Direct compensation from insurers under the new commercial procedure
Will the amended civil procedure rules improve the litigation position of people suffering a loss in motor vehicle collisions?
A further portion of the changes in the Civil Procedure Code introduced by the amending act of 4 July 2019 entered into force on 7 November 2019. Among other changes, the act introduced a separate procedure for commercial cases notable for its rigorous formality. Will these changes impact cases seeking insurance compensation for motor vehicle collisions under the direct compensation system?
Shared liability of driver and insurer
As a rule, in the event of a collision between two motor vehicles, the injured party will turn to the insurer of the driver who was responsible for the accident (from whom the driver who caused the collision has purchased civil liability insurance) seeking payment of compensation for the injury suffered (damage to their vehicle, hauling charges, personal injury, and so on). The injured party may seek compensation from the individual who caused the injury or that person’s insurer, or against both of them together (although the accepted practice now in litigation is to seek compensation exclusively against the insurer).
The rulings by the Supreme Court of Poland have adopted the term “in solidum liability” to describe the joint liability existing between the responsible driver and his insurer (also referred to as “irregular,” “incomplete” or “incidental” joint liability). According to the Supreme Court, in the case of in solidum liability, satisfaction of the claimant’s demand by one of the parties obligated to fulfil it (the responsible driver or his insurer) releases the other one from the obligation to the injured party, even though they are not regarded as jointly and severally liable co-defendants because of the lack of a relevant statutory or contractual basis (Supreme Court resolution of 17 July 2007, case no. III CZP 66/07).
It should be borne in mind that under Art. 20(2) of the Mandatory Insurance Act (the Act on Mandatory Insurance, the Insurance Guarantee Fund, and the Polish Motor Insurers’ Bureau of 22 May 2003), in judicial proceedings seeking compensation for loss covered by mandatory motor vehicle civil liability insurance, the court is required to implead the responsible party’s insurance company as a third party, while the insurer may also join the litigation as an auxiliary intervenor. Thus the seven-judge resolution of the Supreme Court of 13 May 1996 (case no. III CZP 184/95), holding that “in a trial for redress of injury arising as a result of a traffic accident, the relationship of necessary co-parties does not exist between the insurance company and the possessor or driver of the motor vehicle,” continues to hold true.
Direct compensation system
The direct compensation system (known in Polish as BLS [bezpośrednia likwidacja szkód]) was introduced with the aim of improving the market competitiveness of insurance products while simplifying and expediting proceedings seeking insurance compensation. Thanks to the BLS system, in the event of the collision of two motor vehicles, the injured party may seek compensation directly from his own insurer (with whom the injured party has concluded a mandatory civil liability policy for possessors of motor vehicles), rather than against the insurer of the other driver responsible for the accident. This allows the injured party to assess the quality of service of their own insurer in providing compensation for losses.
The BLS system has not arisen from statutory solutions, but was established by a decision of the Polish Chamber of Insurance (PIU), and consequently is provided for in contracts for mandatory civil liability insurance for possessors of motor vehicles. To further improve the competitiveness of their coverage, some insurance companies offer to compensate for loss under the BLS system even if the insurer of the driver responsible for the accident does not offer compensation in the BLS system.
But redress cannot be sought under the BLS system for all types of injury. Among other things, the system does not cover personal injury, or collisions involving more than two vehicles. The injured party may, however, demand compensation for loss in the form of the costs of hauling the damaged vehicle, parking fees for the damaged vehicle, and the cost of hiring a replacement vehicle for the period required to repair the damaged vehicle. Additionally, the amount of the loss must not exceed PLN 30,000.
It must be stressed that the BLS system does not shift civil liability for the accident onto the insurer providing compensation for the loss. For purposes of contractual and tort law, the relationship between the injured party and the perpetrator of the loss (and the perpetrator’s insurance company) remains unchanged. Therefore, in the event of litigation seeking damages, only the perpetrator of the injury, and his insurer, have the capacity to be appear in the civil proceeding as defendants.
Changes involving parties to civil proceedings
If the injured party believes that he has not received adequate compensation from his own insurer under the BLS system, he may file a claim for payment against the persons obligated to redress the loss, i.e. the perpetrator of the injury or that person’s insurer.
In practice, insureds sometimes sue their own insurance company which has paid out an undisputed amount of compensation under the BLS system. Because that insurer does not have the capacity to be sued as a defendant with respect to the event causing the injury, the plaintiff may lose that case and be charged with paying the insurer’s trial costs.
Nonetheless, filing suit against the wrong person can be partially cured through the appropriate procedural initiative, applying the institution of impleading. Under the first sentence of Art. 194 §1 in connection with Art. 198 §1 of the Civil Procedure Code, if it turns out that the claim has not been filed against a person who should be a defendant in the case, at the request of the plaintiff or the defendant the court will summon that person to appear in the case as a defendant. Such a summons by the court takes the place of filing suit against that defendant. The persons summoned by the court as defendants are served with copies of the pleadings and enclosures.
Impleading the perpetrator’s insurer also modifies the proceeding seeking damages by joining in the case an entity which should have been sued from the beginning (as the insurer has the capacity to be sued as a defendant). But notwithstanding this procedural move, the plaintiff will still be required to cover the trial costs of the original defendant if it files the appropriate application by the statutory deadline.
Separate commercial procedure
Effective 7 November 2019, a separate procedure for commercial cases was introduced into the Civil Procedure Code. Under Art. 4582 §1(1), commercial cases include cases between business entities within the scope of their business.
Thus if a business operator injured in a traffic accident sues an insurance company, the trial will be conducted according to the rules for the commercial procedure. In that situation, Art. 4588 §2, which concerns commercial cases, becomes problematic. That provision prohibits modification of the parties (as it excludes application of Art. 194 and 198, among other provisions of the Civil Procedure Code). Thus if the plaintiff sues an entity that does not have capacity to be sued as a defendant in such a case, the plaintiff will not be permitted, through the procedural initiative described above, to implead the proper person. This exposes the plaintiff to the risk of losing the case and incurring additional costs. It should also be pointed out that filing suit against a person who is not the proper defendant does not interrupt the running of the limitations period on the claim. Consequently, the defence of the statute of limitations could potentially be successfully raised by the insurance company in a future suit against the proper defendant.
Nevertheless, it is important to consider the institution provided for in Art. 4586 §1, under which, at the application of a party who is not a business entity or who is an individual business operator, the court will hear the case without applying the provisions of the chapter on commercial procedure. If the compensation was paid under the BLS scheme, and it is uncertain whether the insurer can properly be sued as a defendant in the case, it would be worthwhile to file the application provided for in this section, so that, continuing the case under the ordinary procedural rules, the plaintiff could benefit from the ability to implead the proper defendant.
Summary
The peculiarities of the direct compensation system used by Polish insurers create a risk that the injured party will file a suit seeking damages against the insurance company that does not bear civil liability for the loss. The procedural restrictions imposed in commercial cases would not allow the parties to be modified in such case, ultimately causing the plaintiff to lose the case.
Thus before filing suit for losses arising out of a motor vehicle accident, it is essential to verify whether compensation has been paid out under the BLS scheme. Otherwise, the injured party could be exposed to a financial loss.
Mateusz Kosiorowski, Reprivatisation practice, Private Client practice, Wardyński & Partners
