Directive drives insurance issues home

Pierre Thomas asks whether the 4th Motor Insurance Directive represents a step forward for victims in the EU or whether unresolved anomalies and the common law practice of 'forum shopping' will hamper progress

People who suffer road traffic accidents in the UK, involving a liable party who is insured in another European country, can claim compensation from the Motor Insurers Bureau (MIB), which guarantees the liability of that driver in this country.

The claim will then be dealt with by either the MIB or any approved UK representative of the foreign vehicle involved.

Both will deal with the claim according to the law of the place of the accident within the UK and accept service of proceedings within the relevant jurisdiction.

The scheme is still referred to as the 'green card scheme' because vehicles travelling outside their own countries were originally obliged to extend their cover for foreign travel by obtaining a green card from their insurers and were not allowed into other countries without them.

However, virtually all western European states now issue policies which automatically extend cover for compulsory road traffic liability to the whole area.

Green cards are no longer strictly necessary in this area but remain compulsory for certain other states, mainly eastern Europe (except Russia), the near east and north Africa.

But what happens to the claimant who is the victim of an accident elsewhere in Europe? For the background to answering that question, practitioners should see the Brussels Convention 1968 and the Civil Jurisdiction Act 1982, as reaffirmed by their successor, EU Regulation 2001/44 - or 'Brussels II' - which came into force in 2002.

All provide that, subject to certain limited exceptions, a claimant must pursue this claim in the country of either the place of the accident or of the residence of the defendant.

But that position has now been partly changed by a new EU Directive no 2000/26/EC, known has the 4th Motor Insurance Directive, or '4D'.

It came into force on 20 January 2003, with the UK enabling legislation contained in two statutory instruments - the Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 SI 2003 No 37 (regulation 1) and the European Communities (Rights against Insurers) Regulations 2002 SI 2002 No 3061 (regulation 2).

The general principles of the directive are:

- The citizen of an EU or European Economic Area (EEA) state who is the victim of a road traffic accident in a green card state other than his own caused by the driving of a vehicle normally based in another EU or EEA state may require that his claim for compensation be investigated, negotiated and settled in his own state.

- Every EU/EEA insurer must nominate a representative in each other EU/EEA state to handle such claims.

- The victim is entitled to confirmation of the insurer's cover and the representative's involvement within 21 days of presenting the claim; within a further three months, a 'reasoned offer of compensation' in cases where liability is not contested and damages quantified or a 'reasoned reply' where liability is in dispute or not clearly determined.

- If the insurer does not meet these deadlines, it must pay a fine to be determined by its own national authority.

- Victims are entitled to information about their adversary through information bureaux set up in each state.

In the UK, regulation 1 provides for the setting up of the Motor Insurers Information Centre (MIIC) in Milton Keynes.

If the MIIC receives a written request containing sufficient information to identify the vehicle concerned and accompanied by a fee of 10, it will, through the network of other national bureaux, provide the victim with details of the name, address and policy number of the insurer of the vehicle, the identity of its UK representative and, where the victim has a 'legitimate interest', the registered keeper of the vehicle.

- If the insurer has not nominated a representative or does not react within the 21 days or three months, or the vehicle is not insured, the victim is entitled to have his claim handled by the compensation body of his own state set up for this purpose.

Regulation 1 provides that the body for the UK is the MIB and sets out the conditions under which claims can be made and handled.

The MIB must give its 'reasoned response' within two months of a claim being made.

It then has a right of reimbursement of any payments from the body of the state in which the vehicle is based.

- All victims covered by the directive have a direct right of action against insurers.

That right has also been enacted into UK law by regulation 2 (See [2003] Gazette, 30 January, 34).

There are a number of curious anomalies in 4D.

Although it covers accidents in all green card states, it only applies where EU or EEA state-based vehicles are involved.

This includes accidents in Switzerland but not those involving Swiss vehicles.

Regulation 2 only gives a direct right of action to EU and EEA citizens, so again the Swiss and the rest of the world are excluded.

4D seems only to refer to 'claims' without saying whether they only apply to those created after the 20 January 2003.

No provisions are made for the handling of claims after three months, let alone for the prompt payment of any damages agreed.

4D is now in force in most countries (France as from 1 April 2003); where it is not yet in force, insurers may refuse to deal with claims until it is enacted in their own country, yet the compensation body of another state may still have to pay.

The major problem is that created by preamble 13 of 4D.

This states that the system of representatives affects neither the substantive law to be applied in each individual case nor the matter of jurisdiction.

This has two effects:

- Representatives will settle claims according to the law of damages and costs of the place of the accident.

Therefore, victims' representatives must still become familiar with that law.

The only exception is in regulation 1, article 12 (4)(b).

The UK compensating body pays damages that are 'properly recoverable under the laws applying to that part of the UK in which the injured party resided at the time of the accident'.

- 4D still does not by itself entitle a victim to bring legal proceedings against anyone in the courts of his own jurisdiction.

If a claim cannot be settled, the victim can only go to the courts already provided for by Directive 2001/44.

This last effect is challenged by some authorities.

They accept that no right of action is created against the representative.

But it is argued that various statements in 4D indicate the intention of giving the victim a right of legal action against insurers in his own domicile and that article 9 of Brussels II can be interpreted as actually giving that right.

That article gives such a right to the 'beneficiary' of an insurance policy; such expression must now include a third-party victim who is given a direct right of action against insurers by article 3 of 4D and extend the right to him.

This interpretation is strongly contested by others.

They argue that, whatever the ambiguity of some of the language, 4D and article 9 still do not, on their own, give the victim the right to sue in his own jurisdiction.

The former specifically excludes jurisdiction from its scope and the beneficiary referred to in article 9 still covers only those entitled to indemnity under the policy.

An advisory opinion is currently being sought from the European Commission and any continuing controversy may have to be resolved by the European Court of Justice.

The issue poses a particular problem in the UK and Ireland because of their retention of 'forum shopping'.

Most European civil law systems uniformly apply the substantive law and damages of the place of the accident.

Broadly speaking, a Belgian court dealing with an accident in Greece will apply the same Greek law that will be applied by the Greek courts.

The substantive law and level of damages and the rights and obligations of the parties remain the same whatever the jurisdiction.

Only the UK and Ireland retain the common law practice of forum shopping by applying their own levels of damages and costs to all cases before them.

Given the current levels of both, compared to the rest of Europe, it is not surprising that the issue fuels the main resistance to change by those who would be most affected.

If the common law practice were to abandon forum shopping once and for all, the problem might be easier to resolve.

Nevertheless, even the right to negotiation confers a considerable benefit on a victim.

Investigation and negotiation take place in his own country and language, he does not have to translate documents or travel abroad for medical examinations, and he can instruct his own British lawyer.

He also has the right to positive action within a given period even if his subsequent rights get a little fuzzy.

He also has the fall-back of the compensation body of his own country in the event of default.

So does 4D represent a step forward? It remains to be seen whether the common law countries are prepared to help the process by taking their own step further.

Pierre Thomas is a partner at London-based law firm Pierre Thomas & Partners