PURPOSE: amendment of Council Directives 72/166/EEC, 84/5/EEC, 88/357/EEC and 90/232/EEC and of Directive 2000/26/EC of the European Parliament and of the Council relating to insurance against civil liability in respect of the use of motor vehicles.

LEGISLATIVE ACT: Directive 2005/14/EC of the European Parliament and of the Council.

CONTENT: This Fifth Motor Insurance Directive will update and improve the provisions of current EU Motor Insurance Directives by making it easier for drivers to get insurance and by upgrading the protection of victims. It will improve protection for accident victims and make it easier for drivers to get and claim upon insurance, especially when buying or using vehicles outside their Member State of permanent residence, and to change insurers. The Directive will also make it easier for insurers to operate across borders.

The Directive sets a new minimum insurance amount for personal injuries of EUR 1 000 000 per victim, or a minimum amount of EUR 5 000 000 per accident. For damage to property, it sets a minimum of EUR 1 000 000 per accident, to come into force after a transitional period of five years. The minimum insurance amounts will be revised automatically every five years according to the European Index of Consumer Prices.

Under the Directive, pedestrians and cyclists will be designated as specific categories of accident victims. Motor vehicle insurance will have to cover personal injuries suffered by pedestrians and cyclists and other non-motorised users of the roads who, as a consequence of an accident in which a motor vehicle is involved, are entitled to compensation under national civil law.

ENTRY INTO FORCE: 11/06/2005.

On second reading Parliament adopted seven amendments to the Council's common position. They improve certain aspects of the text without affecting the substance and the principles of the Common Position and the Commission’s proposal. The Commission accepts all these seven amendments which concern:

- insurance cover for imported vehicles: some word changes are introduced: it replaces the word "introduced" by "made available";

- competent jurisdiction : the possibility for the victims to bring legal proceedings against the insurer in their Member State of residence is explicitly recognised. This possibility was not recognised by the Fourth Motor Insurance Directive 2000/26/EC;

- insurance cover for imported vehicles, in relation with Article 4a, paragraph 1 of Directive 90/232/EEC : some word changes are introduced : first, it replaces the word "imported" by "dispatched". Secondly, it replaces the words "the date when the vehicle has been delivered, made available or dispatched to the purchaser for a maximum period of thirty days" by "acceptance of delivery by the purchaser for a period of thirty days";

- competent jurisdiction : a new recital is introduced to explicitly recognise the possibility for the victims to bring legal proceedings against the insurer in their Member State of residence;

- minimum amounts of cover : two new sentences are introduced to emphasise the need to fully and fairly compensate the victims of motor accidents;

- minimum amounts of cover : the amendment aims to clarify that it is optional for the Member State to choose between EUR 1 000 000 per victim or EUR 5 000 000 per claim (whatever the number of victims) as a minimum insurance amount to cover personal injuries. The transitional period of five years for the implementation of the new minimum insurance amounts will not be compulsory but may be requested by the Member States. Such a period will start from the date of implementation. Some wording changes are introduced in the provision concerning the automatic periodical revision of the minimum amounts;

- availability of minimal data for settlement of claims : a new Article is introduced in the Fourth Motor Insurance Directive 2000/26/EC according to which Member States should take appropriate measures to facilitate the availability to the victims and other interested parties of the minimal data for the settlement of claims.

The European Parliament adopted a compromise package on insurance against civil liability in respect of the use of motor vehicles, based on the report by Manuel MEDINA ORTEGA (PES, ES):

-The minimum amount of cover for personal injury should be calculated so as to compensate fully and fairly all victims who have suffered very serious injuries, whilst taking into account the low frequency of accidents involving several victims and the small number of accidents in which several victims suffer very serious injuries in the course of one and the same event. A minimum amount of cover of EUR 1 000 000 per victim or EUR 5 000 000 per claim, regardless of the number of victims, is a reasonable and adequate amount.

- If necessary, Member States may establish a transitional period of up to five years to adapt their minimum amounts of cover to the amounts provided for in the legislation;

- a new Article states that Member States shall take all appropriate measures to facilitate the availability in due time to the victims, their insurers or their legal representatives of the basic data necessary for the settlement of claims.

