Aviation accident cases tend to have a cross-border side to them. At times only seemingly, though, as in a recent case which concluded with a judgement of the District Court in Kraków. In said judgment the court declared the jurisdiction of Polish courts and applied Polish substantive law, despite objections raised by the sued insurer: a joint-stock company incorporated under Czech law.
The accident occurred in 2011 at one of the Polish airports. The pilot and a single passenger both died in the ultralight EV-97 Eurostar aircraft’s crash.
In their report, the State Commission on Aviation Accident Investigation of The Ministry of Transport, Construction and Maritime Economy indicated that dragging the aircraft during take-off, which led to the aircraft spinning and subsequently hitting the ground, was the cause of the accident. In addition, the fact that the take-off mass exceeded the limits by at least 10%, as well as the slow reaction, or even a lack of an reaction of the pilot to the inappropriate angle of attack, both contributed to the accident’s occurrence. As such it was found that the sole cause of the accident was an error on the part of the pilot.
The aircrafts’ permanent base was in a Polish town, but both the pilot and the aircraft’s owner were members of the Amateur Aviation Association of the Czech Republic. The aircraft was registered in the Czech Republic and was covered by valid insurance. The insurance policy was issued by a Czech agent of a Czech insurance company. The indemnity sum for damage caused to a passenger under the policy in question was equal to 113.111,00 SDR.
The policy also mentioned a framework agreement between the insurer and the agent. However, the content of this agreement was not known to the insured at the time of the purchase of the policy.
The abovementioned framework agreement provided that, among other things, the insurance contract does not cover liability for damage caused during lengthy exploitation of the aircraft outside of the geographical territory of the Czech Republic in regard to an insured that – if he/she is a natural person – is not a citizen of the Czech Republic, or if it is a legal entity – is based outside the territory of the Czech Republic. „Lengthy exploitation” is defined as an continuous period of more than 90 days during a single calendar year. The agreement also contained a clause stating that any insurance policies issued on its basis are to be governed by the Czech law.
The family of the deceased passenger notified the Czech insurance company of the damage and claimed redress and compensation. However, pre-court proceedings did not result in any kind of decision by the insurer. As such, the case proceeded to trial.
The insurer argued that the Czech law is applicable, that he lacks capacity to be sued in this case (locus standi as a defendant). The insurer also brought forth statutory defence, which included, among others, circumstances such as the fact that the aircraft was stationed outside of the Czech Republic.
The court found that:
– The basis of the claim, and the entire case, is tort, which is a non-contractual obligation, and therefore the Rome II Regulation is relevant in regard to determining the applicable law.
– In respect of the claimants who demanded redress for non-pecuniary damage (harm) as well as compensation for a significant deterioration of their life situation as a result of the death of a close relative, the place where the damage occurred, in accordance with article 4 (1) of the Rome II Regulation, is Poland, that is where the claimants reside. This justifies the standpoint that Polish law should be applicable. In addition, the accident itself occurred in Poland. The court did not find that the case has any closer ties with the Czech Republic;
– While it is true that in the framework agreement between the Czech defendant insurance company and the Czech agent, who issued the policy, there is a clause stating that the insurance contract and any insurance policies issued on its basis are to be governed by the Czech law, the court did not apply said clause due to finding it contradictory to the provisions of the Rome II Regulation;
– The Polish civil law allows direct right of action against the insurer, and therefore the insurance company had locus standi as a defendant. The direct right of action is based on article 18 of the Rome II Regulation in connection with article 822 § 4 of the Polish Civil Code (the person entitled to compensation in connection with the event covered by a third-party civil liability insurance contract may pursue the claim directly from the insurer).
