New recommendations of the FSA on the settlement of motor insurance claims
In July 2022, the FSA issued Recommendations on the rules for the settlement of motor vehicle claims by insurance companies. The Recommendations will come into force in November this year and will replace the now rather aged “Guidelines for the settlement of motor vehicle insurance claims,” which have been in effect for eight years.
The entry into force of the KNF document in practice for the injured and insured are of little significance. The rules collected in it are essentially binding for years and constitute a set of stabilized and unified case law. Some of the recommendations can be recognized from memory as theses of Supreme Court resolutions, captured in individual justifications of judgments.
However, the document itself is quite momentous, as it affects the uniformity of insurance companies’ liquidation practice. It counteracts the issuance of obviously incorrect decisions by individual insurers.
It is worth discussing at this point what is new in the Recommendations and what was missing from the Guidelines. Let’s start with the fact that the name of the documentation has changed from Guidelines to Recommendations. This is just a stylistic and semantic procedure. It’s just that the new name better conveys the fact that the FSC simply “advises” on how to proceed given the content of regulations and court rulings, rather than that the FSC has anything to say here on a hierarchical subordination basis. This is expressed in the wording of the Introduction: The content of the Recommendation contains requirements arising directly from the applicable laws, from the unquestionable rulings of the Supreme Court indicating the desirable conduct of insurance companies.
Of course, the Financial Supervisory Commission – as the name suggests – is a supervisory body that, among other things, can impose administrative penalties on insurance companies. However, in the practice of imposing penalties, this concerns violations of fundamental principles of liquidation proceedings. Recommendations often deal with more nuanced issues on which, in specific cases, it is easy to come up with arguments that do not facilitate the pursuit of claims, and which are often derived from different positions in case law.
Recommendations – with regard to the previously highlighted guidelines of 2014, introduced a few cosmetic changes, generally not significant, but there were also novelties concerning, in particular, the organization by the insurance company of the liquidation of damage ensuring the restoration of the vehicle to its condition from before the damage under the so-called comprehensive service of liquidation of traffic damage, proposing to the injured to rent a substitute vehicle, reimbursement of expenses incurred in connection with the commissioning of an opinion (expert opinion) by a third party by the entitled person, or conclusion of settlements.
Regarding the new recommendations, it was introduced as the 16th organization of the repair process through a workshop from the repair network. The insurer cannot impose such a solution, which would be disadvantageous to the repairers due to potential price shear. The insurer may arrange such a repair, and consequently set the cost of repair based on the prices of such a service, only with the express consent of the authorized party. As a consequence of this recommendation, insurance companies, for example, may not “invoke discounts or rebates in effect at cooperating repair shops and dealerships” and thereby reduce compensation (Recommendation 17.3).
In recommendation 15, concerning the determination of repair costs, point 7 was added, which is of interest to authorized and unauthorized repair shops in terms of possible disputes over labor hours: 15.7. The insurance company should not dispute the costs incurred by the authorized repairer to repair the vehicle at the repair shop chosen by the authorized repairer, if these costs were determined according to the prices used by the repair shop chosen by the authorized repairer to repair the vehicle, even if these prices deviate (were higher) from the average prices, as long as they correspond to the prices used in the local market. This means that market average (average) prices are irrelevant and cannot be the basis for limiting the rates to their amount.
There has been a thorough expansion of Recommendation No. 21 on the rules for reimbursing the cost of renting a replacement vehicle. From a legal point of view, there is no revolution there. On the contrary, the previous provision in the Guidelines was flawed, archaic and coarse, and the current one has been adapted to the realities of jurisprudence, which, for example, allows for several months of rental and payment of rent that is yet to become due.
The new Recommendation on the rental of a replacement vehicle came in at item 22. It applies to the situation when the insurance company proposes to use a rental service that cooperates with the insurer. Unfortunately, unlike repair shops in the partner network, such “imposition of a lower price” is effective. However, in the case of the service of premium or luxury brands, this Recommendation can be doubted. Because if the damaged vehicle is a Mercedes AMG or a Porsche then the injured party is not obliged to rent, for example, a Renault or a Dacia, in the same segment and thus minimize rental costs.
Interesting and noteworthy is the new Recommendation on reimbursement of the cost of an independent expert opinion, which was found under item 24. If there is a dispute with the insurer, for example, about the scope of the repair, and in order to prove its case, the service center will use a paid opinion of an independent expert who will confirm the service center’s right, the insurance company is obliged to reimburse the cost of such an expert opinion.