The European Parliament adopted a compromise package on insurance against civil liability in respect of the use of motor vehicles, based on the report by Manuel MEDINA ORTEGA (PES, ES):

-The minimum amount of cover for personal injury should be calculated so as to compensate fully and fairly all victims who have suffered very serious injuries, whilst taking into account the low frequency of accidents involving several victims and the small number of accidents in which several victims suffer very serious injuries in the course of one and the same event. A minimum amount of cover of EUR 1 000 000 per victim or EUR 5 000 000 per claim, regardless of the number of victims, is a reasonable and adequate amount.

- If necessary, Member States may establish a transitional period of up to five years to adapt their minimum amounts of cover to the amounts provided for in the legislation;

- a new Article states that Member States shall take all appropriate measures to facilitate the availability in due time to the victims, their insurers or their legal representatives of the basic data necessary for the settlement of claims.

The committee adopted the report by Manuel MEDINA ORTEGA (PES, ES) amending the Council's common position under the 2nd reading of the codecision procedure. MEPs reinstated, sometimes in modified form, a number of amendments adopted by Parliament at 1st reading which had not been taken up by Council:

- the definition of trailers and the introduction of special provisions applying to them;

- inclusion of the costs of pursuing claims in legal proceedings;

- the possibility of injured parties bringing legal proceedings against the civil liability insurance provider in the Member State in which they are domiciled;

- the obligation to make a "reasoned offer of compensation".

On the question of creating a central body for gathering information on accidents, the committee reintroduced Parliament's 1st reading proposal to create a new Article 6a for this purpose but modified the provisions with a view to creating a public internet site on which all traffic accident reports filed by police and emergency services would be deposited and subsequently made available to the public once they had been released to the judicial authorities.

On the thorny issue of minimum levels of insurance cover, the committee altered the wording of the first part of the paragraph relating to personal injury to make it clear that the proposed amount of cover per victim (EUR 1 million) should be seen as a minimum level, not as a ceiling. It left unchanged the second part of the paragraph, in which the Council had taken up Parliament's 1st reading amendment providing for a minimum figure of EUR 5 million per accident, irrespective of the number of victims. Moreover, rather than automatically establishing a five-year transition period, the committee said that Member States could, "if necessary", establish a transition period of "up to" five years. Member States who did so should inform the Commission and indicate how long this period would last.

The Commission takes the view that the common position retains the key elements of the Commission's Proposal as well as those of the European Parliament amendments that were accepted by the Commission. The Commission can commend this common position to the European Parliament.

The common position adopted by the Council by qualified majority retains indeed the essence of the Commission's Proposal. It contains indeed some improvements in certain aspects. First, it incorporates, fully or in their spirit, all the Parliament's amendments which were accepted by the Commission at the Plenary. Second, it meets in some important cases the concern expressed in other Parliament's amendments and contains solutions in the same direction, even if they do not fully coincide with such amendments. Finally, the common position also deals with some technical issues which were not raised by Parliament.

1) Changes in the common position responding to Parliament's amendments: the common position takes account, fully or in their spirit, of the amendments adopted by Parliament in its first reading and accepted by the Commission. These amendments are as follows: - Claims representatives: The common position reflects the content of both Parliaments' amendments. They aim to avoid that the extension to all accidents of the insurance undertakings' obligation to appoint a claims representative in each Member State - as provided for in the Proposal - may overlap with the current Green Card Bureaux' system for the settlement of accidents and hinder its functioning. - Consistency between the 4th Motor Insurance Directive and Council Regulation 44/2001/EC: The common position, which takes account of these amendments, modifies Article 5 of the Proposal and introduces a change in Article 4(8) of the Fourth Motor Insurance Directive. It adds in Article 4(8), together with the reference to the "Brussels Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters", a new mention to the Council Regulation 44/2001/EC of 22 December 2000.

