beneficial for the policyholder or insured than the statutory law provision), respectively. For example, it is a mandatory (i.e., non-amendable) statutory law provision that either of the parties to an insurance contract has the right to terminate the insurance contract at the end of the third year, even if the insurance contract had been agreed for a period longer than three years.

On 1 January 2022, a revised version of the ICA came into force. Among the main objectives of the partial revision were to increase the level of protection of policyholders and insured parties, while at the same time increasing the degree of flexibility with regard to insurance contracts with so-called “professional policyholders”. According to this newly introduced concept of so-called “professional policyholders”, the “mandatory” and “half-mandatory” provisions contained in the ICA do not apply (Article 98a, ICA). Hence, in an insurance contract between an insurer and a professional policyholder, the parties have almost full contractual freedom, limited only by principles of general contract law (e.g., good faith).

Pursuant to the definition contained in the revised ICA, a policyholder qualifies as “professional” if the policyholder, inter alia, has a “professional risk management”, or exceeds two of the following three criteria:

• balance sheet total of CHF 20 million;
• net revenue of CHF 40 million; and
• equity/net assets of CHF 2 million.

It is a fundamental principle of Swiss law that every person must act in good faith in the exercise of their rights and in the performance of their obligations. Accordingly, the manifest abuse of a right is not protected by Swiss law. This principle is enshrined in the Swiss Civil Code (CC) and applies in all areas of civil law, including contract law. Due to the comprehensive importance of the principle of good faith throughout contract law, it equally applies in the realm of insurance contracts.

For example, good faith is of utmost importance for contract interpretation. In the event the court cannot ascertain from the evidence submitted the real mutual intent of the parties, the court has to resort to an “objective interpretation” based on good faith. Such interpretation is also called the reliance test, in which the court determines the concurring intent of the parties by asking how the recipient of the communication, which includes the wording of a policy, acting in good faith had to understand such communication, taking into consideration all circumstances.

However, the principle of acting in good faith already exists at the time before a contract is concluded, i.e., at the stage of contractual negotiations, and is known as culpa in contrahendo. It requires that parties negotiate in good faith and that they do not breach certain limited pre-contractual duties in bad faith.

The Swiss Civil Procedure Code, CPC, explicitly reiterates that the principle of acting in good faith equally applies to all parties that participate in civil proceedings.

Swiss contract law – including insurance – upholds the principle of party autonomy and, thus, freedom of contract. Hence, it is the parties’ freedom to conclude or not to conclude a contract and freedom of choice of the partner. There is no obligation to enter a contract (exceptions exist only in highly regulated areas such as healthcare, public transportation, or based on antitrust law).

Furthermore, there is freedom to establish the content of the provisions of an insurance contract. Furthermore, it is a fundamental principle of Swiss contract law, which equally applies to insurance contracts, that for a consensus required for the conclusion of a contract, the parties must only agree on the basic points of the contract (essentialia negotii), while less important points can be left open.

To the extent that the parties’ insurance contract leaves issues unaddressed, statutory provisions set forth in the ICA will apply by default. Put differently, only if the parties have not agreed on specific provisions in their contract, the statutory law rules serve to complete the contractual terms and, thus, apply by operation of law.

In general, the same principles apply in the realm of insurance contracts concluded with consumers. There is no separate code or law specifically aimed at protecting the interests of consumers buying insurance products. Furthermore, the ICA does not distinguish between consumers and non-consumers, but the revised ICA only grants opt-out privilege to so-called “professional policyholders” (see detailed answer to question 10 hereinabove). Lastly, as Switzerland is not a member of the EU, the EU Directive on “Insurance Distribution”, aimed at strengthening consumer protection, does not apply in Switzerland.

However, there are five caveats to this.

• First, the Swiss Civil Procedure Code (CPC), the Swiss Private International Law Act (PILA) and the Lugano Convention (i.e., the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters dated 30 October 2007 agreed between Switzerland, the European Union, Norway and Iceland) contain provisions concerning the place of jurisdiction for matters pertaining to “consumers” (as defined in the CPC, the PILA and the LC) that cannot be waived by the consumer before the dispute has arisen.
• Second, the PILA contains provisions concerning the choice of law for matters pertaining to “consumers” (as defined in the PILA) that cannot be waived by the consumer.
• Third, general terms and conditions of an insurance contract, i.e., insurance terms and conditions that have not been individually negotiated with the insurer, are subject to the Swiss Act against Unfair Competition, which provided that general terms and conditions must not:

1. be to the detriment of consumers;
2. be against good faith; or
3. contain a significant and unjustified imbalance between the policyholders’ rights and obligations.

