Liability set to expand in Europe despite recent caution

But recent legislative and judicial developments at local level reveal a level of conservatism among judges and legislators that sounds a note of caution over the pace at which legal liability should expand in continental Europe, which is good news for both insureds and the insurance industry, he explained. “Clearly the underlying trend is up in terms of indemnity levels, uniformity and the facilitation of consumers to seek redress—we are moving inexorably in that direction. Having said that, it is going to be over a longer period than might initially have been feared,” noted Mr Lewin. Recent legislative developments in continental Europe suggest that, in terms of indemnity levels, the lowest common denominator is rising across the board, to a level considered acceptable across the whole of the EU. But there is not a ‘crazy acceleration’ towards the highest common denominator, continued Mr Lewin.hide“Local jurisdictions are putting their hands up and saying we are not ready for all this yet. Thus to some extent the brakes are being put on so that we do not go too rapidly towards a United States of Europe common level of high indemnity, ” said Mr Lewin. The conservatism of local legislators, as noted by Mr Lewin, was evident in the Netherlands where recently a draft bill that aimed to introduce compensation for pain and suffering as a result of the loss of life or heavy injury of a relative because of the unlawful action of a third party was defeated by the Dutch parliament. And Mr Lewin believes that the cautious and gradual increase in insured limits, acknowledgement of the need to provide higher levels of compensation and facilitate the means of obtaining compensation that is currently witnessed is good news for insureds, insurers and reinsurers. “If the legislators put the brakes on to too rapid a development that is helpful to everybody and gives people time to adapt. I think it is all about allowing time—not to see too rapid a progress towards a much more aggressive compensatory regime. And I think it is sensible that we do not try to accelerate too fast. If there is a trend at the moment it is really holding up the hand of reason and caution. There is an acknowledgement that liability will continue to rise but the legislators are wary of accelerating the pace too fast,” said Mr Lewin. Increased levels of liability and compensation is good news for victims. Whilst for insureds and insurers it should mean an increase in premium linked to higher and more frequent claims. However, if the pace of change is accelerated too quickly problems can arise, said Mr Lewin. This is because if the insurance industry does not respond to rapid developments or decides to respond with insufficient levels of cover that is obviously bad news for the insured, he said. Although Mr Lewin does not think there is currently much disconnect between liability and cover he points to the European Liability Directive, which has rapidly expanded liabilities across Europe, as an example of how problems can occur. “That is quite a dramatic move and the question is whether or not the insurance industry will respond with appropriate levels of cover and they will be cautious. Both insurers and reinsurers will not want to see a huge limit put out there for new areas of liability, such as environmental damage, when they do not have sufficient statistics and experience to know what will come out of the new legislation,” he added. The development of legislation to facilitate class actions in Europe also reflects a note of caution amongst lawmakers, Mr Lewin said. CLASSICAL ACTIONS Legislation in Italy, France and Germany suggests that, although this form of redress is now ‘over here’, there is an attempt to ‘create a position of reason and logic that is more about managing costs and ensuring that things are kept under control rather than creating a huge accelerator pedal for the development of mass tort litigation,’ explained Mr Lewin. “A legal platform is gradually being created that will enable class actions to take place, but at the same time if you look more closely at the various pieces of legislation in the different European jurisdictions, the platform is not offering ‘carte blanche’ to lawyers to accelerate the process,” he added. Mr Lewin spoke to CRE following the publication of a recent Guy Carp & Co. report entitled ‘Recent Legislative and Judicial Developments in Continental Europe Affecting the Casualty Insurance Industry.’ It was developed in conjunction with law firm Heuking Kühn Lüer Wojtek. Covering developments from March to September of this year, the report notes significant legislative changes at EU level, as well as in individual member states.

Liability set to expand in Europe despite recent caution

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