ECJ confirms that motor insurers cannot increase a premium on the basis that a vehicle will be used in another Member State

Article 2 of the Third EU Motor Insurance Directive provides that "Member States shall take the necessary steps to ensure that all [compulsory motor insurance] policies …cover, on the basis of a single premium…the entire territory of the European Union". In this case, a Lithuanian road haulage company bought compulsory motor insurance from the defendant for two vehicles. It was stipulated that the vehicles would only be used for transporting goods in Lithuania and that if the vehicles were to be used in another Member State for more than 28 days, the insurer must be informed and a premium supplement paid.

The vehicles were involved in accidents in the UK and Germany. The insurer compensated the victims and then sought reimbursement from the insured. The issue which was appealed to the ECJ was whether the charging of a higher premium depending on where in the EU the vehicles were being used contravened Article 2 of the Third Directive.

The ECJ concluded that it did. The provisions of the Directive are aimed at giving greater protection not just to the victims of accidents but also to insureds: "In particular, those provisions imply that, in return for payment by the party insured of the single premium, the insurer assumes, in principle, the risk of compensating the victims of any accident involving the insured vehicle, regardless of the EU Member State in whose territory that vehicle is used or the accident takes place". Accordingly, a premium which varies according to where in the EU the insured vehicle is being used does not fall within the concept of a "single premium" as referred to in Article 2.

COMMENT: Although insurers cannot charge more premium for a vehicle on the basis that a vehicle is to be used in another Member State, this judgment does not appear to preclude insurers from charging a higher single premium at the outset of the policy on the basis that a vehicle might be used in other countries in the EU.