8.5 Chapter 5: the protection under the directive

In the context of the coverage under the policy, I first address the question whether the Directive also affects the nature of the liability to be covered and the aspect of the relationship between the regime of the Directive and compensation systems that are not based on liability but on first party insurance schemes. I also pay attention to the meaning of the words 'liability in traffic' which appear in f.i. in the Dutch and several other language versions of the Directive, this in connection with - for example - the wider scope of Article 3a of the Wam.

It is established that traffic insurance schemes, such as those existing in some northern European countries, are not governed by the Directive, and that there is no reason to deem this contrary to the Directive as long as the injured third party does not receive less protection than he would under a liability regime governed by the Directive. I note that the Council of Bureaux, supported by the UNECE, has also decided that payments under such schemes to the liable driver cannot be recovered under the rules of the green card system.

The liability regimes in the Member States differ greatly from each other. In that context, I discuss the question of whether the Directive also affects the nature of the liability regime to be insured. I conclude that the Directive does not address this issue. I discuss case law of the CJEC, which ensures that the requirements of the Directive apply to each liability regime introduced by a Member State.

The Directive in its Dutch version, as do f.i. the French (and several other language versions) relates to the insurance of the 'liability in respect of the use of motor vehicles in traffic'. In that context, I consider the meaning of these words, particularly in the context of the settlement of international traffic accidents. As the content of the concept of 'traffic' is not very precisely defined and seems to vary between Member States, I take the view that national legislation must be deemed decisive. In relation to accidents in the Netherlands, this means that the injured party can also invoke the protection of Article 3a of the Wam against the insurer of the visiting vehicle (as well as against the Dutch Bureau), for example if the liable vehicle, normally based abroad, with a maximum permitted weight of 3.500 kg and loaded with hazardous substances, causes damage in a closed storage accommodation. The Dutch Bureau can recover compensation paid under that aaide from its foreign sister organisation.

The Directive imposes the coverage obligation on the countries of the European Economic Area: the Member States of the EU plus Iceland, Liechtenstein and Norway. This coverage must also be provided if the insured vehicle is used in another Member State for a longer period of time and during the term of the contract.

I note that the Directive itself does not require an obligation for the insurer to provide coverage in the countries referred to in Article 8 - Andorra, Croatia and Switzerland - as well. Vehicles from these countries are only equated with vehicles from the Member States where admission to the territory of the EU is concerned.

National legislation may prescribe a wider territorial coverage, as for example Germany has done by bringing the whole of geographic Europe under the coverage. The Netherlands has extended the coverage to the aforementioned countries of Article 8 of the Directive.

The second aspect of the coverunder the policy concerns the heads of damage to be covered. The Directive only prescribes coverage of damage to property and personal injury. The Member States may include other types of loss in the cover, such as pure financial losses, which ti. Germany has done in general, while the Dutch Wam brings elements of pure financial loss under the cover under Article 3a: damages caused by hazardous substances in a vehicle with a maximum permissible weight of more than 3.500 kg.

The Directive prescribes a minimum insured sum of € 1 million for damage to property, while with regard to personal injury the Member States can opt between a minimum of € 5 million per event for all persons who have suffered a personal injury combined, or a minimum of € 1 million per injured party, without a limit to the number of victims.

The Netherlands have opted for an amount of € 5 million per event. In the case of transport by bus or coach and in the event of damages caused by hazardous substances as referred to in Article 3a of the Wam in conjunction with Article 8:1210 of the Dutch Civil Code, the minimum amounts are € 10 million per event (in the case of Article 3a Wam in addition to the general sums insured).

The provision of Article 14 of the Directive is discussed, pursuant to which the higher sum of two covers must be taken into account in case of an accident in another Member State: that of the Member State of the accident or, if higher, that of the Member State where the liable vehicle is normally based. I defend the view that only the amount of the coverage, not the scope of the cover, should be taken into account. I argue in this context that the regulation of Article 3a of the Wam is too broad, because it could also be taken to mean that the canalised risk liability and the coverage for certain types of pure financial loss should also be involved in the comparison.

