Report from the Commission to the European Parliament and the Council on certain issues relating to Motor Insurance
Date: 2007-06-25
Institutions: European Commission
Subjects: approximation of laws, civil liability, indemnification, motor vehicle insurance, transport accident

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 25.06.2007 
COM(2007) 207 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on certain issues relating to Motor Insurance 

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

PART 1: Implementation of Article 4(6) of the 4th Motor Insurance Directive on 
national penalty provisions and their effectiveness ..................................................... 3 

Introduction.................................................................................................................. 3 

Review of the implementation of the Directive in Member States.............................. 4 

Assessment of the implementation and effectiveness of Article 4 (6)......................... 4 

1.3.1.  Public awareness and perception of the claims representative mechanism ................ 4 

1.3.2.  The nature of penalties introduced in respect of the reasoned offer/reply procedure 

and their equivalence ................................................................................................... 5 

1.3.3 

The functioning of the reasoned offer/reply procedure in Member States................... 8 

1.4. 

Conclusion ................................................................................................................... 9 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

PART 2: Motor Insurance and Legal expenses ........................................................... 9 

Introduction .................................................................................................................. 9 

EU legal framework for legal expenses insurance..................................................... 10 

Availability of voluntary legal expenses insurance contracts .................................... 10 

Inclusion of legal expenses in the MTPL insurance of the liable party ..................... 11 

2.4.1.  Current situation in Member States ........................................................................... 11 

2.4.2.  Potential impact on MTPL premiums ........................................................................ 12 

2.5. 

Conclusion ................................................................................................................. 12 

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1. 

PART  1:  IMPLEMENTATION  OF  ARTICLE  4(6)  OF  THE  4TH  MOTOR  INSURANCE 
DIRECTIVE ON NATIONAL PENALTY PROVISIONS AND THEIR EFFECTIVENESS  

1.1. 

Introduction 

One of the aims of the 4th Motor Insurance Directive 2000/26/EC (hereinafter "the Directive") 
is to ensure a rapid settlement of motor insurance claims in cases where the accident occurs 
outside  the victim's country  of  residence  (the  so  called  “visiting  victim”). Via  the  claims 
representative1  (a  claims  representative  must  be  appointed  by  every  MTPL  insurer  in  every 
other  MS),  visiting  victims  should  be  able  to  settle  claims  in  their  own  language  and  get 
compensation more rapidly and at less expense. The claims representative is responsible for 
handling and settling the claim by representing the foreign insurer of the party liable for the 
accident2. 

Furthermore,  Member  States  must  impose  sanctions  to  accelerate  compensation.  Liable 
insurers or their claims representatives who take more than three months to make a reasoned 
reply (the so called "reasoned offer/reply procedure") to a compensation request may be fined, 
at a level determined by the Member State in which the insurer is registered, and interest shall 
be charged on the compensation that is due3. 

Article  4(7)  of  the  Directive  states  that  the  Commission  shall  report  to  the  European 
Parliament  and  the  Council  (before  20  January  20064)  on  the  implementation  and  the 
effectiveness of national penalties introduced in respect of the reasoned offer/reply procedure 
as well as on their equivalence and shall submit proposals if necessary (should these national 
penalties fail to produce their expected results).5 

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3 

4 

5 

According  to  Article  4(1)  of  the  Directive,  each  Member  State  should  ensure  that  all  insurance 
undertakings  appoint  a  claims  representative  in  all  Member  States  except  the  Member  State  in  which 
they have been authorized to provide motor insurance (Home Member State). 
According  to  Article  4(4)  and  (5)  of  the  Directive  claims  representative  shall  collect  all  information 
necessary  in  connection  with  the  settlement  of  the  claims  and  shall  take  the  measures  necessary  to 
negotiate  a  settlement  of  claims.  They  shall  also  possess  sufficient  powers  to  represent  the  insurance 
undertaking  in  relation  to  injured  parties  and  to  meet  their  claims  in  full.  They  must  be  capable  of 
examining cases in the official language(s) of the Member State of residence of the injured party. 
According  to  Article  4(6)  of  the  Directive  Member  States  have  to  ensure  through  effective  and 
systematic financial or equivalent administrative penalties that the victim receives a reasoned offer of 
compensation or a reasoned reply in case of refusal within three months of the date when the claim was 
presented either to the insurer of the liable party or to its claims representative. 
The report on Article 4(6) could not be presented by the date foreseen in the Directive because it was 
agreed  in  2005  during  the  negotiations  on  the  5th  Motor  Insurance  Directive  that  the  Commission 
would use this report to cover also the issue of legal expenses (see part 2 of this report ). 
In  this  respect  it  should  be  noted  that  an  error  appeared  in  the  wording  of  Article  4(7)  since  the 
reference in that provision should have been to paragraph 6, first subparagraph dealing with the issue of 
national  penalty  provisions,  and  not  to  paragraph  4,  which  describes  the  tasks  of  the  claims 
representative when settling a claim. 

