A number of provisions in the Regulation by the Cabinet of Ministers that establish the amount of insurance indemnity and the procedure for calculating it for non-material losses caused to a person are incompatible with the Satversme
On 29 December 2014 the Constitutional Court has passed a judgement in Case No. 2014-06-03 “On Compliance of Para 3, Subparagraph 5.5, Para 7 and Para 10 of the Cabinet of Ministers Regulation of May 17 2005 No. 331 “Regulation on the Amount of Insurance Indemnity and the Procedure for Calculating it for Non-Material Losses Caused to Person” with the third sentence of Section 92 and Section 105 the Satversme of the Republic of Latvia, as well as Para 1 of Section 15(1) of the Law on Compulsory Insurance of the Civil Liability of Owners of Motor Vehicle.”
Three cases have been combined in this case: two cases, which on 14 February 2014 and 31 March 2014 were initiated on the basis of an application submitted by the Department of Civil Cases of the Supreme Court, and the case, which on 7 March 2014 was initiated on the basis of a constitutional complaint submitted by the limited liability company “Autofavorīts”.
The amount of insurance indemnity and the procedure for calculating it envisaged in the Regulation of the Cabinet of Ministers for non-material losses caused to a person are incompatible with the Satversme and law.
The Contested Norms
The contested norms established the procedure for calculating the amount of insurance indemnity for pain and mental suffering for bodily injuries of the victim, as well as defined the amount of indemnity. Inter alia, the Regulation envisaged:
- insurance indemnity from 80 to 200 lats (120 to 290 euro), if the victim had suffered moderate bodily injury,
- indemnity from 250 to 400 lats (300 to 570 euro), if the victim had suffered severe bodily injury;
- the total amount of indemnity up to 1000 lats (1430 euro) to each victim of a road traffic accident,
- the amount of insurance indemnity for pain and mental suffering in the case of the death of a breadwinner was 100 lats (150 euro) for each person claiming the insurance indemnity.
The contested norms were in force until 10 July 2014.
The Norms of Higher Legal force
The third sentence in Section 92 of the Satversme provides that everyone, where his or her rights are violated without basis, has a right to commensurate compensation.
Article 105 of the Satversme provides that everyone has the right to own property. Property may not be used contrary to the interests of the public. Property rights may be restricted only in accordance with law. Expropriation of property for public purposes is allowed only in exceptional cases on the basis of a specific law and in return for fair compensation.
Whereas Section 15 of Compulsory Civil Liability Insurance of Owners of Motor Vehicles Law (hereinafter – OCTA Law) set the limits for the amount of insurance indemnity. At the time when the persons referred to in the applications suffered losses, Para 1 of the first part of this Section provided that the limit of insurer’s liability for compensating for the losses caused to a person was 250 000 lats.
The Facts
The applicants noted that the amounts of insurance indemnity envisaged by the contested norms were incommensurably small.
The Supreme Court (SC) turned to the Constitutional Court in connection with a case regarding the collection of insurance indemnity. The claimant – a minor – had lost both parents in a road traffic accident. He had received the insurance indemnity for the loss of a breadwinner in the amount stipulated by the contested norm, i.e., 100 lats for each breadwinner. However, the claimant’s representative turned to court, demanding collection of non-material losses from the insurer. SC noted in the application that a court of general jurisdiction could not, in the case of compulsory civil liability insurance of motor vehicle owners, set the amount of compensation for non-material losses from the insurer that would exceed the one defined in the contested norms.
Whereas Ltd. “Autofavorīts” noted that a driver, who had been driving a motor vehicle owned by the limited liability company, had caused a road traffic accident that had caused severe bodily injury to person. The insurer compensated to the victim the non-material losses in the amount specified in the contested norms; however, the victim considered that this was inadequately small. Therefore the victim requested a court of general jurisdiction to collect from Ltd. “Autofavorīts” as the owner of the motor vehicle the non-material losses caused to her. Ltd. “Autofavorīts” pointed out that the insurer would have had the obligation to disburse the indemnity to the victim, if the contested norms had not envisaged the limit of the compensation.
The Court Findings and Ruling
On the compliance of the contested norms with Article 92 of the Satversme
The Constitutional Court recognised that the norms, which had been contested by the SC applications ( Subparagraph 3.2 and Para 7 of the Regulation) comply with Article 92 of the Satversme, since they did not prohibit from receiving commensurate compensation if the rights had been violated without basis. The right to a commensurate compensation cannot be interpreted to mean that only the insurer disburses this compensation. If the victim holds that the insurance indemnity is not commensurate, the person may turn to a court of general jurisdiction. [23]
On the compliance of the contested norms with Article 105 of the Satversme and OCTA law.
The Constitutional Court, in examining the norms contested in the application by Ltd. “Autofavorīts” (Para 3, Subparagraph 5.5 and Para 10 of the Regulation) recognised that these norms did not comply with Para 1 of Section 15(1) of OCTA Law and, thus, they were incompatible also with Section 105 of the Satversme. [21.2]
First of all, the Constitutional Court established that the contested norms envisaged an infringement of the right to own property [19.2], therefore the Court had to assess, whether this infringement was well-grounded, i.e., whether it was established by law, whether it was introduced for a legitimate aim and whether it complied with the principle of proportionality [20].
The Constitutional Court recognised that the amounts of insurance indemnity and the procedure for calculating them established by the contested norms restricted the fundamental rights of Ltd. “Autofavorīts” , defined in Article 105 of the Satversme. I.e., the obligation of the owner of a motor vehicle to compensate for non-material losses in the amount, which is not covered by the insurance indemnity disbursed by the insurer, limits its right to claim against the insurer.
With the adoption of OCTA Law, a number of European Union directives in the field of compulsory civil liability insurance of motor vehicle owners were transposed. The amounts of insurance indemnity envisaged in the contested norms are significantly smaller than the ones established in the directives. The Constitutional Court recognised that the obligation to implement the provisions of EU directives did not apply solely to the legislator, i.e., the executive power also had the obligation to ensure appropriate and precise transposition of directives into the national legal system. [21.1, 21.2]
The Constitutional Court concluded that the Cabinet of Ministers, in adopting Para 3, Subparagraph 5.5 and Para 10 of the Regulation, had breached Para 1 of Section 15(1) of OCTA Law. Therefore Para 3, Subparagraph 5.5. and Para 10 of the Regulation is incompatible with OCTA Law and the restriction to the fundamental right has not been established by law. [21.2] In examining the compliance of Subparagraph 3.2 and Para 7 of the Regulation, the Constitutional Court recognised that the amounts of insurance indemnity included in these norms were significantly smaller than the ones envisaged by OCTA Law and the EU directives, therefore the Constitutional Court recognised Subparagraph 3.2 and Para 7 as being incompatible with Para 1 of Section 15(1) of OCTA Law.
On becoming invalid
The contested norms have already become invalid. However, to ensure that the rights of Ltd. “Autofavorīts” are protected and to give it the possibility to submit an application to a court of general jurisdiction in connection with newly established facts, the Court recognised that Para 3, Subparagraph 5.5 and Para 10 of the Regulation with regard to Ltd. “Autofavorīts” became invalid as of 11 October 2007.
Whereas Subparagraph 3.2 and Para 7, with regard to persons, whose claims regarding adequate amount of insurance indemnity are examined by a court of general jurisdiction and to who these norms are applicable, as being invalid as of 21 May 2005.
The Judgement by the Constitutional Court is final and not subject to appeal, it shall enter into force on the day of its official publication.
Linked case: 2014-06-03