BIBA response to the Consultation Paper from the European Commission on the Compensation of victims of cross-border Road Traffic Accidents in the European Union

29th May 2009

The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance organisation representing the interests of insurance brokers, intermediaries and their customers.


BIBA membership includes 1700 regulated firms. Insurance brokers and intermediaries distribute nearly two-thirds of all UK general insurance. In 2007, insurance brokers and intermediaries generated £1.5 billion of invisible earnings and they introduce £22 billion of premium income into London’s insurance market each year.


BIBA is the voice of the industry, advising members, the regulators, the Government, consumer bodies and other stakeholders on key insurance issues.  


 


BIBA members provide professional advice to businesses and consumers, playing a key role in identification, measurement, management, control and transfer of risk.  They negotiate appropriate insurance protection tailored to individual needs and operate to a very high standard of customer service with the aim of ensuring peace of mind, security, financial protection and the professional advice required.


 


Our responses to the 2 questions set out are as follows:


 


Question 1 – Compensation Award Options


 


BIBA chooses option 1, this is explained within the options below.


 


Option 1


 


Await the results and impact of application of the ROME II Regulation (EC) 864/2007


which came into force on 11 January 2009 and which in recital 29a) calls upon the


Member States to apply the “restitutio in integrum” principle:


 


“According to the current national rules on compensation awarded to victims of road


traffic accidents, when quantifying damages for personal injury in cases in which the


accident takes place in a State other than that of the habitual residence of the victim, the


court seized should take into account all the relevant actual circumstances of the specific


victim, including in particular the actual losses and costs of after-care and medical


attention.


 


BIBA Response:


 


This would appear to be the most straightforward and more workable of the options which in real terms is the truest form of putting the individual back in the same position they were in prior to the incident allowing for the lifestyle they enjoy in their member state. 


 


Benefiting this further would be for each member state to contribute towards a form of central library indicating the level of compensation awards by their judiciary and/or insurance industry for their own countries.  For instance, BIBA would see the UK lodging the JSB Guidelines to indicate the level of compensation awarded for the UK and we assume that all other countries have similar guidelines.  This, combined with supporting documentation for other heads of claim, i.e. salary, medical reports, NHS charges, care claims, etc., should then result in a fair and accurate settlements.


 


If one of the two parties resides in the country where the accident took place then there seems an overriding view that this is where any action should take place. That would not of course address the innocent party who may reside in another EU territory. However in option 6 the option to go back to their home state to take action has some merit. In UK law where both parties have the option to choose another country where there is a logical reason and BIBA are sure that this would seem sensible. What we must ensure is that the compensation is fair and reasonable and that the innocent party is not prejudiced by this action.


 


Therefore option 1 with the proviso that takes account of the home states position that is to say state aid and compensation is taken into consideration.


 


We could see situations here where an insurer may opt for one state purely on the grounds of lower court costs and compensation awards. We are not sure however how the market will react as the majority of policies will have a jurisdiction clause and Rome II looks to over ride that to harmonise the position across all states.


 


Our understanding of this option is that liability for the accident/injury would be based on the law of the country in which the accident/injury occurred but the quantum would be assessed on the rules of the country where the victim normally resides. Lex fori rule applied in Harding v Wealands 2006 not a decision that found favour with other European courts.


 


We think it is right that when operating in any country you should be subject to the laws of that country and so it is right that in the event of an accident you are judged on the standards of fault or negligence of that country. However, the damages awarded should be an attempt to compensate you for the actual loss suffered. That loss will very much depend on the country in which you reside, as it will be influenced by the cost of medical and other care and the standard of living of that country.


 


By granting the court some discretion over this matter this should over come most anomalies and UK courts have not in the past had undue difficulties in applying the standards for liability for the country where the accident happened but applying the level of UK damages.  We think this option will produce the most equitable solution ad can be reviewed in the light of future experience.


 


Option 2


 


Provide better information to people in cross-border situations such as a standardized


brochure explaining the main reasons for differences in compensation awards between


the Member States and the possibilities or options that exist to reduce or eliminate the


risk of unexpectedly low compensation. This brochure would be distributed via national


channels such as motor insurers’ bureaux, automobile clubs and victims’ associations.


 


BIBA Response:


 


This is not viable due to the volume of information that would need to be disseminated, the number of member states involved and the reliance on individuals promoting and distributing it.


Option 2 would be of little practical use. Very few people would read it as few visitors expect to have a serious accident when travelling abroad. The brochure to cover all members of the EU would be a very lengthy, difficult for the layman to understand and a nightmare to keep up to date. What would the person then be expected to do with the information? We think it unlikely that insurers would offer insurance cover to top up the compensation for individual states.


