The scope of the insured’s liability (and thus, the insurance companies’ auxiliary liability) is affected not only by national law, but also by EU legislation and case law regarding “use of a motor vehicle.” After a recent Supreme Court resolution, a contradiction between the two has emerged.
Motor insurance is one of the most economically significant types of insurance policies. In 2020, the total gross third-party motor liability premium in Poland was PLN 14.6 billion, or about 34% of total premiums from “division II” insurance (personal and property cover other than life insurance).
Motor coverage is shaped not only by the Compulsory Insurance Act and the Civil Code, but also by EU directives and the case law of the Supreme Court of Poland interpreting national regulations.
It is worth considering the resolution of seven judges of the Supreme Court of 14 January 2022 (case no. III CZP 7/22) in this respect, as well as Directive (EU) 2021/2118 of 24 November 2021, amending the Motor Insurance Directive (2009/103/EC). Together, do they suggest a broadening of the scope of liability under the obligatory third-party liability insurance of motor vehicle holders?
“Use of a motor vehicle” under the Civil Code and the Compulsory Insurance Act
When discussing the issue of automotive damage, we must start with Art. 436 §1 of the Civil Code, according to which tort liability (based on risk) is incurred by the user of a motor vehicle propelled by natural forces. Thus, this concerns damage caused by the motion of mechanical means of transport.
In the Polish legal system, this provision has been in force for nearly 60 years, and from the very beginning caused interpretation difficulties for lawyers, specifically over the meaning of “use” of a motor vehicle. For example, in its resolution of 7 March 1968 (case no. III CZP 1/68), the Supreme Court explained that use of a vehicle includes not only use of a vehicle with its engine running, in its intended manner, but also use “with the accidental explosion or starting of the engine or inertial rolling.” Thus four years after the Civil Code entered into force, there was a need for a broader interpretation, and the scope of insurance began to cover cases where use of a vehicle was caused by external factors, often independent of drivers and their will.
Another broadening interpretation was made by the Supreme Court in its judgment of 14 April 1975 (case no. II CR 114/75, confirmed by the judgment of 27 October 2004, case no. IV CSK 133/04). At that time, the court pointed out that damage caused by use of a motor vehicle can also occur during a brief stop of the vehicle with its engine running (while a passenger is getting in or out of the vehicle or goods are being loaded or unloaded). Interestingly, in its order of 30 January 2018 (case no. III CZP 94/17), the Supreme Court held that turning off the engine does not automatically bring the use of the vehicle to an end.
So as a rule, under the case law, at the time of the incident it is the operation of the vehicle’s engine that primarily determines whether the vehicle is being “used,” regardless of whether the vehicle was moving or immobilised at the time of the incident causing the damage.
“Use of a motor vehicle” is also referred to in Art. 34(1) of the Compulsory Insurance Act, according to which compensation from the liability insurance of motor vehicle holders is due if the holder or driver of a motor vehicle is obligated to compensate for damage caused in connection with use of the vehicle.
Thus, the issue of use of a motor vehicle is key in the context of motor insurance and the liability of insurance companies. Insurers bear auxiliary liability, and thus are liable to the same extent and on the same basis as the insured.
Supreme Court resolution of 14 January 2022 and the use of multifunction vehicles
The most recent ruling regarding the concept of “use of a motor vehicle” is the resolution by seven judges of the Supreme Court of Poland of 14 January 2022 (case no. III CZP 7/22), in which it was held that the liability of an insurance company under a contract of compulsory insurance of civil liability of motor vehicle holders covers damage caused by operation of a device installed in the vehicle also when at the time of causing damage the vehicle was not performing its transport function.
This ruling is vital to the issue of motor vehicle damage. The resolution was adopted in connection with the Financial Ombudsman’s application of 18 August 2020 seeking to resolve discrepancies in the case law with respect to the scope of liability under insurance against civil liability of motor vehicle holders for damage caused by the use of multifunction vehicles (such as excavators, bulldozers, tractors with attached agricultural equipment, etc).
