Insurance Aspects of Cross-Border Road Traffic Accidents

1 Introduction 17
1.1 Insurance aspects of cross-border road traffic accidents 17
1.2 Justification 18
1.3 Target audience 18
1.4 Restriction of the field 19
1.5 Acknowledgements 22

2 Historical development 23
2.1 Introduction 23
2.2 Motor insurance, its early years 23
2.3 The period between 1949 and 1953: the conception and birth of the green card system 25
2.4 From 1953 to the first motor insurance directive of the EEC 27
2.5 From 1972 until 1990: 2nd and 3rd Motor Insurance Directives 30
2.6 Freedom of services in motor insurance 32
2.7 Developments in the Council of Bureaux 33
2.8 2000: Protection of visitors (4th directive) 33
2.9 Developments since 2002 35

3 The Green Card system 39
3.1 The basic principles of the Green Card system 39
3.1.1 The goals of the Green Card system 39
3.1.2 National Bureaux 40
3.1.3 Conditions for adherence to the Green Card system 41
3.1.4 Relations between national Bureaux: the Internal Regulations 41
3.1.5 Conditions for the application of the Green Card system: bilateral agreements between Bureaux 45
3.2 The Green Card system in two variants 46
3.2.1 Introduction 46
3.2.2 Geographical scope of the Green Card system 49
3.3 Cross-border traffic without Green Card: frontier insurance 52
3.4 The Green Card system based on the existence of a Green Card 53
3.4.1 The Green Card as a guarantee document 53
3.4.2 The nature of the guarantee offered by a Green Card 54
3.4.3 Issuance, form and content of the Green Card 56
3.4.3.1 Issue and delivery of the Green Card 56
3.4.3.2 Form of the Green Card 59
3.4.3.3 Content of the Green Card 61
3.5 The Green Card system based on deemed insurance cover 64
3.5.1 Influence of the European Union 64
3.5.2 The First European Motor Insurance Directive 68
3.5.3 Necessary conditions 70
3.5.4 Geographical scope 73
3.5.5 The concept of the territory in which a vehicle is normally based 75
3.6 Examination of the guarantee within the Green Card system 76
3.6.1 Introduction 76
3.6.2 Examination of the guarantee within the Green Card system based on the existence of a Green Card 77
3.6.2.1 The request for confirmation of the validity of a Green Card 77
3.6.2.2 The guarantee for false or unauthorised Green Cards 80
3.6.2.3 The limitation of the guarantee for false or unauthorised Green Cards under Article 9(2) of the Internal Regulations 82
3.6.2.4 The consequences of a Green Card for which no guarantee can be provided 84
3.6.3 Examination of the Guarantee within the Green Card system based on deemed insurance cover 86
3.6.3.1 Introduction 86
3.6.3.2 The request for the confirmation that a vehicle is normally based in a Bureau’s territory 87
3.6.3.3 Not corresponding or no longer corresponding registration plate 89
3.7 The claims handling process with the injured party 90
3.7.1 General remarks 90
3.7.2 Claims handled by the handling Bureau 91
3.7.3 Claims handled by an agent 95
3.7.4 Claims handled by a correspondent 97
3.8 The recovery of outlays in the framework of the Green Card system 104
3.8.1 Introduction 104
3.8.2 The recovery between the handling Bureau and the insurer 105
3.8.2.1 General remarks 105
3.8.2.2 The content of a demand for reimbursement 106
3.8.2.3 The period within which the demand for reimbursement must be sent 112
3.8.2.4 The period within which the demand for reimbursement must be settled 114
3.8.2.5 The method to communicate a demand for reimbursement 115
3.8.2.6 Other topics related to the reimbursement obligations listed in the Internal Regulations 115
3.8.3 The recovery between the agent and the insurer 116
3.8.4 The recovery between the correspondent and the insurer 117
3.8.5 The correspondent invokes the guarantee of the handling Bureau 118
3.8.6 The recovery between the handling Bureau and the guaranteeing Bureau 121
3.8.7 The guarantee call 122
3.8.7.1 The guarantee call based on Article 6(1) of the Internal Regulations (the insurer does not reimburse the handling Bureau or agent on time) 122
3.8.7.2 The guarantee call based on Article 6(2) of the Internal Regulations (the correspondent is not reimbursed on time by the insurer) 125
3.8.7.3 The ‘pro forma’ guarantee call in case of late payment by the guaranteeing Bureau 126
3.8.7.4 Qualified reasons to reject a guarantee call 127
3.8.8 The guarantee between Bureaux in case of insolvency of the insurer 128
3.8.9 The ‘second instance recovery’ 129
3.9 Financial discipline and financial stability in the Green Card system 131