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In order to prepare the report, the Commission Services6 consulted Member States in March 
20067 and the insurance industry in April 20068. A public online consultation was also held 
from 6 April 2006 to 5 June 2006 on the website of the Commission9 in order to consult all 
interested  parties  on  their  awareness  of  the  claims  representative  mechanism  and  on  its 
effectiveness10.  

This Commission Report deals with both the implementation and the effectiveness of national 
penalties as well as on their equivalence, as foreseen in Article 4(6) of the Directive, in the 
light  of  the  comments  made  by  Member  States,  the  insurance  industry  and  other  interested 
parties. 

1.2. 

Review of the implementation of the Directive in Member States  

The Directive had to be transposed by Member States by 20 July 2002 and its provisions were 
to become applicable before 20 January 200311.  

With regard to the implementation of the Directive, the Commission sent reasoned opinions 
on 6 January 2003 to France, Greece, Italy, Ireland, Luxembourg, the Netherlands, Portugal 
and the United Kingdom for non-implementation of its general provisions by the agreed date 
of  20  July  2002.  All  these  infringement  cases  were  closed  in  the  course  of  200312  as  the 
national  measures  transposing  the  Directive  were  adopted  and  communicated  to  the 
Commission.  Furthermore,  the  Commission  sent  letters  of  formal  notice  on  23 December 
2004  to  Latvia,  Malta  and  Slovenia  as  these  Member  States  had  not  communicated  all  the 
measures  transposing  the  Directive.  These  infringement  cases  were  closed  in  May  2005 
following the notification of the implementing measures to the Commission. 

1.3. 

Assessment of the implementation and effectiveness of Article 4 (6)  

1.3.1.  Public awareness and perception of the claims representative mechanism  

The  consultation  first  aimed  to  find  out  whether  interested  parties  (European  citizens, 
companies, etc.) confronted with an accident as a visiting victim were aware of the existence 
of the claims representative appointed by the insurer of the liable party in their home country, 
and whether they considered this to be an efficient tool for claims settlement.  

As far as the public's views are concerned, no objective conclusion could be drawn owing to 
the small number of replies received in the public consultation13. 

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10 

11 
12 
13 

This report has been drafted by DG Internal Market and Services.  
A questionnaire was sent in March 2006 to the 25 Permanent Representations and replies were received 
from all Member States apart from Italy in the course of May 2006.  
The  CEA  (Comité  Européen  des  Assurances  –  European  Federation  of  National  Insurance 
Associations) was consulted in March 2006. 
See  the  website  ‘Your  Voice  in  Europe’  http://europa.eu.int/yourvoice/consultations  for  all  public 
consultations  of  the  Commission,  where  an  Interactive  Policy  Making  (IPM)  tool  is  used  to  improve 
governance by web-based questionnaires for collecting and analysing reactions. 
The results of this consultation are available on the following website: 
http://ec.europa.eu/internal_market/insurance/motor_en.htm#consultation 
See Article 10 of the Directive. 
With the exception of France which communicated its national measures on 30 January 2004. 
201 in total (161 responses were received from individuals and 40 responses were collected from 
organisations) out of which only 57 addressed the issue of awareness of the claims representative. The 

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As  regards  the  views  of  Member  States,  the  majority  of  them  believe  that  their  citizens  are 
well  aware  of  the  possibility  to  settle  cross  border  claims  via  the  claims  representative 
appointed in their home country. When responding to this question, Member States referred to 
several  channels  used  for  communicating  information  to  citizens  about  the  existence  of  a 
claims  representative,  such  as  public  information  campaigns,  web  sites  of  national  motor 
insurance bureaux, insurance associations, and information centres set up in accordance with 
Art.5  of  the  Directive.  As  far  as  the  perception  of  the  claims  representative  mechanism  is 
concerned, a large majority of Member States as well as of representatives of the insurance 
industry rated the claims representative mechanism as succeeding in its aim of facilitating and 
speeding  up  the  process  of  settlement  of  cross  border  claims.  The  most  appreciated  aspects 
therein are the proximity of the claims representative to the claimant as well as the possibility 
for the injured party to communicate in his/her mother tongue when settling the claim.  

