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1.Legal Framework and Exceptions

Under Latvian civil procedure, one of the most fundamental principles is the adversarial principle (party equality), under which each party must prove the facts on which it relies to support its claims or defence (Section 93(1) of the Civil Procedure Law). The court does not collect evidence on its own initiative; rather, the parties compete, inter alia by submitting evidence, which the court then evaluates. Legal doctrine and case-law have established that evidence must be provided by the party asserting a fact, not by the party denying it; in other words, until the claimant has proven the claim, the defendant is not required to prove anything.

Although both parties bear independent evidentiary obligations under the above-mentioned provision, it is generally accepted that the claimant must first prove the merits of the claim, and only then does the defendant prove its defence. Often, it is very difficult or even impossible for the defendant to refute the circumstances forming the basis of the claim until those circumstances have been clearly established and proven by the claimant. This general allocation of the burden of proof is closely linked to the adversarial principle (Section 10 of the Civil Procedure Law) and applies unless the law provides for specific exceptions.

In insurance disputes, the legislature has provided special rules and exceptional situations in which, under certain circumstances, the burden of proof is “reversed” and placed on the insurer (the defendant). Section 18(3) of the Insurance Contract Law stipulates the insurer bears the burden of proving the circumstances that exempt it from performance of the obligations set out in the insurance contract in exceptional cases. Similarly, Section 31(5) of the same law refines the insurer’s evidentiary burden by providing that the insurer must prove any circumstances that justify refusal to pay the insurance indemnity or justify a reduction thereof. Historically, the regulation under the former Law “On the Insurance Contract” (in force until 1 June 2018) was substantively similar in this respect: Section 24(6) placed on the insurer the burden to prove any circumstances that exempted it from the obligation to pay the indemnity. Accordingly, these provisions impose an evidentiary burden on the insurer in special cases—namely, where a contractually or legally stipulated exception exists that releases the insurer from the obligation to pay the insurance indemnity.

Instances where the burden of proof shifts to the other party are not unique to insurance law. The legislature has established special rules regarding the burden of proof, for example, in Section 9(2), Section 29(3), and Section 125 of the Labour Law; Section 21(3) of the Competition Law; Section 169(3) of the Commercial Law; and Section 27(2), Section 28(1), and Section 34(1) of the Group of Companies Law, among others. Such rules, which alter or refine the general allocation of the burden of proof in disputes, are often described as a reversed burden of proof and are frequently linked to certain presumptions and to protecting the comparatively weaker party in a dispute. However, where the legislature has not provided, or case-law has not established, such a deviation, the general procedural scheme applies—namely, the claimant must prove the merits of the claim, while the defendant must prove the merits of its defence.

In disputes over payment of an insurance indemnity, it is important to emphasise the reversed burden of proof does not relieve the claimant of the duty to prove the prerequisites for receiving the indemnity (for example, proof that an insured event actually occurred). Only once the insured event has been established and it has been proven the occurrence of the insured risk caused the insured (in loss insurance) damage in a specific amount may the insurer’s burden to prove circumstances excluding or limiting its obligation to pay be examined. The law does not provide that the burden of proof shifts to the insurer merely because the insurer disagrees with the claim or because a statement of claim has been formally filed—especially where the insurer’s refusal specifies that the prerequisites for paying the indemnity have not been established. Only if and when it is proven the insured risk indeed materialised and that it directly (not due to other circumstances) caused the claimant’s losses, should the court assess whether the insurer has properly invoked a contractual (policy) exception or a breach by the policyholder that excludes or limits the obligation to pay.

Accordingly, only after the claimant has proven the foundational facts of the claim does the insurer bear the burden of proving the existence of the relevant exception; until then, imposing such a burden on the insurer is neither justified nor reasonable, and it may not even be possible to discharge it fully.

2. Application of the Exception in applicable Case-law

Although the case-law of the Supreme Court of the Republic of Latvia has relatively consistently reflected the above approach—namely, the claimant must prove the basis of the claim (occurrence of the insured risk and the resulting loss for which indemnity is sought), while the insurer must prove the exceptional circumstances it invokes to avoid or reduce payment—in practice the line between the parties’ evidentiary obligations, and the point at which the insurer’s evidentiary burden arises, is often drawn incorrectly.

