The adequacy of compensation limits stipulated by the European Union motor directive

Abstract

Motor Insurance is one of the insurance coverage, which is compulsory in Malta and in all other Member States (MS). The minimum cover is Third Party (TP) liability cover, which will afford protection to Third Party Personal Injury (TPPI) and Third Party Property Damage (TPPD) in the event of an accident in which the Motor Driver is at fault. The European Union (EU) issued Directives to ensure that adequate insurance cover is in place. The Second EU Directive (84/5/EEC) stipulated the minimum amounts for compensation with a minimum limit of 350,000 European Currency Unit (ECU) for Personal Injury (PI) per victim, which was to be multiplied according to the number of victims if, more than one victim was injured in a single claim. The compensation limit for Property Damage (PD) was 100,000 ECU per claim. The Second EU Directive (84/5/EEC) was revised to allow for inflation and provide an increase in protection. The Fifth EU Motor Directive (2005/14/EC) increased these amounts: EUR 5 million per claim or EUR 1 million per victim for TPPI and EUR 1 million per claim for TPPD. The main objective of this study was to analyse the adequacy of compensation limits as set out under the EU Motor Insurance Directive (MID). The primary research conducted for the purpose of this dissertation shows that although the compensation awarded to victims was constant and that there were only exceptional cases above EUR 1 million, insurers are still concerned when accidents involve foreigners. In addition, if non-pecuniary losses were to be awarded this would escalate the quantum for the injured party. Moreover, the study finds that insurers are still exposed to having to pay awards close to or higher than the limits of indemnity, as stipulated under the MID, when awarded by a non-Maltese EU Court in respect of an accident that occurred in Malta. This is especially the case when the injured party is either a high earning individual residing in another EU state or else where the responsible party and the injured party both resided in the same EU State. Even though the accident occurs in Malta it would be the court in the country of the litigants that will determine the amount of compensation.