1.3.2.  The nature of penalties introduced in respect of the reasoned offer/reply procedure 

and their equivalence 

The nature of financial or equivalent administrative penalties that may be imposed on insurers 
or  their  claims  representatives  for  non  -  compliance  with  the  3  month  reasoned  offer/reply 
procedure varies from Member State to Member State.  

Financial penalties  

Financial penalties have only been introduced in some Member States. They may be imposed 
either  on  the  insurer  (Greece,  Lithuania,  Cyprus,  Portugal,  Spain,  Malta,  Belgium, 
Luxembourg,  Sweden  and  Czech  Republic)  or  both  on  the  insurer  and  on  the  person(s) 
authorized to represent and legally bind the insurer, hereinafter authorized persons (Slovenia, 
Hungary, and Poland).  

Other penalties 

As  far  as  other  kinds  of  penalties  are  concerned,  some  Member  States  apply  disciplinary 
sanctions to authorised persons, such as suspension from office (Poland, Lithuania), whilst in 
other  countries  insurers  may  lose  their  licence  to  conduct  the  MTPL  (motor  third  party 
liability)  business  (Hungary,  The  Netherlands,  Germany,  Luxembourg,  Sweden  and 
Lithuania).  

No specific sanctions 

Some  Member  States  do  not  provide  for  any  specific  sanctions  and  rely  solely  upon  the 
insurers'  duty  to  pay  statutory  interest  on  the  amount  of  compensation  if  the  reasoned 
offer/reply  is  not  made  within  three  months  (UK,  Ireland,  Denmark,  Slovakia,  Austria, 
Estonia, Latvia, Finland, France, Belgium and Spain)14. 

14 

outcome of this public consultation is published on the following website: 
http://ec.europa.eu/internal_market/insurance/motor_en.htm#20051222 
In  this  respect  it  should  be  noted  that  this  sanction  is  explicitly  required  by  the  Directive  and  should 
therefore be obligatorily applied in all Member States. 

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Comparative table  

Financial 
sanction/ 
insurer  

Financial 
sanction/ 
authorized 
persons  

Discipl
inary 
sanctio
n/autho
rized 
persons 

Withdrawal/Su
spension of the 
MTPL Licence  

No  specific  sanction/ 
Interests 
rate  per 
- 
annum (if not specified 
otherwise) 

Statutory interest  

Statutory  rate  of  7%  in 
case  of 
a  delayed 
reasoned offer 

Discount  rate  of  the 
Czech  National  Bank 
in  effect  on  the  first 
day of delay, increased 
by 4 %  

Statutory 
interest 
accruing  30  days  after 
the claim was payable 

0.4  % 
amount/day 

on 

the 

Statutory interest  

Double 
statutory 
interest  rate  in  case  of 
no reply  

Austria  

Belgium  

Cyprus  

250  EUR/day 
in  case  of  a 
delayed 
reasoned 
reply  

Up 
to 
2000CYP  = 
3452 EUR 

Czech 
republic  

Up to  

1 000 EUR = 
28 000 CZK 

Denmark  

Estonia  

Finland  

France  

The 
judge 
may impose a 
fine  of  15% 
of the amount 
of 
compensation 
in the case of 
a 
clearly 
insufficient 
offer  payable 
to 
the 
national 
guarantee 
fund 

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Germany  

X 

X  

5%  over 
interest rate  

the  basic 

Greece 

3 000 EUR 

X  

100 
From 
000  up 
to 
HUF  20  000 
000,  -  HUF 
(1  Euro  = 
260, - HUF). 

From 
000,- up to  

40 

1  000  000,- 
HUF 

Statutory interest  

Unspecified 
administrative 
sanctions 
without 
specification  – 
reference 
to 
Section  33BD 
of  the  Central 
Bank 
Act, 
1942/2004 

Hungary 

Ireland 

-  no 

Italy 
information 
provided 

Latvia 

0.1% 
amount/day 

on 

0.04% 
amount/day. 

on 

the 

the 

Lithuania  

to  100. 