4 Guarantee Funds 135
4.1 Introduction 135
4.2 Territorial scope 138
4.3 Cases of intervention 138
4.3.1 Introduction 138
4.3.2 Uninsured vehicles 139
4.3.3 Unidentified vehicles 142
4.3.4 Vehicles stolen or obtained by violence 143
4.3.5 Cases of intervention in a cross-border context 146
4.3.6 Cases of intervention not imposed by the MID 148
4.4 Limitations to the intervention of the Guarantee Fund 151
4.4.1 Introduction 151
4.4.2 Subsidiarity 152
4.4.3 Unidentified vehicles and material damage 155
4.4.4 Passengers of uninsured vehicles 157
4.4.5 Vehicles stolen or obtained by violence 158
4.4.6 The application of certain excesses 158
4.5 Modalities of intervention 159
4.5.1 The victim’s direct access to the Guarantee Fund 159
4.5.2 No proof required that the liable person is unable or unwilling to pay 160
4.5.3 Reasoned reply 160
4.5.4 Applicable laws, regulations and administrative provisions 161
4.6 Recourse rights 161
4.7 Article 11 MID: disputes between Guarantee Fund and insurer 165

5 The Protection of Visitors 167
5.1 Introduction and historic development 167
5.1.1 Introduction 167
5.1.2 Historical development 168
5.2 General principles 169
5.2.1 Functioning of the protection mechanism introduced by 4th MID 169
5.2.2 Conditions for application and geographical scope 172
5.2.3 Difference with the Green Card system 178
5.2.4 Who can invoke the protection mechanism for the visiting victim? 180
5.3 The claims representative 181
5.3.1 Introduction: the capacity of claims representative 181
5.3.2 Difference between the claims representative and the representative under article 152 Solvency II directive 182
5.3.3 Conditions to be fulfilled by claims representatives 183
5.3.4 Legal proceedings against the claims representative? 186
5.4 The Compensation Body 188
5.4.1 Introduction 188
5.4.2 The Compensation Body’s tasks based on Article 24 MID 189
5.4.2.1 No reasoned reply 189
5.4.2.2 No claims representative appointed 190
5.4.2.3 The Compensation Body’s role in the cases described in Article 24 MID 191
5.4.3 The Compensation Body’s tasks based on Article 25 MID 193
5.4.3.1 Unidentified vehicle 193
5.4.3.2 Unidentified insurer 194
5.4.3.3 The Compensation Body’s role in the cases described in Article 25 MID 194
5.4.4 Limitations to the intervention of the Compensation Body 195
5.4.4.1 Who can present a claim to the Compensation Body? 195
5.4.4.2 Subsidiarity 197
5.4.4.3 Limitations comparable to those that apply to Guarantee Funds 199
5.4.4.4 Vehicles stolen or obtained by violence 199
5.4.4.5 Legal action directly taken against the insurance undertaking 200
5.4.4.6 Legal proceedings against the Compensation Body? 200
5.5 The Information Centre 200
5.6 The recovery of outlays in the framework of the 4th MID 201
5.6.1 Introduction 201
5.6.2 The recovery between the claims representative and the insurer 203
5.6.3 The recovery between Compensation Bodies mutually 203
5.6.4 The recovery between the Compensation Body and the Guarantee Fund 206
5.6.5 The ‘second instance recovery’ 207
5.7 Concurrent application of the Green Card system and the 4th MID 208
5.8 Protection of the visiting victim outside the European Economic Area 211
5.8.1 Introduction 211
5.8.2 Agreement between Bureaux on the protection of visitors 212
5.8.3 Agreement between Guarantee Funds on the protection of visitors 213
5.9 The application of the 4th MID in case of insolvency of the insurer 213

