Motor vehicles liability insurance

Within the framework of the establishment of the internal market, the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles helps to give substance to the free movement of persons and goods. The First Council Directive 72/166/CEE on motor vehicle insurance established the basic principles for ensuring the free movement of motor vehicles, viz. the abolition of frontier checks on insurance and compulsory insurance against civil liability for motor vehicles in the EU. Four other directives on motor vehicle insurance were subsequently adopted to supplement this system by providing enhanced protection for persons involved in road-traffic accidents.

ACTS

First Council Directive 72/166/EEC of 24 April 1972 on the approximation of the laws of Member States relating to insurance against civil liability in respect of the use of motor vehicles, and to the enforcement of the obligation to insure against such liability.

Second Council Directive 84/5/EEC of 30 December 1983 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles.

Third Council Directive 90/232/EEC of 14 May 1990 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles.

Fourth Directive 2000/26/EC of the European Parliament and of the Council of 16 May 2000 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles and amending Council Directives 73/239/EEC and 88/357/EEC.

Fifth Directive 2005/14/EC of the European Parliament and of the Council of 11 May 2005 amending Council Directives 72/166/EEC, 84/5/EEC, 88/357/EEC and 90/232/EEC and Directive 2000/26/EC of the European Parliament and of the Council relating to insurance against civil liability in respect of the use of motor vehicles (Text with EEA relevance)

SUMMARY

The harmonisation of the laws on compulsory insurance against civil liability in respect of the use of vehicles * is important for the attainment of the common market. The free movement of persons and goods can then be secured in full.

Between the First Council Directive 72/166/EEC and the Fifth Directive 2005/14/EC the scope of motor vehicle insurance was extended, in particular by strengthening cooperation between Member States concerning compensation for persons suffering an accident outside their Member State of residence.

Abolition of frontier checks on insurance certificates at frontiers

The abolition of frontier checks on certificates of insurance against civil liability is an important principle designed to make traffic in the European Union as fluid as in an individual country. Nevertheless, non-systematic checks on insurance certificates may be carried out if they are not discriminatory and do not constitute checks intended solely to verify such insurance.

In the case of vehicles that are normally based * in the territory of a Member State, national insurers' bureaux * are responsible for settling accidents occurring in the territory of another Member State.

In the case of vehicles which are based in the territory of a third country, they are not allowed to enter the territory of the European Union unless they are covered by insurance against civil liability in respect of loss or injury caused anywhere in the territory of the European Union.

Compulsory insurance against civil liability in respect of the use of vehicles

The obligation to take out insurance arises from the abolition of checks at frontiers. Each Member State must take all measures necessary to ensure that civil liability in respect of all vehicles normally based in its territory is covered by insurance.

The insurance must in particular cover all the territory of the European Union. European law also aims to ensure that persons using a vehicle outside their State of residence can be quickly compensated under procedures in their State of residence for an accident occurring in another Member State.

Policies for compulsory insurance against civil liability in respect of the use of vehicles cover, for the duration of the contract, the whole of the territory of the European Union with the payment of a single premium.

Moreover, derogations may exist in certain Member States for certain natural or legal persons and for certain types of vehicle having a special registration plate. These derogations must be notified to the Commission by the Member States in question, which must take appropriate measures to ensure that compensation is paid in respect of any loss or injury caused in the territory of other Member States by such persons or vehicles. In addition, Member States must designate a body responsible for compensating injured parties in such cases in order to ensure that they are not deprived of compensation in the event of an accident.

Each national insurance bureau is required to centralise and communicate to other national insurance bureaux information on accidents caused in their territory by vehicles of other Member States (such as particulars of vehicle insurance).

The rule determining the country in which the risk is situated is subject to derogation for accidents involving a vehicle imported from one Member State into another. In such cases, after June 2007 the Member State of destination of the vehicle will be liable for compensating injured parties for a period of 30 days after the buyer takes delivery of the vehicle even though the vehicle has not yet been officially registered.

Protection of injured parties

Injured parties are protected in respect of all loss or injury caused in their Member State of residence. They are also protected in respect of all loss or injury caused in a Member State other than their Member State of residence but arising through the use of vehicles insured and normally based there. In addition, subject to certain conditions, special rules apply to compensation for loss and injury caused by vehicles that are unidentified and not insured.

The scope of loss and injury is also clarified. Compulsory insurance against civil liability in principle covers personal injuries and damage to property. It also extends to the personal injuries of all passengers in a vehicle, other than the driver. From June 2007, personal injuries and damage to property suffered by pedestrians, cyclists and other non-motorised road users will also be covered by this insurance in all Member States.

In this connection, the following cannot be excluded from cover:

• injured parties, on the ground that they are relatives of the person causing the accident;
• third parties who are injured in connection with unauthorised use of a vehicle or if the vehicle is used by a person without a driving licence or does not fulfil technical and safety requirements.

In addition, the minimum amounts of cover for which insurance is compulsory have been prescribed by European law. They are without prejudice to higher cover that may be prescribed by Member States. These minimum amounts are as follows:

• in the case of personal injuries, a minimum amount of EUR 350 000 per person or EUR 500 000 per accident irrespective of the number of injured parties. These amounts will be increased to EUR 1 million per person or EUR 5 million per accident with effect from June 2007 or the date of the end of the transitional period for the Member State in question;
• in the case of damage to property, EUR 100 000 per accident irrespective of the number of injured parties (this amount will be increased to EUR 1 million with effect from June 2007 or the date of the end of the transitional period for the Member State in question). In addition, in the case of damage to property, excess may be fixed by the Member State if the vehicle involved in the damage has been stolen or obtained by violence.