• Fourth, statutory law provides that, in general, the insurer is liable for all events that display the characteristics of the risk for which the insurance was taken out unless the insurance contract excludes particular events from the insurance in a precise and unambiguous way (Article 33 ICA). Hence, to the extent that coverage is not explicitly excluded, there is a certain presumption for coverage concerning the type of risk insured under an insurance contract.
• Fifth, even though the parties to an insurance contract are generally free to agree on contractual provisions that deviate from Swiss statutory insurance law, there are certain boundaries which should guarantee a certain level of protection for policyholders. As set out in the answer to question 10 hereinabove, Articles 97 and 98 of the ICA contain exhaustive lists of certain statutory law provisions defined as either “mandatory” (which means that the parties to an insurance contract must not contract around these provision) or “half-mandatory” (which means that the parties can only agree on a provision that is more beneficial for the policyholder or insured than the statutory law provision), respectively. (As also set out in the answer to question 10 hereinabove, so-called “professional policyholders” can opt out, Article 98a ICA).

In the field of liability insurance (in German: Haftpflichtversicherung), an injured (third) person or its legal successor has a direct right of action against the third-party insurer despite not being a party to the respective insurance policy.

The revised ICA, which came into force in 2022, introduced a direct right of action for third parties (or their legal successors) against the liability insurer (Article 60 ICA). Prior to the revised ICA, only a limited number of special laws requiring compulsory liability insurance in the areas such as motorised vehicles, ships, airplanes, railway, hunting, or nuclear plants, provided a direct right of action against the liability insurer. Apart from these statutory law provisions, a third party could only be entitled to sue an insurer if entitled by means of assignment of a claim for coverage. Under the revised ICA, this right applies to all types of liability insurance contracts, and it applies regardless of whether or not the liability insurance is compulsory.

However, there are several limitations, both regarding the third party’s direct right of cation as well as the insurers’ right to rely on defences:

In general, the third party may claim for insurance coverage only within the scope of liability insurance cover that exists between the insurer and the policyholder. Hence, the insurer’s obligation to provide coverage is subject to the same objections and defences that the insurer may raise by virtue of the statutory law or the contract against the policyholder. Put differently, the third party suing an insurer for coverage does not benefit from more beneficial coverage conditions than the policyholder. Hence, the insurer can rely on the same defences as in a coverage dispute directly brought by a policyholder or insured.

Furthermore, third parties have only very limited (and in the case of non-compulsory liability insurance almost no) rights to obtain information about the insurer and/or the insurance contract, which usually puts thirds parties at a significant disadvantage.

In the realm of compulsory liability insurance, however, the insurers’ right to rely on defences are significantly limited by operation of statutory law. The insurer must not raise any defences arising from the insurance contract or from statutory insurance law (e.g., non-fulfilment of cover conditions, exclusions of cover, breach of obligations, failure to pay premiums or the deductible). In the area of mandatory liability insurance, the statutory exclusion of defense means that the insurer’s obligation to pay benefits to the injured party goes beyond what is agreed between the insurer and the tortfeasor (policyholder). Thus, in the area of mandatory liability insurance, the insurer cannot assert any objections against the injured party apart from the mandatory sum insured.

As there are no official statistics available in Switzerland as regards the trigger for cover agreed in insurance contracts, this question is difficult to answer. In insurance policies governed by Swiss law, parties usually agree on ‘claims-made’ or on an ‘occurrence’ trigger.

However, depending on how broad or narrow the parties to a ‘claims-made’ policy define the term “claim”, the actual trigger for coverage may be a hybrid between ‘claims-made’ and ‘occurrence’.

Again, as there are no official statistics available in Switzerland as regards the trigger for cover agreed in insurance contracts, this question is difficult to answer. The type of exclusions usually agreed in insurance contracts depends on several factors, such as the type of insurance policy, the premium paid, the time when an insurance contract is agreed (i.e., whether there is a soft or hard insurance market at the time of concluding the policy), or the risk appetite which can vary from insurer to insurer.

Business liability insurance policies usually contain standard exclusions, such as for losses arising from asbestos, nuclear energy, war and civil war, terrorism, or international sanctions.

