Accident and Parties
C and D1 were British nationals resident in London. They had been partners for several years and were engaged to be married. The couple travelled to the Greek island of Rhodes for a week long holiday in the summer of 2010. D2 hired a quad bike in which C1 rode as pillion passenger. Tragically, D2 lost control of the quad bike, driving into a stationary vehicle and causing C to be thrown off. C suffered life changing injuries: she was rendered paraparetic and began proceedings against D1 and his Greek insurer D2. As C and D1 lived in England, English jurisdiction and law applied to the claim under the Brussels Regulation and Rome II (see Article 2(1) of Council Regulation (EC) No 44/2001 and Article 4(2) of Council Regulation (EC) No 864/2007). C’s claim eventually settled just one week before trial in January 2014 with damages at the full insurance indemnity of EUR 500,000 plus a six figure payment of costs.
The Insurance Policy
After much prevarication liability was conceded. However, D2 argued a EUR 500,000 indemnity limit existed on D1’s policy which was inclusive of damages and the costs of bringing the claim.
Articles 3 and 9 of the Motor Insurance Directive 2009/103/EC (“MID”) require each Member State to ensure vehicles in their territory are insured for civil liability to a minimum level of cover, currently EUR 1,000,000 for personal injuries and a further EUR 1,000,000 for damage to property. Given the accident date, the indemnity limit was EUR 500,000 for personal injuries in this case, as Greek insurers still enjoyed the benefit of the state defined transitional period to facilitate the introduction of the minimum cover.
Whilst Article 12 states the minimum cover for personal injuries should be calculated to “fully and fairly compensate all victims who have suffered very serious personal injuries”, implying it is costs exclusive, the MID is actually silent on the point. That uncertainty undoubtedly fuelled D2’s arguments in relation to the extent of their cover.
Position Under Greek Law
Whilst the applicable law of the negligence claim was of England and Wales, the insurance issue was a matter of Greek contractual law. C instructed Greek Counsel, Georgios Natsinas, to advise on this aspect of the claim. His strong view was that Greek law would deem the indemnity limit to be exclusive of C’s legal costs although he recognised some cases had gone the other way. Disclosure of the advice at a settlement meeting proved crucial in convincing D2 their argument was likely to fail. Despite arguing this important point for several years it appeared that the Defendant insurer had never agreed to fund the obtaining of their own Greek law opinion and instead simply relied on their own views.
A further concern was that Georgios Natsinas identified several past cases involving English cost awards relating to Conditional Fee Agreements (CFAs) that the Greek Courts had refused to enforce on public policy grounds. However, C’s case could be distinguished on the basis that the costs, whilst higher than those usually seen in Greece, were proportionate to the damages.
Position Under English Law
Under s51(3) of the Senior Courts Act 1981, the Court has an absolute discretion as to who should pay costs and the extent of that payment. It follows that, had the Court been asked to rule on the matter, it was within its power to order D2 to pay C’s legal costs in line with the long established loser pays principle, even if under Greek law D2’s liability was capped at the policy limit of EUR 500,000.
In the view of the Claimant’s legal team, the prospects of the Court making such an order were high: it would be manifestly unfair to find otherwise and deprive C of substantial legal costs in a claim where D1 was clearly liable and where they had had been driven up by D2’s conduct. In addition, as soon as this argument had first come to light, the Claimant had protected her position by making a formal offer to settle under Part 36 of the Civil Procedure Rules, which can carry consequences in costs and interest if not accepted within a 21 day period.
Furthermore, C would have brought to the Court’s attentions a number of authorities in which insurers, have been ordered to pay costs over and above the established policy limit, especially but not exclusively if joined as a party to proceedings. Often an insured is driven out of the frame, leaving the insurer to fight the claim solely for their financial interest. If insurers take the decision to defend a claim, fund it, conduct it, and fight it exclusively for their benefit and their defence fails in its entirety, they can expect to pay a Claimant’s costs irrespective of the indemnity limit (see TGA Chapman Ltd v Christopher  1 W.L.R 12).
In cases where EU RTA insurers argue their policy limits are costs exclusive:
- Establish quantum as quickly as possible. Early offers of the indemnity limit could tempt an insurer into settling even if they believe they have a strong case on indemnity limits being costs exclusive. In cases of catastrophic injury involving fixed indemnity limits insurers can save themselves considerable costs by paying out at the indemnity level at an early stage.
- Whether an EU RTA insurance policy indemnity is costs inclusive or exclusive is a matter of local law. Advice from local Counsel should be taken at early stage. Disclosure of the same may assist if a Defendant insurer has adopted a tough bargaining position when having conducted little legal research of their own.
- If local law research proves unfavourable, the costs regime within the EU jurisdiction may assist. In many Member States, Courts have an absolute discretion as to costs. It is possible they would respond to common sense arguments that deeming MID derived policy limits as costs inclusive would be contrary to the spirit of the legislation. It is also possible forceful authorities exist which demonstrate a named party or a party closely related to proceedings can be ordered to pay costs above any indemnity limit due to their conduct.