Parties insured are those whose liability should be covered under the policy. The Directive leaves this to the national legislature. It does stipulate, however, that the Member States can exclude from coverage the liability of a thief and a person who obtained the vehicle through an act of violence, provided that the victim can present a claim to the guarantee fund. The Wam allows for this exclusion.

The Directive restricts the types of victims who may be excluded from cover. Only the driver and loss suffered by occupants other than bodily injury can be excluded.

The Directive restricts the possibilities to statutory and policy clauses that exclude or limit coverage against third parties.

The Court of Justice of the European Union (CJEU) has ruled that the Directive provides an exhaustive list of restrictive and exclusion clauses that may be invoked against third parties. In practice, this means that only the theft exclusion (explicitly allowed provided the injured party can apply to the guarantee fund) and - if the driver is not authorised to drive the vehicle, if the driver is not in possession of a driving license or if the vehicle does not meet with legal technical safety requirements - the limitation of the compensation for damages for which the injured party is not compensated under social security, are permitted. In my view, the CJEC limits restrictive clauses in the policy beyond what the legislature originally intended. My view is based on comments made by the European Commission in a number of proceedings before the Court. However, the final word is for the Court.

It follows from the Candolin ruling of the CJEC that not only are Member States not authorised to introduce or allow other grounds for exclusion than those permitted by the law relating to insurance, but that - for example - the law on liability and on compensation may also not restrict the rights of victims disproportionately. I argue that the ruling has the effect that the responsibility borne by the passenger of a vehicle with a driver under the influence of alcohol or another intoxicant or stimulant, is eliminated in a socially undesirable mannen

With respect to the Wam, it is established that only the theft exclusion is permitted. Unlike under the Belgian Wam - which is also based on the Benelux Agreement - joyriding does not fall under the term theft. The exclusion on the policy for speed, regularity or agility competitions, which is allowed by the Wam, is not mentioned by the Directive, but is essentially not an exclusion within the meaning of the Directive, because the exclusion is subject to the condition that the liability is covered on another policy - taken out by the organisers of the relevant competition. The liability is thus still covered in accordance with the Wam, but merely under a different policy of insurance than the motor vehicle insurance.

The reasoned response procedure and the sanctions regime imposed by the Directive in the event that the insurer fails to comply with this procedure are discussed in detail. After the zith Directive introduced this procedure to protect the injured party within the meaning of this Directive, the 5th Directive extended its scope to include injured parties in purely national accidents and to green card related damages.

I find that, although the Directive provides that the insurer must submit a reasoned response within three months of the request for compensation, or - if the liability or the amount of damages have not (yet) been established - must motivate why it is unable to do so, it is not very clear on the concept of the motivated response. Clarity can also not be found in the literature. Whether the insurer has complied with this obligation is important, because the Directive stipulates that the national legislature shall impose sanctions on non-compliance with these rules, while the injured party within the meaning of the 491 Directive must be given access to the compensation body. The compensation body shall limit its activity to verifying that an offer of compensation has been made in accordance with the time limits and procedures laid down, without any assessment of the merits. Especially the case of a visiting injured party will show that, in the end, the only way for this person to establish that the insurer has failed to fulfil its obligations, would be by taking the matter to court. The simplification of the victim's path to compensation that the Directive intended thus seems not to be fully achieved.

With regard to the sanctions regime against the insurer (and the Bureau in case of a green card accident), I consider the 'suggestions' to the national legislature in the preamble of the Directive to be very strict and often difficult to apply in incidental cases of non-compliance with the reasoned response requirement. These suggestions - contrary to what appears to be the intention of the Directive - are also not particularly suitable to guarantee the injured party's right to prompt settlement of his claim.

This may not apply to the obligation imposed on Member States to give injured parties a claim to statutory interest in case of non-compliance with the procedure, but this provision is not clearly worded and in addition makes it possible to suffice with a reference to existing obligations. It is to be feared that this obligation will fail to have a real motivating effect on the practice of many Member States.

In a 2007 review of the Directive, the European Commission concluded that injured parties in the Member States are sufficiently aware of their options and rights, that they are familiar with the existence of the claims representative and that the reasoned answer procedure works satisfactorily. I doubt that these conclusions are supported by the survey of the Commission.