In addition, statutory insurance law provides that an insurer does not owe any indemnification to the insured under the insurance contract if the insured has intentionally caused the insured event (Article 14(1) ICA) or such indemnification has to be reduced in case of gross negligence (Article 14(2) ICA). The insured acts “intentionally” within the meaning of statutory law when the insured person acts with so-called “specific intent” (in German: Absicht) or “direct intent” (in German: direkter Vorsatz). Therefore, so-called “conditional intent” (in German: Eventualvorsatz), i.e., where an insured is aware that its actions might cause damage and nonetheless acts accepting these consequences, is not sufficient to exclude coverage by operation of law (i.e., based upon Article 14(1) ICA).

Liability under Swiss law exists only if the breach of contract was causal to the damage occurred (e.g., Articles 41 or 97 Swiss Code of Obligation, SCO). Causation means the relationship between the harmful act (or omission) and the alleged damage (loss). Causation in the meaning of Swiss law is subject to a twofold requirement:

First, the injured person bears the burden of proof that there is a causal connection between the unlawful act (or omission) and the alleged damage (loss). Pursuant to the so-called “conditio sine qua non”-formula – which is a “but for”-test –, there is causation if there had not been any damage if the harmful act (or omission) had not taken place. This is called the “natural causal connection” (in German: natürlicher Kausalzusammenhang) and is a question of fact.

Second, the causal connection must be adequate – which is a “proximate”-test –, which requires that, according to the normal course of events and general life experience, the tortfeasor’s behaviour is likely to induce the occurrence of the respective damage or if the occurrence of the damage seems at least favoured by such behaviour. Put differently, the damage must not have arisen due to extraordinary and unexpected circumstances. The “adequate causal connection” is a question of law.

In general, the same principles apply in wide area damage scenarios.

Under Swiss tort and contract law, where there exists more than one possible cause of an injury or damage (e.g., multiple tortfeasors), the persons responsible for these multiple causes are jointly and severally liable to the person suffering damage (Article 50(1) SCO). The court determines at its discretion whether and to what extent these persons responsible for these multiple causes have a right of recourse against each other (Article 50(2) SCO).

Swiss statutory insurance law and usually most insurance policies impose on the insured different duties beyond the duty to pay the premium. In general, these additional duties qualify as so-called obligations (in German: “Obliegenheiten”). Hence, an obligation is the general term for a duty to behave in a certain manner that the policy or the law imposes on the policyholder or the insured.

The legal consequences in case of breach depend on the policy wording and statutory law. However, non-compliance with an obligation does not automatically and not in any event lead to legal consequences. In general, non-compliance with an obligation agreed in the policy only means that the insured does not behave as agreed with and, thus, expected by the insurer. Statutory insurance law does not contain a general provision defining the legal consequences in case of breach of an obligation. Hence, apart from a general right to claim damages (provided that the specific preconditions for damages are met), there are no specific legal consequences and no specific remedies for the insurer, unless the insurance contract or statutory law provide for any specific consequences in case of breach.

However, even if the parties have agreed in the insurance contract on a specific clause which provides for a legal consequence in case of breach of an obligation, a policyholder or insured does not automatically suffer any disadvantage. Under the revised ICA, a policyholder or insured is exempt from legal consequences if the breach was caused without fault or if the insured can prove that the breach had no impact on the occurrence of the claim and on the benefits to be paid by the insurer, i.e., that there was no causation (Article 45 ICA).

As set out in the answer to question 18, a breach of an obligation does in general not entail legal consequences, unless specifically agreed in the insurance contract. And even if the policy provides for a legal consequence, a policyholder or insured is exempt therefrom if the breach was caused without fault or if the insured can prove that the breach had no impact on the occurrence of the claim and on the benefits to be paid by the insurer, i.e., that there was no causation (Article 45 ICA). Considering this, Swiss insurance law provides to a certain extent for a rule which prevents insurers from avoiding liability for unintentional breach (i.e., without fault) of obligations.

Swiss insurance law does not provide for a mechanism pursuant to which a breach of policy terms by one of the policyholders or insured parties would automatically invalidate cover for all the policyholders and insured parties. Instead, the possible legal consequence in case of a breach of policy terms depends, inter alia, on the type and purpose of the policy terms and each policyholder’s or insured party’s individual role in the context of the policy. Hence, it may well be that the breach of one policyholder does not entail any negative consequences for other policyholders or insureds which had duly discharged their duties.

