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Coris News - February 2008

Welcome to 2008's first edition of Coris News. Everyone at Coris would like to wish you a Happy New Year!

We interrupt our usual review of relevant highlights of insurance matters in European countries to focus on a landmark decision given in the European Court of Justice which may well prove to have a dramatic impact on the future handling of insurance claims across Europe.

On thirteenth December 2007 the European Court of Justice ruled that Jack Odenbreit, a German national who had been involved in a road traffic accident in the Netherlands with a Dutch motorist was entitled to bring his claim directly against the responsible Dutch insurers before the courts of his domicile in Germany. This decision marks the culmination of legislative developments over the last decade.

Position under the Fourth Motor Directive

As will be well known the Fourth Motor Directive [2000/26/EC] created a mandatory requirement for motor insurers to appoint Claims Representatives in each of the countries of the EU in order to facilitate the settlement of claims by allowing victims of road traffic accidents, in countries other than their own, the opportunity to approach Representatives of responsible insurers in their own country of residence. The objective was to facilitate negotiations in the language of the victim and accelerate settlement of claims. The same Directive also provided that each Member State should ensure that victims of road traffic accidents should enjoy a direct right of action against a responsible insurer.

It was however explicitly provided that the activities of such Claims Representatives were not such as to modify existing rules as to jurisdiction nor to confer jurisdiction on the courts in the injured person's domicile. It was equally stipulated that the system of Claims Representatives was not to affect rules governing the substantive law to be applied.

Regulation 44/2001

Shortly thereafter there came into force Council Regulation [EC] No 44/2001. Essentially a reworking of what was conventionally known as the Brussels Convention, this set out slightly modified rules governing matters of jurisdiction and enforcement of judgements. For the purposes of road traffic accidents the rules provided, as before, that a Defendant could always be sued before the courts of the Member State of his domicile [Article 2] or alternatively, and if different, before the courts where the 'harmful event' took place [Article 5.2].This was understood to mean, in a road traffic case, the country where the accident took place, rather than where the majority of the damage or loss occurred - most frequently the victim's country of residence. Other rules regulate the position where there is more than one Defendant.

Attention focussed on Section 3 of the Regulation which contains special rules entitled "Jurisdiction in matters relating to Insurance" and in particular on Article 9.1 [b] which provides that an Insurer domiciled in a Member State may be sued "in another Member State, in the case of actions brought by the policyholder, the insured or a beneficiary, in the courts for the place where the plaintiff is domiciled".

Recital 13 to the preamble to the Regulation set out that "In relation to insurance, consumer contacts and employment, the weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules provide for." Taken together some sought to argue that the Regulation should be understood as entitling a victim to bring a claim against an insurer before the victim's home courts but on at least two occasions the English Court is known to have rejected that interpretation, on the grounds that the word 'beneficiary' was not to be understood as including an injured party. As a consequence attempted claims in this country against foreign insurers following accidents occurring abroad were struck out.

Fifth Motor Directive

There the matter rested until the issue was revived in the Fifth Motor Directive [2005/14/EC]. Recital 25 to the preamble to this Directive asserted "injured parties may bring legal proceedings against the civil liability insurance provider in the Member State in which they are domiciled." The basis for this proposition is said to be a proper understanding of Articles 9.1 [b] and 11 [2] of Regulation 44/2001 and in order to reconcile the apparent contradiction with the wording of the Fourth Motor Directive it was stated that that Regulation 44/2001 post-dated the Fourth Motor Directive which was now to be understood as having been "adapted appropriately".

Questions followed from MEPs to the Commission with repeated responses being given in the European Parliament that it was the Commission's intention that such a direct right of action should exist in favour of an injured party before the courts of his or her domicile against a responsible insurer following an accident occurring in another Member State.

Odenbreit v FBTO Schadeverzekeringen NV

During this time Mr Odenbreit had been pursuing his claim. At first instance the Court of Aachen dismissed the proceedings on the grounds of absence of jurisdiction. An appeal by Mr Odenbreit to the Cologne Higher Regional Court overturned that decision in September 2005 but it was then the turn of the Dutch insurers to appeal to the German Federal Court of Justice. That court decided to refer the issue to the European Court of Justice in Luxembourg. The ECJ was asked to rule whether Articles 9.1[b] and 11[2] of Regulation 44/2001 were to be understood as meaning that an injured party in such circumstances could bring an action directly against an insurer before the courts in the Member State where the injured party is domiciled.

Decision of 13 December 2007

The European Court has now answered the question in the affirmative subject to the proviso that the insurer is domiciled in a Member State and that such a direct right of action exists.

In reaching its decision the ECJ appears to have placed considerable weight on the content of Recital 13 to the preamble to Regulation 44/2001. "To deny the injured party the right to bring an action before the courts for the place of his own domicile would deprive him of the same protection as that afforded by the regulation to other parties regarded as weak in disputes in matters relating to insurance and would thus be contrary to the spirit of the regulation." The decision spells out that this finding is not dependent "upon the classification of the injured party as a beneficiary" , but rather that Regulation 44/2001 properly understood had led to "a widening of the scope of that rule to categories of plaintiff other than the policyholder, the insured or the beneficiary of the insurance contract who sue the insurer."

The effect of this decision seems to have created a new third type of cross-border motor claim. In addition to

- the traditional handling of third party claims in the country of the accident or domicile of the Defendant under the Green card scheme, and;

- the Fourth Directive system of mandatory Claims Representatives in the victim's country of domicile, empowered to deal with negotiation of claims and with responses required within specified time limits, there is now added a new route, namely

- An entitlement for injured parties to bring claims directly against insurers before the courts in their own countries of domicile.

Thus an Italian domiciled pedestrian injured in London in a road traffic accident with an English driver may choose to bring his claim before the Italian Courts whilst a Greek resident driver injured in an accident in Germany may prefer to seek compensation from the relevant German insurer before the courts in Greece.

The position of UK Insurers

UK Insurers probably have little to fear from the confirmation of this new jurisdictional opportunity offered to overseas victims.

The position of non UK Insurers

They may well find that where possible the UK will become a jurisdiction of choice with a potential for much increased cost to insurers.

Once claims are brought in a country other than that of the accident the question does of course arise as to which law will be applied - but that is a separate topic worthy of further consideration at a later date. We shall revert to this subject in a future Newsletter.

Michael Zurbrugg

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