This is largely due to claimants’ procedurally flawed positions and to incorrect or selective interpretation of Supreme Court holdings, with claimants arguing that they disagree with the grounds for refusal and the claim should be granted because the court may assess only whether the grounds for refusal are proven, and the insurer may not alter or expand its reasoning once the dispute is before the court. In effect, this would mean the court should almost automatically uphold the claim if the insurer, as the defendant fails to prove the indemnity is not owed. This is an incorrect and unfounded approach to allocating the burden of proof, as discussed below.

The case-law recognises that if the insurer refuses to pay an indemnity by relying on a statutory or contractual exception (for example, the policyholder’s fraudulent intent, gross negligence, breach of safety rules, unauthorized use of the insured object, etc.), then the burden of proof shifts to the insurer to prove those grounds for refusal. Moreover, the insurer may refuse to pay the indemnity only on a basis provided by law or the contract, and it must prove the facts entitling it to refuse payment. For example, in a case decided by the Supreme Court (Judgment of 14 February 2014 in case No. SKC-17/2014), the insurer refused payment after a fire, alleging the policyholder had provided false information and violated policy conditions. The Supreme Court upheld that the insurer’s suspicions or doubts about the claimant’s conduct do not justify refusing payment—there must be a specific legal ground and proof supporting it; if the insurer refuses, it must: (i) identify the relevant legal basis; and (ii) prove it with evidence. The claimant is not required to “disprove” the insurer’s unproven suspicions. In the latter case, the court found the insurer had failed to prove fraudulent intent or gross negligence by the claimant.

Similarly, in another case (Judgment of 23 December 2014 in case No. SKC-172/2014), where the insurer refused payment, alleging that the driver caused the accident through gross negligence, the Supreme Court essentially agreed that the insurer had not proven the grounds for refusal as required by law. The appellate court had assessed all the evidence and concluded the driver’s conduct did not amount to gross negligence.

In yet another case (Judgment of 13 October 2016 in case No. SKC-311/2016), the insurer refused to pay after a fire, invoking several policy exceptions (damage caused by electrical wiring; premises leased to a third-party without consent; etc.). The Supreme Court emphasised the insurer’s refusal merely citing policy clauses and attaching an expert opinion did not relieve it from the obligation to prove the existence of the exceptions in court. The court concluded the insurer had not actually proven any of the circumstances relied upon in its refusal. For example, it was not proven the fire was caused by a policy exclusion.

Also, there is another noteworthy case (Judgment of 28 March 2018 in case No. SKC-75/2018) concerning indemnity after a vehicle theft. The insurer refused payment, alleging various breaches by the insured (failure to notify the police in time, failure to hand over all sets of keys, etc.). The case turned on whether the insurer had proven these breaches and whether they justified refusal of payment, as well as whether the evidence in the case file supported the reasoning stated in the refusal. The court of first instance had initially focused on whether the insurer had acted in accordance with its obligations, rather than assessing the matter from the perspective of the refusal. The Supreme Court, however, stressed the court must examine whether the grounds cited by the insurer (e.g., late notification) were indeed proven and sufficiently material to release the insurer from its obligation to pay. In this case, the Supreme Court upheld that the appellate court had done so properly, concluding the insurer had legitimately applied the contractual provisions because the insured had acted recklessly and negligently, breaching its obligations.

3. Preconditions for Shifting the Burden of Proof in Case-law

Accordingly, although it is appropriate to refer (when analysing the content and allocation of the burden of proof in disputes over payment of an indemnity) to Section 24(6) of the erstwhile Law “On the Insurance Contract” or to Section 18(3) and Section 31(5) of the current Insurance Contract Law, citing these provisions alone may foster a misleading and imprecise understanding of how and when they apply.