 


Option 3


 


Create European guidelines on the types of recognized compensation items and the way


these should be calculated. These guidelines could be used, especially in jurisdictions


with a great deal of judicial discretion in relation to assessment of damages, to assist


judges in assessing damages and to move towards a more harmonized system in the long term.


 


BIBA Response:


 


This is a good idea in theory but who is to decide what are the types of recognised compensation items and the way they should be calculated? As referred to above each country’s system has been developed to reflect the circumstances of that country. Option 1 achieves much of the aims of this option but more constructively. We would agree that in the long term a more standardised set of recognised compensation items could be desirable but that should be the subject or a separate exercise and will take years to agree.


 


It would also be viewed as subjective and reliant upon the interpretation of individual Member States creating a conflict of views and create two systems for judges to adhere to.


 


Option 4


 


Set minimum EU standards for the types of recognized compensation items and the way


these should be quantified. This solution would not prevent Member States from


continued use of headings not caught by the minimum standards and therefore


differences between compensation levels would remain.


 


BIBA Response:  


 


This option only partially solves the problem and this would not necessarily reflect the loss suffered by the victim. The minimum standard would presumably have to be the lowest figure of any state and so would not reflect the costs or circumstances of other countries.


 


Option 5


 


Create a table at the EU level detailing minimum awards per type of injury


(compensation for pain and suffering). Compared to option 4, only one of the many


damage award elements would be standardized.


 


BIBA Response:


 


Option 5 is marginally better than 4 but difficult to apply. In the UK there are only certain guidelines for Judges in assessing pain and suffering. Trying to produce a table would take years to agree and then how is it to be used if it is only for minimum standards.


 


What decides whether you award more? is it based on the awards of the country where the accident happened or where the victim lives. If the minimum standard is above the normal payment in that country do they have to increase their standards for an entirely domestic incident. How many types of pain and suffering are going to be in the table and will it be increased each year by inflation?


 


Ultimately it would be too difficult to standardise fairly across differing economic climates between Member States.


 


Option 6


 


Apply the law of the country of the victim’s residence “lex damni” to claims of visiting


victims. This solution would provide the victim with compensation that is based on the


practice in the victim’s country of residence. However, in cases where several victims


with different nationalities are involved in the same accident and the claim is settled


collectively in the country of the accident, several foreign laws would have to be applied.


 


BIBA Response:


 


In essence this is fair but would be automatically incorporated if Option 1 if taken up.


 


Option 7


 


Introduce a compulsory driver’s insurance (the so-called first-party insurance) covering


also passengers travelling in the vehicle. Drivers’ policies appear to exist in most


Member States and are sometimes even automatically included in third party liability


insurance policies. The idea is to make this type of insurance compulsory. In order not to


only address victims who are drivers, the scope of cover should be extended to all


passengers travelling in the vehicle of the driver.


 


 


 


 


BIBA Response:


 


This option is very little use. Not all victims are passengers in vehicles, what happens to pedestrians? If it is compulsory how do you set the limits, does it only apply if you travel outside your country of residence if so what happens if you have people from Germany and France travelling in your car in the UK? Will you be able to claim compensation in addition? If not surely that is removal of a very important right. If you could then you would be compensated twice. Therefore we do not support option 7.


 


Option 8


 


Introduce a system EU wide whereby visiting victims would settle their claims with their


own third-party liability motor insurer and, by applying the presumption that the accident


took place in the victim’s country of residence, receive compensation in accordance with


the law of the country of their residence.


 


Such a system would require an agreement between insurers in order to determine


apportionment of costs, and to allow effective settling of accounts. Systems for so-called


direct settlement of claims already exist in many countries.


 


BIBA Response: 


 


Interesting option but again assumes the victim has third party cover but of course they may not if they are a pedestrian. What happens if the eventual payer disagrees with the amount paid? This seems far too complicated to work and who pays the costs as in Spain and France the costs are generally not recoverable.


 


Where insurers enter into agreements for agents to handle claims voluntarily these can work but the service provider has an incentive to perform to retain the contract, which would not apply under this option.


 


We have concerns about the recovery aspect once the victim’s Insurers have met and settled their Insured’s claim and then the Member State has an issue with quantum and/or liability.  This could be seen as too dictatorial rather than having open negotiation channels through the EU.


  


 


Question 2 – Limitation periods options


 


Biba supports three options (2,3,7) for limitation periods and we have answered 2,3 and 7 first.