- Personal injuries caused by unidentified vehicles: The common position modifies the Proposal and takes account of the spirit of this amendment. The common position provides that the conditions for the personal injuries to be considered significant shall be determined in accordance with the Member States legislation and specifies as recommended by Parliament that Member States may take into account in this regard whether the injury has required "hospital care". - Claims statements: As pursued by this amendment Article 4 of the common position ensures that the claim statement should be provided by the insurance undertaking at any time on the policyholder's request. The common position also contains other changes which meet the concern expressed in other Parliament's amendments and go therefore in their same direction, even if the solution retained by the Council does not fully coincide with such amendments: - Minimum insurance amounts: The common position takes account to a large extent of the Parliament's requests concerning the increase of the minimum amounts of insurance cover. Indeed the minimum amount for personal injuries is raised to five millions euros per accident as requested by Parliament although the minimum amount for material damages has been fixed in one million euros per accident instead of 2 million euros requested. Furthermore the Common Position grants Member States the option to fix a minimum amount of 1 million euros per victim. The Parliament's request of a transitional period of 5 years has been retained in the Common Position. - Derogation from the obligation of insurance in favour of certain special vehicles: The First Motor Insurance Directive permits Member States to apply derogation from the obligation of insurance in favour of certain special categories of vehicles. The Proposal intended to eliminate such derogation because, after Schengen, if one of these vehicles crosses the border it is not possible to guarantee the other Member States' right to require on entry the possession of a valid green card or a frontier insurance to compensate potential victims as provided for in the Directive. However, the common position has kept this derogation following a few of Parliament's amendments, but introducing a mechanism to ensure compensation to any victim of accidents caused by these vehicles either in the Member State in which they are based or in any other Member State. This derogation may be revised after 5 years time depending on the experience of application. Finally, in order to take account of this change, the common position deletes point 2(ii) of Article 5(1) of the Fourth Motor Insurance Directive, but keeps point 5(ii) of Article 5(1) of the same Directive. In short: the common position on this point follows the spirit of the Parliament's request and meets at the same time the Proposal's concern to provide full protection to any victim caused by these vehicles. 2) Other changes introduced by the Council in the common position: the common position has also introduced the following changes which were not requested by Parliament: - Compensation to victims of accidents caused by vehicles exempted from the insurance obligation according to Article 4(a) of the First Motor Insurance Directive: The common position [Article 1(3)(a)] ensures that victims of accidents caused by vehicles exempted from the insurance obligation according to Article 4(a) of the First Motor Insurance Directive in the Member State in which they are normally based shall be duly compensated by the authorities or bodies designated by the Member State. The First Motor Directive only ensured compensation to victims caused abroad by such vehicles but not to victims of accidents in the Member State of registration. The common position provides furthermore that the Commission shall publish the categories of vehicles affected by this derogation as well as the authorities or bodies responsible for compensation. These changes reinforce the protection of victims. - Territorial scope of the Motor Insurance Directives: the common position [Article 1(4)] deletes the references to "the non-European territory" of the Member States in Articles 6 and 7(1) of Directive 72/166/EEC. - Pedestrians and cyclists: The common position does not fully follow the Proposal with regard to the protection of pedestrians and cyclists. However, the new wording of this provision stresses that the compulsory insurance of the motor vehicle involved must cover personal and property damages suffered by pedestrians, cyclists and other non-motorised users of the roads to the extent they are entitled to compensation according to national legislation on civil liability. This provision goes along the lines of a draft amendment that was considered at the EP Legal Affairs Committee, but was not finally retained.

The common position rejected the following Parliament amendments: Definition of trailers and introduction of special provisions applying to them; Inclusion of the costs of pursuing claims in legal proceedings; Limitation period for direct right of action; Creation of a central body for gathering information on accidents; Possibility of checks; Revision of amounts; Scope of insurance cover;

- Definition of the Member State where the risk is situated; Obligation to make a 'reasoned offer'.

The common position adopted by the Council by qualified majority retains indeed the essence of the Commission's Proposal. It contains indeed some improvements in certain aspects. First, it incorporates, fully or in their spirit, all the Parliament's amendments which were accepted by the Commission at the Plenary. Second, it meets in some important cases the concern expressed in other Parliament's amendments and contains solutions in the same direction, even if they do not fully coincide with such amendments. Finally, the common position also deals with some technical issues which were not raised by Parliament.

1) Changes in the common position responding to Parliament's amendments: the common position takes account, fully or in their spirit, of the amendments adopted by Parliament in its first reading and accepted by the Commission. These amendments are as follows: - Claims representatives: The common position reflects the content of both Parliaments' amendments. They aim to avoid that the extension to all accidents of the insurance undertakings' obligation to appoint a claims representative in each Member State - as provided for in the Proposal - may overlap with the current Green Card Bureaux' system for the settlement of accidents and hinder its functioning. - Consistency between the 4th Motor Insurance Directive and Council Regulation 44/2001/EC: The common position, which takes account of these amendments, modifies Article 5 of the Proposal and introduces a change in Article 4(8) of the Fourth Motor Insurance Directive. It adds in Article 4(8), together with the reference to the "Brussels Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters", a new mention to the Council Regulation 44/2001/EC of 22 December 2000.