In this regard, it is necessary to refer to Supreme Court case-law holding that where the insurer refuses payment on the ground that the insured risk did not occur or that there is no causal link between the risk and the loss, the burden of proof lies first with the claimant. In such circumstances, the reversed burden of proof does not apply because the dispute concerns the very existence of the insured event, not an exception after its occurrence that would entitle the insurer to refuse or reduce payment. In another Supreme Court case (Judgment of 30 August 2016 in case No. SKC-259/2016), the insurer argued that the collapse of a building roof was not caused by an insured risk (heavy snowfall). The Supreme Court stressed that in such a dispute the claimant must prove that an insured event occurred and the loss was caused by the insured risk. The reversed burden of proof (then Section 24(6) of the Law “On the Insurance Contract”) does not apply because the core issue is whether an insured event occurred at all. The Supreme Court therefore set aside the appellate judgment, which had improperly shifted the burden of proof to the insurer by requiring it to prove the absence of causation (which is a negative fact).

In an earlier case, the Supreme Court also held that it is the claimant who must prove insurable interest in the specific object and the right to receive the indemnity. In that case (Judgment of 13 March 2013 in case No. SKC-145/2013), the claimant insured a building that only partially belonged to the claimant. The Supreme Court upheld that an insurance contract may be concluded only within the bounds of the insurable interest (an individual may insure only their own share). The claimant failed to prove rights to the entire building and therefore could not receive indemnity for the two-thirds share that did not belong to her. This is not an “exception,” but rather a non-existence of the claim in part: the insurer had no obligation to pay for someone else’s property, and the court accordingly dismissed the claim insofar as it concerned the portion owned by third parties. These holdings reflect the general principle and a sound approach: the claimant must prove entitlement to indemnity, including title. The insurer is not required to prove the contrary (e.g., that the claimant lacks rights) until the claimant has proven them.

These Supreme Court holdings align with the Court’s very recent conclusions (Judgment of 24 September 2025 in case No. SKC-482/2025), in which the Court held that the appellate court had erred in imposing on the insurer the burden to prove that a certain period of business interruption was not related to the insured fire; it was for the claimant (the policyholder) to prove causation. The Supreme Court also referred to legal doctrine, according to which, when bringing an action against an insurer for payment of an insurance indemnity, the claimant must prove the existence of the insured event, which rests on the proof of the following: first, the occurrence of the insured risk as defined in the insurance contract; second, the amount of damage suffered or the amount of the specific sum stated in the contract; and third, a causal link between the occurrence of the insured risk and the amount of the damage suffered or the amount of the specific sum (see: Mantrovs, V., Apdrošināšanas tiesības, Riga: University of Latvia Academic Press, 2018, p. 263).

Thus, the Supreme Court’s comparatively recent holdings reaffirm a principle that is well known yet of exceptional importance for the allocation of the burden of proof in insurance disputes: the claimant must prove occurrence of the insured risk, the losses, and the causal link between the event and the losses; the insurer is not required to prove the “non-existence of the insured event,” but only the circumstances that exclude or limit its obligation to pay the indemnity—and only after the claimant has discharged its own burden of proof. A claim cannot be upheld merely because the insurer has failed to prove the non-existence of a risk.

4. The Significance of the Latest Case-law

Although, in general, the Supreme Court’s case-law reflects a consistent approach to allocating the burden of proof in insurance disputes—and for more than a decade has supported the view that the claimant must prove the occurrence of the insured event and the resulting amount of loss, while the insurer must prove the exceptional circumstances on which it relies to refuse payment—lower courts’ judgments reveal divergent approaches to interpreting and allocating the burden of proof.

The principal risk in allocating the burden of proof is an unwarranted departure from the adversarial principle and a disturbance of the balance of parties’ rights and interests, potentially leading to an unjust outcome. For example, if a court improperly requires the insurer to prove the non-existence of the insured event or the absence of causation, it effectively relieves the claimant of its obligation and violates the general allocation rule in Section 93(1) of the Civil Procedure Law. The Supreme Court has repeatedly emphasised the proof of negative facts (“no causation,” “no insurable interest”, etc.) must not be imposed on the defendant until the claimant has positively proven the relevant facts. Consequently, when adjudicating a claim for an insurance indemnity, the court must distinguish whether the insurer’s defence essentially asserts “the event is not an insured event” (which the claimant must prove to the contrary) or that “an exception applies” (which the insurer, as defendant, must prove). The Supreme Court’s judgments in cases No. SKC-259/2016 and No. SKC-482/2025 are instructive in drawing this line; in both, the Court set aside lower-court judgments that had improperly allocated the burden by requiring the insurer to disprove the claimant’s foundational case.