These new amounts will be reviewed every five years in order to take account of changes in the European Index of Consumer Prices.

Injured parties have a right to information. With this in view, information centres have been set up pursuant to European law in every Member State. They are required to provide any person who has suffered injury or damage to property with the information needed to allow them to claim compensation for the loss and injury sustained, i.e. the registration plate and insurance policy details of the vehicle involved in the accident.

Injured parties also enjoy a right of direct action against insurance undertakings, to be secured by Member States, including in the party's Member State of residence.

Representative responsible for settling claims

The representative is responsible, in relation to such claims, for compiling all information necessary for the settlement of the claim and for taking the measures necessary to negotiate a settlement. Representatives must be capable of examining cases in the official language(s) of the Member State of residence of the injured party.

All insurance undertakings covering risks relating to the civil liability of terrestrial motor vehicles must appoint a claims representative in each Member State other than that in which they have received their official authorisation.

The representative must be resident or established in the Member State where he is appointed. However, the requirement of appointing a claims representative does not preclude the right of the injured party or his insurance undertaking to institute proceedings directly against the person who caused the accident or his insurance undertaking.

Moreover, financial or administrative penalties may be imposed if the injured party's claim for compensation presented to the insurance undertaking of the person who caused the accident or to its claims representative has not received a response within a period of three months. These penalties ensure that injured parties will obtain proper compensation.

Guarantee funds, information centres, compensation bodies and central bodies

The Community directives provide enhanced protection for injured parties by requiring four bodies to be set up in each Member State, i.e. a guarantee fund, a compensation body, an information centre and a central body. Member States have the option of designating a single institution or several institutions to discharge the duties of these bodies. These bodies must ensure that the injured party can be compensated as quickly as possible, even if the insurer of the person responsible for the accident refuses to cooperate.

Guarantee funds are responsible for compensating the injured party for personal injury or damage to property caused by a vehicle that is unidentified or not insured.

The injured party may thus apply directly to the guarantee fund of his Member State of residence. The fund must provide a reasoned reply concerning its intervention on the basis of the information provided by the injured party.

However, Member States may preclude such funds from intervening where persons have voluntarily entered the vehicle causing the injury if the fund can prove that they knew the vehicle was uninsured. Member States may limit or exclude the intervention of such funds in the case of damage to property caused by an unidentified vehicle. Lastly, in some Member States, excess may apply to damage to property caused by an uninsured vehicle.

Compensation bodies are responsible for compensating injured parties in the following cases:

• where the insurer of the vehicle that caused the accident has not designated a claims representative;
• where the insurer or his representative has not made an offer of compensation or provided a reasoned reply within a period of three months from presentation of the claim for compensation.

However, the compensation body will not intervene if the injured party has initiated legal proceedings.

The compensation body must respond within two months of presentation of the claim for compensation by the injured party unless the insurance undertaking or its representative has in the meantime provided a reasoned reply to the claim.

A compensation body that has been subrogated can claim reimbursement of the sum paid by way of compensation from the compensation body of the Member State where the insurance undertaking of the person who caused the loss or injury is established.

Where the vehicle or insurance undertaking cannot be identified, the compensation body is subrogated to the rights of the injured party and is thus entitled to claim against:

• the compensation body in the Member State where the vehicle is normally based, if the insurance undertaking cannot be identified;
• the guarantee fund of the Member State where the accident took place, if the vehicle cannot be identified; or
• the guarantee fund of the Member State where the accident occurred, if a third-country vehicle is involved.

Information centres must keep a register of vehicles registered in their territory, a list of insurance undertakings providing cover against civil liability for such vehicles and a list of bodies designated to provide compensation for injured persons in the Member State in question.

An injured party is entitled a period of seven years after the accident to contact the information centre of the Member State where he resides, that of the country where the vehicle is normally based or that of the country where the accident occurred. An injured party may thus obtain details of the name of the insurer, the number of the policy for the vehicle in question and the name of the representative responsible for settling claims in his country of residence.

Information centres must cooperate with each other and apply to insurance undertakings or vehicle registration bodies to obtain such information. They must provide such information to injured parties if the latter have a legitimate interest in obtaining it. When processing personal data, they must act in accordance with the law on the protection of personal data (Directive 95/46/EC).

Moreover, in order to facilitate the provision of the basic data necessary to settle accident cases, data on such cases must be compiled in each Member State by a central body from June 2007, if appropriate electronically.

RELATED ACTS

Council Directive 72/430/EEC of 19 December 1972 amending Council Directive 72/166/EEC of 24 April 1972 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles and to the enforcement of the obligation to insure against such liability [Official Journal L 291 of 28.12.1972]

Commission Decision 2003/20/EC of 27 December 2002 on the application of Article 6 of the Directive 2000/26/EC of the European Parliament and of the Council of 16 May 2000 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles and amending Council Directives 73/239/EEC and 88/357/EEC (Text with EEA relevance)

Commission Decision 2003/564/EC of 28 July 2003 on the application of Council Directive 72/166/EEC relating to checks on insurance against civil liability in respect of the use of motor vehicles (Text with EEA relevance) [notified under document number C(2003) 2626]

Commission Decision 2004/332/EC of 2 April 2004 on the application of Council Directive 72/166/EEC with regard to checks on insurance against civil liability in respect of the use of motor vehicles [Official Journal L 105 of 14.04.2004]

Commission Decision 2005/849/EC of 29 November 2005 on the application of Council Directive 72/166/EEC with regard to checks on insurance against civil liability in respect of the use of motor vehicles [Official Journal L 315 of 01.12.2005]

Last updated: 09.03.2006