 


Option 2 (see Option 2 with regard to compensation awards)


 


Provide better information for people in cross-border situations such as a standardized


brochure explaining the differences between limitation periods. This brochure would be


distributed via national channels such as motor insurers’ bureaux, automobile clubs and


victims’ associations.


 


 


BIBA Response:


 


A website that contained information on limitation periods would be helpful and should be constructed but we do NOT see this as a single solution as it would be very technical, particularly the UK law section. See additional comments below.


 


Option 3


 


Make it compulsory for third party liability insurers and their claims representative


appointed in accordance with Directive 2000/26/EC to inform claimants in cross–border


cases about the applicable limitation period as well as related procedures, failing which


responsibility might be established on the side of the insurer where the expiry of the


limitation period leads to the foreclosure of the right to claim.


 


BIBA Response:


 


Option 3 – This would be OK for seasonal travellers, however, could be confusing for any high frequency traveller visiting a number of different States. 


 


It is a good idea, although at this stage the victim should have their own legal advice but it seems a sensible safeguard at little cost. Option 3 would be more beneficial if coupled with a minimum to be agreed but not less than 4 years.


 


One recommendation we would make is that there could be compulsory legal expenses cover included in motor policies where the vehicle is used outside its country of use covering the driver and passengers. This still leaves a gap with pedestrians, cyclists etc but goes some way to help what could be an enormous expense.


 


However we would like to move long term towards option 7 to wider consideration for a harmonisation of all personal injury time bar periods (not just motor) and that this should also be consulted upon, but we are aware this would take some years to achieve.


 


Option 7


 


Introduce a general European regulation on limitation periods that would provide for a


harmonized legal framework and which would deal with all important elements of


limitation periods (starting date, suspension and interruption, length, rules for disabled


and minors).


 


BIBA Response:


 


Unlike with the compensation awards, this element is not affected by the economic climate of each Member State, therefore, a standard regulation across all states seems to be the most structured and fair way to cater for all aspects of the claim and yet protect the claimant without prejudicing them with regards to unrealistic time periods.  All of this is good as long as there is consultation and full agreement on what limitation is decided upon.


 


Option 7 is one of our chosen options, as to sit back and let the system resolve itself (option 1) is not realistic. We do have to have the option for the central time bar to be over turned on appeal, so is there potentially an appeals process in the event that if there is a failure and then the injured party is not disadvantaged. This option is a good solution for the Motor insurance issue and one that we should work towards although we are aware that this is a long term solution and also have concerns that there is a strong argument that wider consideration for a harmonisation of all personal injury time bar periods should also be consulted upon. (not just Motor).


 


Option 1


 


Do nothing since the negative impact of the current system on visiting victims is not


significant.


 


BIBA Response:


 


If one person is disadvantaged then it is significant to them. There should be a better option.


 


Option 2 (see Option 2 with regard to compensation awards)


 


Provide better information for people in cross-border situations such as a standardized


brochure explaining the differences between limitation periods. This brochure would be


distributed via national channels such as motor insurers’ bureaux, automobile clubs and


victims’ associations.


 


BIBA Response:


 


We feel that this is impossible. Whole text books could be written on the limitation periods in the UK alone and the exceptions and the courts still grapple with these problems from time to time and is not really viable for the same reasons with regard to compensation awards


 


Option 4


 


Create a rule setting the time frame within which the claim must be presented by the


visiting victim to the foreign liability insurer or its claims representative. This obligation


would be complementary to the reasoned offer procedure stated in Directive 2000/26/EC.


 


BIBA Response:


 


A viable option although this is more akin to a memorandum of understanding or gentleman’s agreement, whereas Option 7 provides for more stringent regulation and clear parameters.


 


Forming the rule would be the problem and could take years and then there would need to be exceptions.


 


Option 5


 


Increase the limitation period for visiting victims, by granting them additional time in


order to reflect the fact that they have to organize their legal action from their country of


residence. This option presumes partial harmonization of national civil laws.


 



BIBA Response:


 


If you have a uniform limitation period, taking into account minors etc, as per Option 7, this would incorporate allowance for the additional time required for this element.


Some limitation periods are already long, 10 years in France or 30 years for serious or fatal accidents in Germany so extending them beyond these limits would be a problem for a number of countries such as Spain where it is generally 1 year. A minimum could be set of say 4 years.


 


Option 6


 


Create a rule according to which the limitation period is suspended as soon as the victim


has sent a claim either to the liable party, to the insurance company of the liable party or


to the national compensation body in cases where the vehicle was uninsured or


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