The Swiss Federal Supreme Court held in a generic manner that the insurer’s behaviour constitutes grounds of excuse for the insured’s breach of its obligation vis-à-vis the insurer under the policy. In academic writing on Swiss insurance law, some authors are of the view that in the event of the insurer’s unjustified denial of coverage, the insured obligations under policy cease to exist. As a result, the insured’s non-compliance must remain without negative consequences for the insured.

In Swiss tort and contract law, the general rule is that a person claiming damages must prove that damage occurred (Article 42(1) SCO). However, there is the following exception to this general principle: Where the exact value of the damage cannot be quantified, the court shall estimate the value at its discretion in the light of the normal course of events and the steps taken by the person suffering damage (Article 42(2) SCO).

In insurance law, in essence the same principles apply with regard to the damages recoverable under the policy, unless the parties agree on a different mechanism concerning the calculation and proof of the quantum.

There is no statutory law or case law according to which pre-existing plans for a change of use are relevant to calculation of the recoverable loss in the realm of policies providing for reinstatement of damaged property. However, as Swiss insurance contract law – like Swiss contract law in general – provides parties with maximum autonomy and a high degree of flexibility (see answer to question 10 hereinabove), parties to an insurance contract are free to agree on specific provisions governing the calculation of the recoverable loss.

The insurer’s right of action to recover sums from third parties is codified in Article 72 of the ICA. Pursuant to Swiss statutory insurance law, casualty insurers have a right of action to recover sums from third parties causing an insured loss to an insured. However, the insurer is not given more rights vis-à-vis a third party than the insured. Instead, to the extent that there is coverage, the insurer assumes the insured’s rights vis-à-vis the third party. Under the revised ICA, which came into force in 2022, the insurer’s right of action exists with regard to any type of claim (tort, including fault-based and strict liability, and contract). By contrast, under the old law, the insurer’s right of action was limited to tort claims and, until 2018, to fault-based liability.

If a policyholder becomes insolvent, all its seizable assets and receivables owned by the policyholder at the time of the opening of the insolvency proceedings – including any claims it may have under an insurance contract against an insurer – form the insolvency estate and, thus, are under the control of the insolvency trustee (liquidator). Hence, it is for the insolvency trustee do decide, in compliance with its professional duties, whether or not to bring any claims under the insurance policy.

If in the opposite case, the insurer’s claim for premium (or any other claim it may have) against the insolvent policyholder become due against the insolvent policyholder upon the commencement of insolvency proceedings, and all claims whose object is not a sum of money are converted into monetary claims of corresponding value. The insurer must lodge its claim(s) with the insolvency trustee (liquidator). Absent any collaterals, the insurer’s claim constitutes an unsecured claim. Unsecured claims are divided into three classes. Each class of creditors must be paid in full before creditors in the class below can be paid. As an insurer does not qualify as privileged creditor, its claims would be in the third (and, thus, lowest) class of creditors.

Identifying trends and developments is generally a challenging task as there are no official statistics available in Switzerland as regards litigation on insurance coverage. Yet, it is probably fair to say that not only in the past 12 months, but in recent years policyholders and insureds have developed a stronger appetite for litigating their claims in court rather than settling out of court for a low amount or even accepting the insurer’s denial of coverage. Furthermore, there has been an ongoing trend that disputes pertaining to larger insurance programmes for companies with international commercial activities are usually submitted to arbitration.

Apart from specific revisions on substantive insurance law (see answer to question 10 hereinabove), there have been general improvements on procedural law that will also be beneficial in insurance disputes.

Switzerland has been one of the preferred venues for hosting international arbitrations for decades and has been ranked among the three top venues for ICC arbitration proceedings worldwide. Disputes on insurance contracts are among the cases decided by arbitral tribunals seated in Switzerland. In an effort to make Swiss arbitration even more user-friendly, the Act on the Swiss Federal Supreme Court has been amended so that submissions in the appeal proceedings before the Swiss Federal Supreme Court can also be submitted in the English language.

Furthermore, there are plans to establish a “Zurich International Commercial Court”, which would be a special chamber at the existing Commercial Court of the Canton of Zurich for international commercial disputes to be heard and decided in the English language. This would certainly be an additional improvement to the international “litigation environment” in Switzerland.