6 The protection of the policyholder, liable and injured party
under the Directive 217
6.1 Introduction 217
6.2 Cover under the motor third party liability policy 218
6.2.1 General remarks 218
6.2.2 The goals of the Directive 219
6.2.3 The concept of ‘motor vehicle’; trailers 220
6.2.4 Use of the vehicle in traffic? 224
6.2.5 The obligation to insure, the normally based concept and dispatched vehicles 230
6.2.5.1 General remarks 230
6.2.5.2 The ‘normally based’ concept 231
6.2.5.3 The ‘normally based’ concept according to the Court of Justice of the European Union 232
6.2.5.4 The response of the Bureaux on the decisions of the EU Court 234
6.2.5.5 Vehicles without or with no longer corresponding plates 235
6.2.5.6 Dispatched vehicles 236
6.2.6 Exempted persons and vehicles: article 5(1) and 5(2) of the directive 240
6.2.7 Liability regimes; no fault and first party schemes 242
6.2.8 Geographical aspects of the cover 246
6.2.8.1 Cover in the EEA 246
6.2.8.2 Single premium 247
6.2.8.3 Third countries 249
6.2.8.4 Checks on insurance 250
6.2.8.5 National legislation: Germany, Belgium 251
6.2.9 Different types of damage 251
6.2.9.1 Property and bodily injury 251
6.2.9.2 Non pecuniary damage 253
6.2.9.3 Other types of damage: legal costs, late payment interest; costs of preventive measures 254
6.2.10 Amounts of cover 254
6.2.10.1 History 254
6.2.10.2 5th Directive: two alternative regimes 256
6.2.10.3 Periodic indexation 257
6.2.10.4 Which cover is applicable? Article 14 point (b) of the Directive 258
6.2.10.5 Amounts per claim or per accident? 259
6.2.11 Persons insured: the liable party or parties 260
6.2.11.1 The Directive 260
6.2.11.2 National legislation; liability regimes; Switzerland and the Netherlands 261
6.2.12 Protected parties 261
6.2.12.1 Victims and persons injured, a relevant distinction? 261
6.2.12.2 Passengers 264
6.2.12.3 Passengers carried free of charge 267
6.2.12.4 Passengers of stolen vehicles 267
6.2.12.5 Vulnerable road users 268
6.2.13 Statutory and contractual exclusions and restrictions of cover 268
6.2.13.1 General remarks 268
6.2.13.2 Internal and external effect 269
6.2.13.3 The exclusions of Article 13(1) of the Directive 270
6.2.13.4 Alcohol exclusions: Article 13(3) of the Directive 272
6.2.13.5 Deductibles and franchises: Article 17 of the Directive 273
6.2.13.6 The case law of the Court of Justice of the EU: is the list of admissible exclusions limitative? 274
6.2.13.7 Intentional damage 276
6.2.13.8 Non-payment of premium and expiry of cover 277
6.2.13.9 Contractual geographical limitations of cover 277
6.2.13.10 Restrictions to the use of a vehicle on certain days or
hours 277
6.2.13.11 Misrepresentation 278
6.2.13.12 Distinction between cover and liability; case law of the Court of Justice of the EU 278
6.3 Aspects of procedure; the Information Centre 280
6.3.1 General remarks 280
6.3.2 Direct right of action or ‘droit propre’? 281
6.3.3 Reasoned reply procedure 283
6.3.4 Disputes between insurer and Guarantee Fund 285
6.3.5 The central body 285
6.3.6 The Information Centre 286
6.3.6.1 Introduction 286
6.3.6.2 The information to be collected 287
6.3.6.3 The information to be provided 288
6.3.7 Claims history statement 290
6.4 Cover by the Green Card Bureau and protection by the Guarantee Fund 292
6.4.1 Cover by the Bureau 292
6.4.2 Protection by the Guarantee Fund 293

7 Providing Motor Insurance in the European Internal Market 295
7.1 Introduction 295
7.2 Single authorisation 296
7.2.1 Introduction 296
7.2.2 Freedom of Establishment (FoE) 298
7.2.3 Freedom to Provide Services (FoS) 300
7.3 Home country control 301
7.4 Consequences of FoE and FoS for MTPL insurance 304
7.4.1 Introduction 304
7.4.2 Membership of the Bureau and Guarantee Fund in the host Member State 305
7.4.3 Consequences for the injured party of a road traffic accident 307
7.4.3.1 Introduction 307
7.4.3.2 FoE: access to the insurer’s branch 307
7.4.3.3 FoS: access to the insurer’s representative 308
7.4.4 Appointment of correspondents and claims representatives 310
7.4.5 Insolvency 312