My examination of the transposition of the reasoned response procedure in the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft) shows that the obligations in the Wft to make the injured party an offer, or to give a reasoned response, and the sanctions in case of non-compliance with this obligation, protect the foreign victim, but not the Dutch injured party. This follows from the Pact that the law applicable to the sanctions is the law of the Member State of establishment of the insurer, which in itself does not promote the effectiveness of the sanctions.

With respect to the sanctions regime of the Wft, I have come to the conclusion that the possibilities for the Dutch supervisory authority to apply the instruments of the Wft in (isolated) cases of non-compliance with the procedure are limited. Solace can in practice only be expected from the informal instruments of the 'standard-ofconduct transferring discussion' and the warning letter, which are not based on an explicit statutory power. The obligation to pay the (normal) statutory interest (also payable without this provision) cannot be regarded as an additional incentive. Compared with the sanctions threatening French insurers and the 'penalty provision' of € 250 per day of delay to which the injured party is entitled under Belgian law, the Dutch sanction regime may not be very effective in practice.

Finally, I briefly discuss the procedural requirement for the Member States to provide a system for the settlement of disputes between insurer and guarantee fund. I find that the Directive does not provide a system for disputes between the insurer and the guarantee fund in the Member State of the accident in the event of a 491 Directive accident. If the insurer has denied cover, and the guarantee fund of the Member State of the accident also refuses to settle the damages (because in its opinion the insurer should compensate for the damages), the victim will have to institute legal proceedings against the insurer (under the direct right of action) or against the compensation body in the Member State of his residence (for example on the grounds that the liable vehicle was not insured or could not be identified). I do not regard the later body as a representative of the guarantee fund of the Member State of the accident or of the Member State where the vehicle is normally based, but as an independent party. A European system for this situation could be considered.

The claims representative is required to provide a certain level of protection as well. He is the agent of the insurer and it follows from this that his obligations are in principle identical to those of his principal. He will in particular be obliged to apply the same law, which, in most cases, will be the law of the country of the accident.

The claims representative must have sufficient powers to represent the insurer - including, if necessary, in court - and he must be authorised to proceed to payment of the compensation. I believe that, in practice, the Jatter provision will not really benefit the injured party. The claims representative often lacks the financial resources to pay if the insurer has not advanced those resources and a claim will need to be lodged against the insurer. It may be derived from the parliamentary history of the Wft that the claims representative is not required to consult with the insurer, because he must have sufficient powers. I note here that this may be true in theory, but that the claims representative must have factual information about the accident. This information can usually only or in any case most easily be provided by the insurer. He will also sometimes need legal information as well, especially in more complex claims, regarding liability and loss items eligible for compensation, which the claims representative must also request from the insurer.

If the conditions for its involvement are fulfilled, the Bureau guarantees that the claim will be settled as though it were an insurer. As a result, it is possible to refer here to the minimum cover to be provided under the policy.

If the responsible vehicle is normally based in a Member State and the minimum sum to be insured in that State exceeds the sum to be insured in the Member State of the accident, it will be possible to claim this higher sum from the Bureau.

The question of how the Bureau is affected by the restriction of the possibility of the insurer to invoke restrictions on coverage or exclusions is examined. I discuss a number of rulings of the CJEC discussing the relationship between the provision in the Directive that the Bureau acts as guarantor 'in accordance with its national legislation on the compulsory insurance' and the provision in the Directive that the Bureau also acts as guarantor for a loss caused by uninsured vehicles that are normally based in another Member State. Based on these rulings, it can be concluded that the Bureau of the country of the accident can be held responsible if the liable vehicle, normally based in another Member State, is uninsured. The reference to national legislation only pertains to the law regarding liability and the right to compensation. Only in respect of accidents caused by vehicles stolen or obtained through an act of violence does the Directive allow that the victim will have to apply to the guarantee fund of the Member State of the accident. This guarantee fund will then not have a right of recourse against any body in the Member State where the vehicle is normally based.