Up 
000 EUR 

X  

Luxembourg   X 

X 

X 

Statutory interest  

Malta  

Lm  5000  = 
€11 650 

Statutory interest  

Netherlands  

Poland  

Portugal  

Slovakia  

0.5%  of  the 
premium 
written 

Three 
salary  

From  748,20 
to  74.819,68 
EUR 

X  

times 

X  

Statutory rate of 11.5% 

Double 
interest rate  

statutory 

rate 

(basic 
Discount 
interest  rate)  of 
the 
National Bank in effect 

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Slovenia  

8 400 EUR 

420 EUR 

Spain  

to  150 

Up 
000 EUR  

Sweden  

X 

UK  

on the first day of delay

Statutory rate of 13.5% 

Statutory interest 

Statutory interest  

X 

Unspecified 
administrative 
penalties 
without 
specification  – 
reference 
to 
Regulations 
2002 
(No.2706) 

1.3.3 

The functioning of the reasoned offer/reply procedure in Member States 

In order to assess the effectiveness of national penalties introduced in respect of the reasoned 
offer/reply  procedure,  the  consultation  aimed  to  find  out  whether  insurers  and  their  claims 
representatives  are  able  to  meet  in  practice  the  3  month  deadline  available  to  them  for  the 
settlement of motor insurance claims.  

The  feedback  received  in  the  consultation  has  shown  that  both  insurers  and  their  claims 
representatives  are  generally  able  to  handle  claims  within  the  3  month  timescale.  Only  in 
exceptional  and  isolated  cases,  linked  to  difficulties  in  receiving  information  from  other 
parties involved in the settlement of claims, could the deadline not be met. These cases relate 
to  situations  such  as  where  police  reports  or  similar  documents  necessary  for  the 
establishment  of liability  are submitted  belatedly15, or cases of bad communication between 
the claims representative and its insurer16. 

In this respect it should be recalled that the claims representative mechanism/reasoned offer 
(reply)  procedure  became  operational  only  in  2003  for  15  Member  States  and  after  1  May 
2004 for the new Member States. Therefore, the experience gained so far in Member States on 
the  functioning  and  effectiveness  of  Article  4(6)  of  the  Directive  has  turned  out  to  be  still 
rather limited. 

15 
16 

Such cases reported by Greece, Hungary, Italy, Poland, Sweden and the UK.  
Reported by Lithuania and Finland.  

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1.4. 

Conclusion  

The obligation for insurers and their claims representatives to settle claims in accordance with 
the  reasoned  offer/reply  procedure  has  been  established  in  all  Member  States.  Based  on  the 
outcome of the consultation carried out with Member States and the insurance industry, two 
groups  of  penalties  introduced  by  Member  States  in  order  to  back  up  this  duty  could  be 
identified.  These  are  either  financial  or  disciplinary  in  nature.  Whilst  some  Member  States 
apply  these  sanctions  cumulatively,  the  others  apply  merely  the  payment  of  interest  on  the 
amount of compensation.  

It  emerges  clearly  from  the  consultation  that  national  penalties  are  not  equivalent  to  each 
other  and  are  handled  differently  by  Member  States.  However,  this  seems  not  to  have  a 
significant  negative  impact  on  insurers  and  their  claims  representatives  in  terms  of  meeting 
the  3  month  time  scale  prescribed  for  providing  the  claimant  with  a  reasoned  offer/reply. 
Since  the  reasoned  offer/reply  procedure,  despite  the  fact  that  it  has  been  in  force  for  a 
relatively  short  time,  has  proven  to  be  well  established  and  is  functioning  in  all  Member 
States, all the measures taken at the level of Member States obviously have the desired effect. 
Therefore,  there  is  no  reason  for  the  Commission  to  take  action  or  submit  any  proposals  in 
this respect.  

2. 

PART 2: MOTOR INSURANCE AND LEGAL EXPENSES  

2.1. 

Introduction 

According  to  Article  1  of  the  2nd  Motor  insurance  Directive  84/5/EEC17,  motor  third  party 
liability  insurance  has  to  compulsorily  cover  both  damage  to  property  and  personal  injuries 
This  provision  has  been  introduced  to  remove  national  disparities  concerning  the  extent  of 
MTPL  coverage  and  thus  to  ensure  a  minimum  level  of  protection  of  victims  of  road 
accidents18.  