The Financial Ombudsman asserted that such discrepancies often concerned damage on farms, most often during the performance of fieldwork. As an example, the decision of the Wrocław Court of Appeal of 7 February 2012 (case no. I ACa 1382/11) was cited, concerning damage sustained while working in the field with a tractor to which a straw baling machine was attached, powered by the tractor engine (via a shaft connecting the machine to the tractor). The damage occurred when the multifunction vehicle admittedly had its engine running, but was itself immobilised and was not performing any transport function.
Ultimately, the Supreme Court resolution acknowledges that a vehicle does not have to be performing a transport function at the time of damage for liability to exist. Thus, the liability of the insured and insurers providing motor coverage appears to have been expanded.
Directive (EU) 2021/2118 and the new legal definition of a vehicle and its use
When discussing issues related to the use of motor vehicles, it is impossible to ignore the EU directives that must be implemented into the legal systems of member states. The Motor Insurance Directive (2009/103/EC) seems to be the most important. It is crucial to compulsory third-party liability insurance for motor vehicle holders, as it regulates, among other things, concepts such as “vehicle” and “injured party,” and the obligation to insure vehicles as such. Additionally, from 22 December 2021, as a result of Directive (EU) 2021/2118, amending Directive 2009/103/EC, the Motor Insurance Directive also uses a legal definition for the term “use of a vehicle.”
The amending directive was intended to adapt the Motor Insurance Directive to reflect current legal, economic and technological realities and challenges. As its preamble states, “Insurance against civil liability in respect of the use of motor vehicles is of special importance for European citizens,” while the need to amend the directive arose in part due to rulings of the Court of Justice (C-162/13, Vnuk; C-514/16, Rodrigues de Andrade; and C-334/16, Torreiro) and the need to target legal solutions in the areas of compensation by insolvent insurance companies, minimum obligatory coverage amounts, and accidents involving trailers towed by other vehicles. Additionally, the preamble notes that light electric vehicles have entered the market which should be excluded from application of the directive. At the same time, this highlights the view that the definition of a vehicle should be based on its general characteristics, in particular its maximum design speed and net mass (regardless of how many wheels the vehicle has).
The amending directive added a new legal definition to the Motor Insurance Directive, according to which “use of a vehicle” means “any use of a vehicle that is consistent with the vehicle’s function as a means of transport at the time of the accident, irrespective of the vehicle’s characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion.”
In turn, under the amending directive, “vehicle” means “any motor vehicle propelled exclusively by mechanical power on land but not running on rails with:
- A maximum design speed of more than 25 km/h, or
- A maximum net weight of more than 25 kg and a maximum design speed of more than 14 km/h.”
Additionally, any trailer to be used with such a vehicle, whether coupled or uncoupled, should also be considered a vehicle.
The new regulations are designed to unify the European traffic accident regulations. The member states should implement the new regulations into their legal systems by 23 December 2023.
There is an apparent contradiction between the direction of the European legislation and the recent case law of the Supreme Court of Poland, although their common goal is to safeguard the financial interests of potential injured parties. It seems that implementation of Directive (EU) 2021/2118 should result in limitation of the insurer’s liability for accidents caused by the use of multifunction vehicles (excavators, threshing machines or the like), while the case law of the Supreme Court takes the opposite tack, finding that the motion of such multifunction vehicles should be covered by liability insurance of motor vehicle holders, while the transport function of such vehicles at the time of the damage is not determinative.
In turn, this issue is of considerable importance for the practice of insurance companies. The potential changes in the scope of liability of the insured under third-party liability insurance of motor vehicle holders, and therefore of the insurance company with auxiliary liability, may affect the economic results achieved by the insurer, which in turn may be reflected in the net insurance premium. This is because the premium is tied to the actuarial calculation of the expected loss within a given risk community. Thus, any change in the scope of third-party liability insurance of motor vehicle holders and liability rules may affect the amount of insurance premiums. Therefore, it is worth following the decisions of the Supreme Court, even if they involve seemingly narrow definitional issues.
Mateusz Kosiorowski, adwokat, Filip Marcinkowski, Insurance practice, Wardyński & Partners