– In accordance with article 209 (2) of the Polish Aviation Law, in cases of non-commercial exploitation of aircrafts with a maximum take-off mass of 2700 kg, the minimum indemnity sum in respect of third-party civil liability insurance in respect of each single passenger during a single flight and in connection with a single event, the consequences of which are covered by the insurance policy, without prejudice to the provisions based on article 33 (2), is the equivalent of 100.000 SDR. The indemnity sum of the policy in question was equal to 113.100 SDR, and the claim did not exceed that amount;
– The court also did not apply another clause contained in the framework agreement, namely that the insurance contract does not cover liability for damage caused during lengthy exploitation outside of the geographical territory of the Czech Republic in regard to an insured that – if he/she is a natural person – is not a citizen of the Czech Republic, or if it is a legal entity – is based outside the territory of the Czech Republic. „Lengthy exploitation” is defined as an continuous period of more than 90 days during a single calendar year. The court explained that in spite of the framework agreement, in the insurance policy and the certificate it is explicitly stated that the insurance covers the territory of the entire world, and there are also no time restrictions to be found. In addition the court pointed out that the provisions of European law do not stipulate any such limitations;
– The court explained that there are also other factors which justify the standpoint that the aforementioned clause is unlawful, and should not be applied. The reason for the existence of obligatory third-party civil liability insurance stems from the fact that aviation accidents may result in severe damage, both pecuniary and non-pecuniary. The potential consequences of such accidents may in fact be so severe that compensating the harm and the damage will exceed the capabilities of the tortfeasor. In such an event the injured party may be left without any reliable means of obtaining compensation. The legislator’s intention was to prevent such situations from occurring, thus obligatory third-party civil liability insurance was introduced, in accordance to which the user of an aircraft pays a premium, and the insurance company is liable for the damage. In such a way it can be guaranteed that the harm and the damage of the injured party will be compensated. Therefore, any attempts to limit the liability of the insurance company on the basis of imprecise final dates should be considered unacceptable. In the case at hand it is not possible to determine on what day exactly the 90-day period, mentioned in the framework agreement, should commence. If the clause in question would be applied, the possibility of claiming compensation by the injured party would depend on when the user of the aircraft began the continuous period of exploitation of the aircraft outside of the territory of the Czech Republic, which can only be evaluated ex post. Moreover, it is an highly questionable and unverifiable event, not subject to any form of registration. Approving of such limitation would practically result in a situation where there is no valid insurance on the territory of Poland, which in turn would mean that the aircraft, in accordance with the provisions of the law, could not be used.
– The court also stated that the aforementioned clause is contradictory to the rule of non-discrimination of citizens of other Member States on grounds of nationality, which can be found in article 18 of the Treaty on the Functioning of the European Union. In accordance with said provision, Within the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may adopt rules designed to prohibit such discrimination.
Article 18 of the Treaty on the Functioning of the European Union has direct effect (see for example: the judgments of the European Court of Justice in cases C-122/96 Saldanha, point 15; C-274/96 Bickel, point 31; C-234/99 Niels Nygard, point 51; C-17/91 Lornoy et. al., point 24). The doctrine is not uniform in regard to whether said provision also finds application to private entities in the horizontal aspect, however in the judgment in case C-281/98 Angonese, point 35 and point 36 the European Court of Justice stated that it does, and in case C-411/98, Ferlini, point 50, the Court found that it does in respect of entities that exercise some form of power over an individual, and are able to impose certain conditions on that individual which impact the execution of the fundamental rights stipulated by the Treaty in a negative way. The Regional Court agreed with the European Court of Justice and found that the general terms of insurance or framework agreements on the basis of which insurance contracts are concluded cannot contain clauses that discriminate individuals on grounds of their nationality.
– All of the participants of the accident and the claimants are citizens of Member States, the defendant is a Czech-based entity, which is a Member State, and on top of that the accident occurred on the territory of Poland.
– The court therefore found that that the aforementioned clause contained in the framework agreement is contradictory to the non-discrimination rule of citizens of other Member States, since for the same price a citizen of the Czech Republic is provided a different scope of insurance protection than a citizen of any other Member State. The only differentiating criteria in this case is the citizenship. Approving of such a clause would result in a situation where a citizen of another country than the Czech Republic would have to obtain additional insurance, provided that he or she uses the aircraft outside of the territory of the Czech Republic for more than 90 days. What is more, he or she would not be refunded for the premiums for the period of time that is not covered by insurance (there is no grounds for that under the provisions of the agreement). Meanwhile a citizen of the Czech Republic for the same price would not have to buy additional insurance, and would be covered by insurance at all times. Due to the above the court found that said clause is invalid in relation to citizens of Member States.
– The claim itself was quantified on the basis of Polish substantive law. The court awarded the wife of the deceased passenger a total of 43.067 SRD as both redress and compensation for a significant deterioration of her life situation. The son of the deceased passenger was awarded 34.996 SRD along with statutory interest which ran after 30 days passed from the day on which the insurer was called to fulfil the obligation.
Dzień dobry!
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