During  the  2nd  reading  of  the  Fifth  Motor  Insurance  Directive  2005/14/EC19,  the  European 
Parliament  proposed  to  include  all  necessary  and  appropriate  legal  costs  (legal  expenses) 
borne  by  the  victim  during  the  settlement  of  the  claim  in  the  scope  of  cover  of  the  MTPL 
insurance  of  the  liable  party.  Concerned  that  an  amendment  might  be  adopted  that  failed  to 
take into account  the practical difficulties that might exist in Member States in this respect, 
the Commission suggested it should examine this issue and include its findings in the report 
on the 4th Motor Insurance Directive. In this context, the Commission agreed to examine the 
following questions:  

•  Firstly,  the  current  availability  of  voluntary  legal  expenses  insurance,  which  can  be 

concluded by any potential victim of a road accident; 

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18 

19 

Directive 84/5/EEC, OJ L 8, 11.1.1984, p. 17–20 
Before the adoption of the 2nd Motor Insurance Directive MTPL insurance covering damage to property 
was not mandatory in some Member States.  
Directive 2005/14/EC of the European Parliament and 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, OJ L149, 11.6; 2005, p. 14. 

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•  Secondly, the impact on the costs of MTPL premiums if victims' legal expenses were to be 

covered by the MTPL insurance of the liable party. 

To that end, the Commission Services consulted the 25 Member States, the insurance industry 
and the public through a set of questions. Replies were received from 24 Member States, 10 
legal  expenses  insurers,  9  MTPL  insurers  and  the  CEA  as  a  representative  of  the  European 
insurance 
industry.  The  Commission  Services  also  received  certain  statistics  and 
recommendations from the legal expenses insurance industry in the form of a position paper 
formulated by RIAD – The Association of Legal Expenses Insurers.  

Interested parties were also consulted in the online public consultation held from 6 April 2006 
to 5 June 2006 on the website of the Commission20. However, and as mentioned earlier in this 
report, no objective  conclusion could be drawn from this public consultation, given the low 
number of replies received.  

This part of the report seeks to give an analysis of the coverage of legal costs of victims of 
road accidents in the light of the information available and the comments made by Member 
States, the insurance industry and interested parties. 

2.2. 

EU legal framework for legal expenses insurance 

Under  the  EU  Non-Life  Insurance  Directives,  legal  expenses  insurance  is  recognized  as  a 
separate  class  of  insurance21.  Therefore,  it  can  be  provided  throughout  the  EU,  either  under 
the  freedom  of  establishment  or  the  freedom  to  provide  services,  by  any  insurer  licensed  to 
that  end  in  one  of  the  Member  States.  Conditions  for  conducting  legal  expenses  insurance 
business  in  the  EU  are  further  set  down  in  Directive  87/344/EEC  on  legal  expenses 
insurance22.  According  to  Article  2  of  the  Directive,  the  legal  expenses  insurer  undertakes, 
against the payment of a premium, to bear the costs of legal proceedings and to provide other 
services directly linked to insurance cover, in particular with a view to:  

–  securing  compensation  for  the  loss,  damage  or  injury  suffered  by  the  insured  person,  by 

settlement out of court or through civil or criminal proceedings,  

–  defending  or  representing  the  insured  person  in  civil,  criminal,  administrative  or  other 

proceedings or in respect of any claim made against him.  

For the purpose of this report, it should be stressed that legal expenses insurance concluded on 
a voluntary basis meets victim's legal costs, up to the limits set down in the policy, incurred in 
order to pursue claims and will, in addition, pay the other party's legal costs if the victim is 
unsuccessful in the claim.  

2.3. 

Availability of voluntary legal expenses insurance contracts 

In  order  to  judge  the  availability  of  legal  expenses  insurance  for  potential  victims  of  road 
accidents, the Commission Services tried to obtain data about the current spread in the EU of 
legal  expenses  contracts  covering  individuals  when  pursuing  or  facing  motor  insurance 

20 
21 
22 

See footnotes 9 and 10 for the reference on the publication of the results of this public consultation. 
Annex I to Directive 73/239/EEC. 
Council  Directive  87/344/EEC  of  22  June  1987  on  the  coordination  of  laws,  regulations  and 
administrative provisions relating to legal expenses insurance, OJ L 185, 4.7.1987, p. 77–80 

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claims. Regrettably, neither the legal expenses insurance industry23 nor Member States were 
able to provide data on the basis of which a clear conclusion could be drawn for every country 
in terms of how many individuals, i.e. what percentage of the population, are covered by legal 
expenses insurance relating to motor insurance claims.  