8 Aspects of Private international law 317
8.1 Introduction 317
8.2 General remarks 319
8.3 Jurisdiction under the Brussels Ia Regulation and the Lugano II Convention 321
8.3.1 Introductory remarks 321
8.3.2 Scope of the Brussels Ia Regulation and the Lugano II Convention 323
8.3.3 Structure of the jurisdiction rules in Brussels Ia and Lugano II 326
8.3.4 Section 1 – general provisions 327
8.3.5 Section 2 – special jurisdiction 328
8.3.5.1 General remarks 328
8.3.5.2 The specific jurisdictions of Article 7 328
8.3.5.3 The regime of Article 8 331
8.3.6 Section 3 – jurisdiction in matters relating to insurance 333
8.3.6.1 General remarks 333
8.3.6.2 Action against the insurer; general rules 334
8.3.6.3 Action against the insurer: liability insurance; direct right of action 335
8.3.6.4 Action of the insurer against the policyholder, insured or beneficiary 340
8.3.6.5 Contractual choice of jurisdiction 340
8.3.6.6 The positions of Green Card Bureau, Guarantee Fund and Compensation Body 341
8.3.6.7 Rules of the Lugano II Convention relating to insurance matters 342
8.3.7 Section 4 – jurisdiction over consumer contracts 342
8.3.8 Section 9 – lis pendens – related actions 343
8.3.9 Final remarks 346
8.4 Applicable law 346
8.4.1 Introductory remarks 346
8.4.2 The Rome II Regulation 347
8.4.2.1 Material, formal and temporal scope 347
8.4.2.2 Structure of the Regulation; relationship with the Hague traffic law convention 349
8.4.2.3 Which aspects are governed by the Regulation 350
8.4.2.4 The main rule 351
8.4.2.5 Exceptions to the main rule 353
8.4.2.6 Choice of law 356
8.4.2.7 Direct right of action against the insurer 357
8.4.3 The Hague traffic law convention of 1971 359
8.4.3.1 Introduction 359
8.4.3.2 Material, formal and temporal scope of application 360
8.4.3.3 The methodology of the Hague Convention’s referral rules 363
8.4.3.4 The main rule of the Hague Convention: Article 3 363
8.4.3.5 Exceptions to the main rule: Article 4 364
8.4.3.6 Exceptions to the main rule: Article 5 366
8.4.3.7 Unregistered vehicles: Article 6 367
8.4.3.8 Which aspects are governed by applicable law? 368
8.4.3.9 The direct right of action and applicable law 369
8.4.4 The Rome I Regulation 370
8.4.4.1 Introductory remarks 370
8.4.4.2 Material, formal and temporal scope of application 371
8.4.4.3 Structure of the Regulation 372
8.4.4.4 Aspects governed by the Regulation 372
8.4.4.5 The basic principle: freedom of choice of law (Article 3) 373
8.4.4.6 Applicable law in the absence of choice (Article 4) 373
8.4.4.7 Applicable law in contracts of carriage (Article 5) 374
8.4.4.8 Consumer contracts (Article 6) 376
8.4.5 Subrogation and recourse actions 376
8.4.5.1 General remarks 376
8.4.5.2 Recourse of a first party insurer against a liable party or their insurer 377
8.4.5.3 The law applicable to contractually or legally subrogated claims 378
8.4.6 The law applicable to claims on Guarantee Funds and compensation bodies 381
8.4.6.1 Introduction 381
8.4.6.2 The legal relationships between parties involved in the accident 383
8.4.6.3 Applicable law in relation to Guarantee Funds and Compensation Bodies 383

9 Future Developments 389
9.1 Introduction 389
9.2 Geographical scope 389
9.3 The European legislator’s plans regarding a new Motor Insurance Directive 392
9.4 The influence of technological developments 393
9.4.1 Introduction 393
9.4.2 Connected vehicles and detection systems installed in vehicles 394
9.4.3 Semi-autonomous and autonomous vehicles 395
9.4.4 The future of the Green Card 397
9.5 The concept of car ownership in a changing society 397
9.6 Conclusion 399

10 Conclusions 401

About the authors 405
Annex 1 - List of Member countries of the Green Card system 407
Case Law 409