Insurance/Reinsurance - Germany.

In a case published in January 2007 the Federal Court of Justice had to deal with the question of the admissibility of a legal action taken by a German plaintiff against a Dutch insurer. The key question for the court was whether the German courts have international jurisdiction in cases of direct action by an injured party domiciled in Germany against an insurer that is based in another EU member state.

Facts

The plaintiff was involved in a car accident in the Netherlands in which he suffered damage. The accident was caused by a Dutch driver whose indemnity liability insurer has its business seat in the Netherlands. The plaintiff raised a direct claim for damage against the Dutch insurer before the German regional court of his domicile. The regional court dismissed the action, arguing that the German courts have no international jurisdiction in such cases. However, the Cologne Court of Appeal ruled that the action was admissible. It stated that according to Article 11(II) in connection with Article 9(I)(b) of the EU Regulation on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters (the Brussels Regulation), the injured party is entitled to take direct action against the insurer in its home country. The Dutch insurer appealed to the German Federal Court of Justice.

Judgment

The federal court did not make a final ruling. Instead, it submitted the matter to the European Court of Justice (ECJ) and asked for a statement as to the interpretation of Article 11(II) of the Brussels Regulation in order to secure a uniform application of this provision within the European Union. In its reasoning the federal court made it clear, however, that it shares the view of the Cologne Court of Appeal. According to Article 9(I)(b) of the Brussels Regulation, the insured or the third-party beneficiary is entitled to sue the insurer at the place of its own domicile or business seat. Article 11(II) of the Brussels Regulation provides that Article 9 shall apply accordingly to a direct action brought by the injured party against the insurer, provided that such direct action is admissible. The federal court was of the opinion that because of this reference, in the case of direct action against the insurer jurisdiction is given to the domicile of the injured party. According to the federal court, this holds true irrespective of the fact that the injured party is not mentioned in Article 9(I)(b).

The federal court argued that this understanding follows on from EU Directives 2000/26/EC and 2005/14/EC, which strengthen the legal status of the injured party by obliging member states to establish rules that allow for the possibility of direct claims by the injured party against the insurer. The preparatory materials for these directives show the intention of the European Commission and the European Parliament that the fulfilment of this obligation should be followed by the establishment of jurisdiction at the domicile of the injured party.

By taking this view, the federal court contradicted the prevailing view among German legal commentators. Most commentators deny that Articles 11(II) and 9(I)(b) of the Brussels Regulation provide jurisdiction for the injured party at its own domicile. They argue that a direct action by the injured party against the insurer cannot be considered as an insurance matter under the meaning of Articles 8 to 14 of the Brussels Regulation. This opinion was explicitly rejected by the federal court.

Comment

The view of the German federal court is well founded and persuasive. It remains to be seen whether the ECJ will adopt the same opinion. However, taking the federal court's line of argument into account, the ECJ's interpretation of the provisions in question should not differ too greatly from the federal court's view.

The decisions of the German federal court and the ECJ in this case are relevant to all types of insurance (eg, protection and indemnity insurance, marine insurance). If the ECJ confirms the position of the federal court, any European protection and indemnity insurer could be sued by an injured party before a court in the home country of that injured party. The only condition is that the law of the country where the party liable for the damage acted or the law governing the relevant insurance contract must provide that the injured party is entitled to a direct claim against the insurer. There is no way for the insurer to circumvent this legal consequence (eg, by agreeing with the insured on a specific place of jurisdiction). Such agreement would be considered invalid with no binding effect on the injured party.

"International Law Office"