On 10 July 2015, the Dutch Supreme Court ruled that in cases of recourse (regres) by insurers, the correction for fairness (billijkheidscorrectie) applies in exactly the same way as it does for the insured party (Achmea/Menzis). Insurers can thus benefit from ‘subjective circumstances’ particular to the insured party. As a result of this judgment, the Dutch Supreme Court has put a stop to a long-lasting discussion amongst Dutch legal scholars on this issue.
Under Dutch law, a debtor’s obligation to pay damages is decreased by the extent that part of the blame for the damages can be apportioned to the creditor. This does not apply if – in fairness - the majority of the blame can be attributed to one of the parties or other circumstances involved lead to a different outcome. This is referred to as the correction for fairness.
In 1997, the Dutch Supreme Court ruled that this correction for fairness, in principle, also applies when insurers have a claim on the basis of recourse (Terminus/ZAO). That judgment led to a discussion between Dutch scholars on the scope of such applicability. Some argued that only ‘objective circumstances’ should be taken into account when applying the correction for fairness in cases of recourse by an insurer. Objective circumstances are those circumstances that are equal to all parties. In their view, subjective circumstances, in other words those that are particular to the victim, should not be allowed to play a part in such cases. Other scholars argued that there is no difference between the circumstances, or that both should be taken into account equally in cases of recourse by insurers.
In this case, an insurer claimed for damages caused to its insured party in an accident between motorized vehicles. In short, a bus driver applied its brakes and a motorbike crashed into the back of the bus. As a result of the accident, the young driver of the motorbike will be bound to a wheelchair for the rest of his life. The motorbike driver’s insurer paid for all damages and filed a claim for such damages against the bus company’s insurer.
The Court of Appeal had previously ruled that the bus driver was to blame for 40% of the damages and the driver of the motorbike was responsible for the remaining 60%. It then applied a 25% correction for fairness taking into account subjective circumstances on the motorbike driver’s side, including the severity of his injuries and his young age. The bus company’s insurer thus had to pay for 65% of the damages, whilst the motorbike driver’s insurer had to account for the remaining 35%.
Before the Supreme Court, the bus company’s insurer argued that the Court of Appeal had made a mistake by taking into account such subjective circumstances because there is no legal basis for recourse in pitifulness (regres in zieligheid) . It also pointed out that insurers do not include subjective circumstances in their mathematical models used to calculate overall costs and insurance premiums. It argued that if subjective circumstances were to be included in these models, insurance premiums would rise significantly.
Contrary to the view expressed in this case by the advocate general, Mr Spier, the Supreme Court ruled that, in principle, the correction for fairness applies in exactly the same way to insurers after recourse as it applies between the insured parties. It specifically confirmed that this also includes subjective circumstances. The fact that insurers do not take these subjective circumstances into account when they calculate costs and insurance premiums, does not change that principle.
In practice, this judgment implies that insurers will have to assess whether their mathematical models used to calculate costs and insurance premiums include such subjective circumstances. If those circumstances are not included, the models may need to be adjusted accordingly. This could potentially lead to an increase in insurance premiums.