A tractor pulling a trailer overturned in Germany (due to the driver's negligence), causing property damage to a third party. The Lithuanian insurer of the tractor paid the third party and then sought a contribution from the Lithuanian insurer of the trailer (on the basis that it was jointly liable for the damage). Under German law (but not Lithuanian law), liability would be shared with, and a contribution could be sought from, the trailer's insurer. A dispute therefore arose as to whether German or Lithuanian law applied to this issue, and the question was referred by the Lithuanian courts to the Court of Justice of the European Union ("CJEU"). It has now ruled as follows:
- The EU Motor Insurance Directive, which helps EU residents involved in a road accident in another EU country, did not assist with resolving this issue, since it was concerned with compensating road accident victims, rather than with the relationship between motor insurers.
- There is no contractual relationship between the two insurers and so the applicable law governing the relationship between them must be determined in accordance with the Rome II Regulation (EC Regulation 864/2007), rather than the Rome I Regulation (EC Regulation 593/2008).
- Article 4 of the Rome II Regulation provides that the applicable law to determine the issue of contribution between the insurers will be that of the country in which the harm was sustained, i.e. German law on the facts of this case.
- However, it is first necessary to determine whether the non-paying insurer is under any duty to compensate the victim of the accident. That issue will be determined by that insurer's contract with its insured. The paying insurer could then be subrogated to the victim's rights against the non-paying insurer.
- The issue of whether the non-paying insurer is liable to the victim is therefore governed by the Rome I Regulation. Article 7 of that regulation provides that the law of the country where the insurer has his habitual residence (i.e. Lithuania) will apply (unless it is clear from all the circumstances that the case is more closely connected to another country).
The case was therefore remitted to the referring courts to determine which applicable law applied on the facts.
COMMENT: How does the CJEU's approach fit with the approach adopted under English law to these issues? The CJEU categorised the paying insurer's claim for contribution as arising from its right to be subrogated to the rights of the victim against the insurer. Under English law, a contribution claim is based on equitable principles (and so is non-contractual (as was confirmed recently by the judge in XL v AXA (see Weekly Update 44/15), albeit there it was held that the claim arose out of the operation of law, rather than equity) and so the dispute between the insurers would presumably be governed by Rome II and not Rome I). However, in order for a claim of contribution to arise between insurers, there must be two policies covering the same risk or peril, and that is a contractual issue which, presumably would be governed by Rome I. It remains to be confirmed, though, how the English courts would approach a similar factual scenario to the one in this case.