- Personal injuries caused by unidentified vehicles: The common position modifies the Proposal and takes account of the spirit of this amendment. The common position provides that the conditions for the personal injuries to be considered significant shall be determined in accordance with the Member States legislation and specifies as recommended by Parliament that Member States may take into account in this regard whether the injury has required "hospital care". - Claims statements: As pursued by this amendment Article 4 of the common position ensures that the claim statement should be provided by the insurance undertaking at any time on the policyholder's request. The common position also contains other changes which meet the concern expressed in other Parliament's amendments and go therefore in their same direction, even if the solution retained by the Council does not fully coincide with such amendments: - Minimum insurance amounts: The common position takes account to a large extent of the Parliament's requests concerning the increase of the minimum amounts of insurance cover. Indeed the minimum amount for personal injuries is raised to five millions euros per accident as requested by Parliament although the minimum amount for material damages has been fixed in one million euros per accident instead of 2 million euros requested. Furthermore the Common Position grants Member States the option to fix a minimum amount of 1 million euros per victim. The Parliament's request of a transitional period of 5 years has been retained in the Common Position. - Derogation from the obligation of insurance in favour of certain special vehicles: The First Motor Insurance Directive permits Member States to apply derogation from the obligation of insurance in favour of certain special categories of vehicles. The Proposal intended to eliminate such derogation because, after Schengen, if one of these vehicles crosses the border it is not possible to guarantee the other Member States' right to require on entry the possession of a valid green card or a frontier insurance to compensate potential victims as provided for in the Directive. However, the common position has kept this derogation following a few of Parliament's amendments, but introducing a mechanism to ensure compensation to any victim of accidents caused by these vehicles either in the Member State in which they are based or in any other Member State. This derogation may be revised after 5 years time depending on the experience of application. Finally, in order to take account of this change, the common position deletes point 2(ii) of Article 5(1) of the Fourth Motor Insurance Directive, but keeps point 5(ii) of Article 5(1) of the same Directive. In short: the common position on this point follows the spirit of the Parliament's request and meets at the same time the Proposal's concern to provide full protection to any victim caused by these vehicles. 2) Other changes introduced by the Council in the common position: the common position has also introduced the following changes which were not requested by Parliament: - Compensation to victims of accidents caused by vehicles exempted from the insurance obligation according to Article 4(a) of the First Motor Insurance Directive: The common position [Article 1(3)(a)] ensures that victims of accidents caused by vehicles exempted from the insurance obligation according to Article 4(a) of the First Motor Insurance Directive in the Member State in which they are normally based shall be duly compensated by the authorities or bodies designated by the Member State. The First Motor Directive only ensured compensation to victims caused abroad by such vehicles but not to victims of accidents in the Member State of registration. The common position provides furthermore that the Commission shall publish the categories of vehicles affected by this derogation as well as the authorities or bodies responsible for compensation. These changes reinforce the protection of victims. - Territorial scope of the Motor Insurance Directives: the common position [Article 1(4)] deletes the references to "the non-European territory" of the Member States in Articles 6 and 7(1) of Directive 72/166/EEC. - Pedestrians and cyclists: The common position does not fully follow the Proposal with regard to the protection of pedestrians and cyclists. However, the new wording of this provision stresses that the compulsory insurance of the motor vehicle involved must cover personal and property damages suffered by pedestrians, cyclists and other non-motorised users of the roads to the extent they are entitled to compensation according to national legislation on civil liability. This provision goes along the lines of a draft amendment that was considered at the EP Legal Affairs Committee, but was not finally retained.

The common position rejected the following Parliament amendments: Definition of trailers and introduction of special provisions applying to them; Inclusion of the costs of pursuing claims in legal proceedings; Limitation period for direct right of action; Creation of a central body for gathering information on accidents; Possibility of checks; Revision of amounts; Scope of insurance cover;

- Definition of the Member State where the risk is situated; Obligation to make a 'reasoned offer'.