However, the information received has produced some general findings:  

•  voluntary legal expenses insurance is provided in the vast majority of Member States24. It 
is offered either by specialized insurers or by insurance undertakings conducting also other 
classes of insurance business,  

•  some insurance markets are less developed in this regard as the demand for legal expenses 
insurance is for various reasons relatively low there25. On the contrary, countries such as 
the  UK,  Germany,  Belgium  and  Sweden26  maintain  that  a  relatively  large  proportion  of 
their population hold legal expenses insurance concluded either as a stand-alone product or 
as an extension to other cover such as motor and household insurance.  

2.4. 

Inclusion of legal expenses in the MTPL insurance of the liable party 

As regards the possible impact of an EU wide inclusion of legal costs incurred by the victim 
in the scope of cover of the MTPL policy of the party liable for the accident, the following 
findings  could  be  made  based  on  the  replies  provided  by  Member  States  and  the  insurance 
industry.  

2.4.1. Current situation in Member States  

In  22  Member  States27  the  legal  costs  of  the  victim  may  be,  on  different  grounds  and  to  a 
different degree, reimbursed by the MTPL insurer of the liable party.  

Legal costs incurred by the victim are very often considered to constitute a part of the damage 
under national civil law and to be eventually reimbursed the victim must very often succeed in 
the claim (the so called winning-losing principle). 

In countries where legal costs do not follow the event, they are allocated to the victim by a 
court decision on a "case by case" basis28, and the winning–losing principle does not always 
apply.  

If  deemed  to  be  part  of  the  damage,  the  recovery  of  legal  costs  is  very  often  limited  to 
reasonable  sums  (only  reasonable,  necessary  or  inevitable  costs  may  be  recovered)  or  their 

23 

24 

25 
26 

27 
28 

RIAD (The Association of Legal Expenses Insurers) provided some more concrete data in this respect. 
However,  due  to  differences  between  Member  States  regarding  statistics,  presentation  and  data 
collection  this  did  not  provide  an  accurate  picture  concerning  the  spread  of  voluntary  legal  expenses 
insurance within the EU.  
Only Estonia, Latvia, Malta and Cyprus have not provided relevant information in this respect, in the 
other Member States, voluntary legal expenses is available.  
This is the case especially in the 10 new Member States.  
Sweden  and  Belgium  provided  an  estimate  of  around  90%  of  households  to  hold  legal  expenses 
insurance. This is due to the fact that legal expenses insurance is automatically offered to policyholders 
with either a third party liability or a household insurance.  
Not in Portugal and Latvia, Greece provided no information in this respect. .  
Spain, France and Italy.  

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recovery  presupposes  a  mutual  agreement  between  the  insurer  and  the  claimant29.  In  some 
countries, certain legal expenses  are  excluded from  reimbursement  by  the  MTPL  insurance, 
such  as  costs  of  legal  advice  in  general30  or  costs  of  legal  representation  at  extra-  judicial 
bodies in the course of claims settlement procedures31.  

2.4.2. Potential impact on MTPL premiums  

Member States as well as the insurance industry differ as to their estimate of whether and how 
far the inclusion of victims' legal expenses in the MTPL cover of the liable party would affect 
rates of MTPL premiums in their markets. In principle, apart from a few estimates made by 
individual  insurers,  no  concrete  numbers  were  provided  in  the  consultation.  Nevertheless,  a 
general conclusion could be drawn that insurance markets of countries, in which legal costs 
already to a great extent constitute part of the victim's claim against the MTPL insurer of the 
liable  party,  would  be  very  unlikely  to  be  affected  by  an  increase  in  premiums.  On  the 
contrary,  in  countries  where  either  limited  or  no  recovery  of  legal  expenses  applies,  MTPL 
premiums  would  very  probably  rise  since  claimants  would  be  encouraged  to  pursue  their 
claims  in  court  assisted  by  legal  advisers,  in  the  expectation  of  obtaining  a  higher  level  of 
compensation.  In  this  context  the  Irish  experience  is  worth  mentioning  where  legal  costs 
escalated  in  the  past  (to  as  much  as  46%  on  top  of  the  amount  of  compensation)  as 
proceedings were issued routinely in almost all personal injury claims. In order to address this 
problem  a  State  agency  has  been  established  handling  claims  in  cases  where  court  hearings 
are  not  required32.  In  this  way  the  number  of  in-court claims  settlements,  which  go  hand  in 
hand  with  increased  legal  costs,  has  been  significantly  reduced.  Similar  alternative  claims 
settlement mechanisms serve the purpose of minimizing legal costs in Sweden and Finland. 