Conversely, where a contractual exception or a policyholder’s breach does in fact exist, the Supreme Court has held the insurer must prove only those facts that release it from liability. For example, in case No. SKC-311/2016, the Supreme Court stressed the insurer could not rely on general phrases such as “the fire started due to technical reasons”; it had to prove the specific exceptional circumstance (e.g., that the damage arose due to an exclusion set out in the policy conditions). If there is no evidence of that, the court cannot release the insurer from its assumed obligations.

Accordingly, if the claimant fails to discharge its burden to prove the insured event and the amount of loss, the claim cannot be considered well-founded. Where and to the extent the claimant has not fulfilled its burden, the maxim ei incumbit probatio qui dicit, non qui negat applies and the burden remains with the claimant; the insurer need not prove anything until the claimant has proven the claim. Conversely, if the claimant has proven the above elements but the insurer cannot prove its defence, the court would have grounds to uphold the claim, absent other impediments. Moreover, the insurer may justify refusal only by reference to grounds provided by law or the insurance contract (e.g., fraudulent intent, gross negligence, enumerated exclusions, failure to perform policyholder obligations, etc.), and the court must examine whether those references to exceptions are substantiated and proven.

5. Conclusions and Recommendations

In light of the foregoing case-law, insurers can protect themselves against unfounded indemnity claims by preparing diligently for potential disputes (both in collecting evidence and in developing procedural strategy). Several conclusions and recommendations emerge as to how insurers may safeguard their interests:

First, if refusing to pay an indemnity is under consideration, the insurer must be prepared to prove each ground for refusal in court. The refusal letter should therefore clearly set out specific circumstances and supporting evidence, rather than vaguely concluding that legal or policy provisions were not observed; it should identify and substantiate precisely which requirement was breached and what facts and documents prove it. Avoid boilerplate language and unsubstantiated suspicions, since in a dispute the claimant or the court may require an explanation for each assertion. For example, if relying on the policyholder’s fraudulent intent or negligence, the insurer should gather as much evidence as possible (expert opinions, witness statements, documents) to substantiate those concerns before making a decision. It is also advisable to refrain from citing merely formal breaches—even if policy provisions were violated—where it is obvious or reasonably apparent that the breach had no impact on the occurrence of the insured risk.

Second, although it may seem self-evident, it is more important than speed to obtain and verify all available information before making a decision, while retaining the possibility to revisit a negative decision (refusal to pay) if significant facts emerge that were unknown to the insurer at the time. This will make it more difficult for the claimant (or the court) to argue that the refusal was unfounded. In this connection, it is advisable to request all necessary information from the policyholder and the insured, to record the relevant facts in a manner suitable for proof in court, and to engage with experts where necessary. In the event of litigation, this will increase the likelihood of proving that the refusal was balanced, reasoned, and well-grounded rather than merely formal.

Third, at the stage of decision-making—or, at the latest, when a potential dispute over payment of an indemnity is foreseeable—insurers should consider how to present their defence most clearly and effectively, including whether to emphasise the claimant has not proven the insured event (for example, lack of causation between the incident and the loss) or that a statutory or policy-based exception applies (for example, the claimant caused the event through gross negligence). It is therefore important to assess the materials and evidence available to the insurer and, if there is confidence that the claimant will be unable to prove causation or other prerequisites for payment, to focus on that aspect. If, however, the principal defence is a claimant breach that entitles the insurer to refuse payment in whole or in part, it is crucial to obtain credible and sufficient evidence in good time (preferably before the decision) and to reflect all such evidence in the refusal letter.