The Bureau is obliged to give a reasoned response within three months as well, and is subject to the same sanctions regime as the insurer. With regard to the period of three months within which the reasoned response should be given, I refer to the special position of the Bureau, which must obtain its information from abroad, sometimes from non Member States. Examples include information about coverage or validity of the green card, or about the liable person's version of the accident. With regard to the sanctions regime, I advocate exercising restraint in its use, as most of the claims are settled under the green card system by nominated correspondente. Although the Bureau is also responsible for their actions under the mandate described in Chapter 4, the Bureau cannot exercise any real influence in practice. With regard to Dutch law, I find that the Dutch Bureau is not subject to the sanctions regime of the Wft, as the Bureau is not defined as an insurer within the meaning of that Act.

The Directive does not provide for a procedure to settle disputes about cover between the Bureau and the guarantee fund, although such disputes are conceivable. Under Dutch law such disputes are not likely to occur since, under the Wam, the Dutch Bureau is equated with an insurer. Therefore Article 25, fourth paragraph of the Wam can also be applied to the Bureau.

With respect to the guarantee funds, I first examine the subsidiary position of (many) of these bodies. I argue that the provision of the Directive that the guarantee fund has to compensate for the damages of the injured party 'at least within the limits of the compulsory insurance', implies that the guarantee fund must compensate the victim for the same damages and up to the same sums as an insurer. Restrictions allowing the guarantee fund to pay lower sums (and sometimes even not compensating certain heads of damage at all), compared to the damages an insurer would compensate under similar circumstances, seem contrary to the Directive.

In this respect I provide a comparison with the guarantee fund regimes in France and Germany. In the first country, the Fonds de garantie is to a large extent subsidiary: if the injured party can receive compensation from any other source, access to the guarantee fund will be denied to that extent. The German guarantee fund, the Verkehrsopferhilfe, can be considered as subsidiary as well. My conclusion is that the Dutch Waarborgfonds Motorverkeer can hardly be regarded as subsidiary compared to the schemes in the two aforementioned countries.

In principle, the guarantee fund can only be held liable for accidents occurring in its 'own' country. The adjustment of the Wam to the 3rd Directive has given room for an interpretation - in my opinion not intended at the time and also not sustainable before the transposition into Dutch law of the 4^th Directive - which held the Dutch Waarborgfonds Motorverkeer also responsible for accidents caused by uninsured Dutch motor vehicles in the countries in which the Dutch MTPL policy under Dutch law must provide cover. The Dutch victim of an accident caused by an uninsured vehicle in another Member State, as well as in one of the countries equated with the Member States in Article 8 of the Directive, can apply to the Waarborgfonds Motorverkeer, under the Wam.

The next question concerns the types of damages that the guarantee fund is as a minimum required to compensate under the Directive. These are the same kinds of losses that are recoverable under an insurance policy: damage to property and injury to persons. Member States are allowed, however, to exclude or limit compensation of damage to property caused by unidentified motor vehicles, unless any person also suffered significant bodily injury in the same single accident, with the possibility for national law to stipulate an excess of up to € 500. The Directive seems to entail that also the property damage of persons other than those who suffered significant bodily injury must be compensated. It is not entirely clear what is considered 'significant bodily injury' and the Member States appear to use different definitions. This issue is hardly relevant for the Netherlands, because the Dutch guarantee fund also compensates damage to property by unidentified vehicles - with an excess of € 250 - if the loss is not accompanied by any personal injury.

With regard to the sums to be covered by the guarantee fund, the national law of the Member State of establishment of the guarantee fund is the basis. A guarantee fund can, however, be held liable for higher sums by way of recourse. Examples are cases in which an uninsured vehicle, normally based in another Member State, causes a loss to a visiting resident of a third Member State. In such cases, the compensation body of the Member State of residence of the victim will have to settle the claim up to the amount of the minimum sums to be covered under the laws of the Member State of the accident, with a right of recourse against the guarantee fund of the Member State where the offending vehicle is normally based. One can also think of damages caused in other Member States by a vehicle exempted from compulsory insurance under Article 5, second paragraph of the Directive. The 'handling' guarantee fund then also compensates the victim up to the limits applicable in the Member State of the accident and takes recourse against the guarantee fund of the Member State in which the exempted vehicle is normally based.