2.5. 

Conclusion 

In response to the question raised by the European Parliament, an EU action consisting in the 
obligatory inclusion of legal costs in the scope of cover of the MTPL insurance of the liable 
party would not seem to produce clear benefits. 

As a result of different approaches taken by Member States in respect of the reimbursement of 
legal costs incurred by the victim and due to the fact that the law applicable to the claim is 
always the law of the country where the accident occurred, EU nationals may enjoy different 
treatment  in  different  countries  when  settling  cross  border  claims.  However,  an  EU  wide 
extension of the scope of cover of MTPL insurance to include legal costs, even if restricted to 
necessary  or  reasonable  ones,  would  be  very  unlikely  to  provide  an  equivalent  regime 
throughout the EU. Member States would retain the possibility of maintaining their national 
practice  by  interpreting  the  necessity  of  the  legal  costs  recovery  in  accordance  with  their 
national specificities.  

To ensure an EU wide equal protection of victims of road accidents in respect of the recovery 
of their legal costs, specification as to which legal costs and under which circumstances they 
would  be  subject  to  coverage  by  the  MTPL  policy  of  the  liable  party  would  have  to  be 
introduced.  In  this  context,  the  question  arises  as  to  whether  the  motor  insurance  directives 

29 
30 
31 
32 

Denmark.  
Luxembourg, Poland (acknowledges merely court fees).  
Sweden (only in respect of personal injuries legal assistance can be sought), Finland, Ireland.  
The PIAB Agency would currently dispose of 75% of claims for personal injuries.  

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would be the appropriate place in which to deal with these issues since it might influence the 
definition of damage covered traditionally under national civil law. 

A simple reference to necessary or reasonable legal costs would not attain the intended goal. 
On  the  other  hand,  a  more  specific  approach  at EU  level  might  interfere  with  national  civil 
law and also affect rules on reimbursement of legal costs governed by civil procedural law. In 
addition, a specific approach might even lead in some cases to distortion of well established 
national  systems  of  motor  claims  settlement.  For  instance,  an  EU  wide  obligatory  inclusion 
only  of  in-court  legal  expenses  in  the  MTPL  insurance  might  encourage  victims  to  take 
judicial action without having first explored the possibility of extra-judicial claims settlement. 
In this way, the mechanism of the claims representative introduced by the 4th Motor Insurance 
Directive  might  also  be  threatened  since  victims,  in  the  expectation  of  receiving  a  higher 
amount of compensation, would try to involve legal advisers and courts in the settlement of 
their  claims  instead  of  applying  to  the  claims  representative  appointed  in  their  country  of 
residence.  Moreover,  the  inclusion  of  legal  expenses  in  the  MTPL  insurance  of  the  liable 
party  might  lead  to  an  increase  in  premiums  in  countries  where  either  no  or  limited 
reimbursement of legal costs has been the practice so far.  

Voluntary  legal  expenses  insurance  has  proved  to  be  available  in  the  large  majority  of 
Member  States.  Since  this  insurance  product  allows  the  victim  to  recover  his/her  legal 
expenses regardless of the law applicable to the accident and irrespective of the success in the 
claim, it seems to be the comprehensive and satisfactory solution for meeting the interests of 
victims  of  road  accidents.  In  this  manner,  national  rules  on  reimbursement  of  legal  costs, 
which differ from Member State to Member State and often reflect national specificities of the 
motor claims settlement systems, would not be affected.  

However,  the  Commission  Services  observe  that  a  better  promotion  of  voluntary  legal 
expenses  contracts  is  necessary  in  some  Member  States  in  order  to  ensure  a  more  balanced 
level of protection of EU citizens. 

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