Motor Insurers in Italy Celebrate Constitutional Court’s MTPL Decision
For motor insurers in Italy, 2014 will be fondly remembered as the year that the Italian Constitutional Court finally clarified the country’s motor third party liability (MTPL) system of compensation. With Verdict Number 235, the court closed the book on a 13-year-long legal conflict and codified a fair system of compensation for victims of traffic accidents that is widely supported by the insurance sector.
The Court had been asked to assess the legitimacy of Article 139 of the Italian Insurance Code. Article 139 relates to a specific table (and criteria) that was created in order to determine compensation amounts for minor bodily injuries arising from motor accidents.
The implications of the decision for motor insurers are hugely significant. Minor bodily injuries represent the bulk of compensation in the MTPL market and the values given by the table issued in accordance with the contested Article 139 are around 40% lower than the Milan Court Tables, which are applied in other (non-motor) types of injury cases.
The Italian court verdict follows an earlier decision by the European Court of Justice issued at the beginning of 2014 (European Court of Justice, Case 371/12) that went in the same direction, legitimising Article 139. The European Court’s decision about this case was anxiously awaited in other European countries, including Spain, where a legal compensation tariff is similarly applied.
The Italian Court’s ruling can be summarized in two main sections:
1) First of all, the Court declared that the fact that an injury caused by a motor accident is compensated with a different (and lower) amount in comparison with the same injury suffered during any other type of accident, doesn’t breach Article 3 of Italy’s Constitution (the principle of equality).
The Court underlined that, in the case of a motor accident, the victim - despite the lower compensation amount - in reality is over-protected by the law in comparison with victims of accidents other than motor, considering the fact that Italy’s system oversees compulsory cover for motor third party liability.
In order to maintain this "secure" protection, the system can provide a lower level of compensation that allows insurers to offer premium levels that are acceptable to consumers.
A sustainable level of compensation is also necessary if the market is to preserve the all-important Guarantee Fund, which provides compensation in cases where insurance cover is missing or the damage is caused by an unidentified vehicle.
2) The second key issue resolved by the Italian Constitutional Court ruling is the legitimacy of Article 139 with regard to the right to obtain “complete compensation” i.e., not only compensation for “biological damage” connected to a physical or psychological injury but also for associated pain and suffering.
The Constitutional Court ruled in support of the system set out by Article 139, considering that it already allows standard compensation to be increased by up to 20% depending on the circumstances.
With these momentous decisions, Italy’s Constitutional Court has definitively resolved the long-running argument about how best to deal with the compensation of minor bodily injuries arising from MTPL. The Court has expressly affirmed that the needs of all stakeholders are reasonably catered for in the legal framework - the social need for motor insurance cover at reasonable rates, the need for insurance companies to be able to sustain the business, and the need for sufficient and complete compensation for injured parties.
The Court has received widespread support from the (re)insurance community for its effort to resolve this long and hard juridical conflict and should be congratulated for the clarity of this ruling. From our perspective it would be very hard to misinterpret the key messages in future - hopefully providing insurers with renewed optimism for the year ahead.