As regards the procedural aspects, a parallel can be drawn between the 'reasoned response procedure' to be followed by the insurer, the claims representative and the Bureau, and the obligation of the guarantee fund to give 'a reasoned response with regard to the payment of compensation'. They serve the same purpose, although the guarantee fund is not required to respond within a given period, which I regard as a deficiency.

With regard to the provision in the Directive that national legislation must provide for a procedure with regard to disputes on cover between insurer and guarantee fund, I compare the Belgian, German and French rules with the Wam. The Dutch rules are inspired by the 'innocent third-party procedure' of the Association of Insurers: the party first approached by the injured party settles the claim at the expense of whom it may concern. Pursuant to a decision of the Hoge Raad (the Supreme Court of the Netherlands) of 25 September 2009, the party required to settle the loss with one of the injured parties under Article 25, fourth paragraph of the Wam, must also settle the loss with any other claimants involved in the same accident.

The last entity that could be held liable by the injured party in a 4^th Directive accident is the compensation body. In line with the Directive I distinguish between the claims of injured parties under Article 24 of the Directive and those under Article 25.

Article 24 regulates the situation in which the liable vehicle is insured, but the insurer has either failed to appoint a claims representative or the claims representative or insurer fails to give a motivated response within three months. If the insurer also fails to give a response within the subsequent two-month 'grace period' after having been invited by the compensation body of the Member State of domicile of the victim, this compensation body will settle the claim. Decisive for the claims of the injured party are his rights against the insurer under the law of the country of the accident, while the compensation body must also take into account the possibly higher insured sum in the Member State where the vehicle is normally based.

One of the most complicated aspects of the Directive is - as already discussed in the context of the obligations of the insurer and the claims representative - the interpretation of the term 'reasoned response' and the circumstances under which the compensation body must take action. The international literature does not provide much clarity in this respect. The compensation bodies have attempted to create some clarity for themselves in their 'Provisional Recommendations', but these recommendations cannot (yet) have any binding effect, because - as the title indicates - they are still provisional and can and will develop further. Moreover there is no guarantee that insurers will consider themselves bound by them. Only over time and possibly through court judgments will the content of a reasoned response become clearer.

The Directive appears to entail that the compensation body settling a claim after expiry of the grace period must transfer the claim back to the insurer if the later should at any time decide to get involved in the case with a reasoned response. The compensation bodies in their Agreement governing their mutual relations have agreed that they will not transfer the file in such a situation. This position - although it seems not in line with the teat of the Directive - must be welcomed as beneficial for the victim.

Within the framework of Article 25 of the Directive - in which the liable person is unknown or the insurer cannot be identified within two months - the compensation body will act immediately.

Compared to the situation under Article 24, the question of the law applicable on the claim of the injured party is less easy to answer. This question gains in importance in the case of an accident by an uninsured vehicle, visiting another Member State, in which the victim is a resident of a third Member State. Two regimes can be considered in such a situation: that of the Member State of the accident and that of the Member State where the uninsured vehicle is normally based. In my opinion, the law of the Member State in which the accident occurred governs under all circumstances the claim of the victim against the compensation body. This view means that the paying guarantee fund will have to reimburse other, possibly higher sums than it would have under its own national legislation. I do not regard that as a very serious problem.

I conclude my discussion of the compensation body with an examination of the subsidiarity referred to by the Directive. The Member States appear to have worked this out in different ways. Belgium and Germany appear not to have given the compensation body a subsidiary position in this sense. In France, the compensation body has a position similar to that of the Fonds de garantie. The Dutch compensation body is - contrary to the Waarborgfonds Motorverkeer - subsidiary. However, the Wam provides that the injured party who submits a claim to the Compensation Body must first present his claim to the liable persons (and to the extent that they are insured, their insurers and the claims representatives appointed by the insurers). This provision is incorrect, at least to the extent that the liable person is uninsured and the Toss will eventually be settled under the laws of the Member State of the accident and charged to the guarantee fund of that Member State. The law of the Member State of establishment of the ultimately paying guarantee fund, determines the conditions for access to that guarantee fund and not Dutch legislation. In addition, it is not realistic to expect the injured party to fulfil this obligation effectively. Article 27r of the Wam should therefore be revoked.