It is precisely 191 years since Josef Božek in Prague drove the first Czech steam automobile before a wide audience. Since then, there has been rapid development of the automotive industry, with motor vehicles of various types becoming equipment in almost every household. However, this rapid development of motoring brings not only freedom of movement for people but also a high probability of damage necessarily connected with the operation of a vehicle. And given that damage to property in connection with motoring unfortunately occurs frequently, the legislature decided to establish for its citizens an obligation to insure themselves for damage caused by the operation of a vehicle with one of the authorised insurance institutions (hereinafter “the insurer”).
As with almost all legal norms, the regulations governing liability for damage caused by the operation of a vehicle are accompanied by certain ambiguities and problems that arise in practical life, because as the classic says – “Theory is grey and the tree of life is green”. For this reason, the authors will attempt in this article to describe the issue of liability for damage caused by the operation of a vehicle, focusing primarily on the question of the creation, modification and termination of the contractual relationship between motorists and insurers.
Legislative Framework In 1999, Act No. 168/1999 Coll., on Insurance of Liability for Damage Caused by the Operation of a Vehicle and on Amendment of Certain Related Acts, as amended (hereinafter “the Act”), was adopted by the Parliament of the Czech Republic, which as the principal regulation governs insurance of liability from the operation of a vehicle (hereinafter “insurance”). This Act is then followed by Decree of the Ministry of Finance No. 205/1999 Coll., as amended, which implements certain provisions of the Act on insurance of liability from the operation of a vehicle, and so that the lay public has sufficient reading material for long winter evenings, certain matters are also regulated in acts relating to insurance matters generally. These are Act No. 363/1999 Coll., on Insurance, as amended, and Act No. 303/2004 Coll., on Insurance Contracts, as amended, which are in turn followed by a secondary regulation in the form of Decree of the Ministry of Finance No. 303/2004, as amended, which supplements and implements certain provisions of the Act on Insurance.
Obligation to Conclude Insurance and Its Creation Insurance is created on the basis of an insurance contract with the insurer. As regards the obligation to conclude an insurance contract for liability for damage caused by the operation of a vehicle, it could be hyperbolically stated that there are as many insurance contracts as there are vehicles on the road in the Czech Republic. The Act provides that anyone who operates a vehicle on a public road must have insurance of liability for damage caused by that vehicle. In listing the vehicles that must be insured, the legislature is truly thorough and considers a vehicle to be, for example, a moped, tricycle or quadricycle, a trailer, a self-propelled work machine, a towed work machine and also particularly a snowmobile or snow groomer, and the question thus arises whether it would not be more fortunate to list only vehicles that need not be insured. The person obliged to conclude insurance is the owner or co-owner (hereinafter “owner”) of a domestic vehicle or the driver of a foreign vehicle, the latter being obliged to conclude an insurance contract in the Czech Republic only if he does not have such a contract concluded in another state.
We consider it appropriate in this context to mention that operating a vehicle without insurance is an administrative offence for which the locally competent municipal authority may impose a prohibition on activity consisting of a prohibition on driving motor vehicles for up to one year and also a fine of up to CZK 20,000; every irresponsible motorist is thus a welcome contributor to the regularly deficit state budget.
Insurance by law extends to the territory of the Czech Republic, other member states of the European Union and also to damage caused by the operation of domestic vehicles in the territory of states such as Albania, Andorra, Bulgaria, etc., which can considerably simplify the resolution of damage events in these countries for drivers.
Scope of Compensation for Damage From the perspective of the scope of compensation for damage, the Act provides that the insurer compensates only damage that occurred to the health, life and property of the injured party and not to the property of the liable entity. An exception to this rule applies, namely that the insurer is obliged to compensate damage to health or arising from death also to the owner of the vehicle or a person who lawfully handles the vehicle, but only if at the time the damage arose this vehicle was being driven by another person.
For all fans of motor racing or members of terrorist organisations, it is also important to note that the insurer is released from performance for damage caused during an organised motor race and also damage arising during a terrorist attack or as a result of a war event. Although some of the aforementioned reasons may have seemed remote from reality at the time the Act was created, they have now become very topical and when travelling to certain countries actively involved in the anti-terrorist campaign, which unfortunately include some Western European countries, this eventuality must also be considered.
The insurer pays compensation for damage in money, fundamentally in Czech crowns. The amount of compensation for damage is limited by law to the maximum limit of insurance performance according to the wording of the insurance contract with minimum amounts established by law; the injured party would therefore have to claim the remaining compensation directly from the tortfeasor. For the insured person who causes damage by the operation of his vehicle, it is sad news that in certain cases the insurer has the right to claim paid compensation within the framework of a so-called recourse claim against the insured person, particularly if the damage was caused intentionally, the vehicle was used without authorisation, a traffic accident was not reported in which death or injury to a person occurred or material damage apparently exceeding CZK 50,000 to one of the vehicles involved including transported items or to other items, etc.
Termination of Insurance Contract and Practical Consequences The insurance contract may be terminated in several ways. The first method is a change of vehicle owner, which will probably be the most common case of termination of insurance in practice. In this case, insurance ends only on the day the insurer is notified of the change in ownership of the insured domestic vehicle. Both the original owner of the vehicle and the new owner are entitled to report the change in ownership of the vehicle, without undue delay from the moment of the change of ownership. This fact should be remembered immediately upon sale of the vehicle and it is not amiss to regulate it in the relevant purchase contract. In practice, situations frequently occur where, due to trust that “the other party” will make the notification, no notification of the change of ownership occurs at all and employees of the debt administration and recovery departments of individual insurers have another reason to write not very accommodating reminders for non-payment of premiums. From this perspective, an unwanted connection is certainly also the possibility of termination of vehicle insurance, whereby insurance terminates on the day following the fruitless expiry of the time limit for payment of the premium, which may not be shorter than 1 month. The usual method of allocating payments to premiums is also that they are used to cover the oldest debts in accounting and it may thus happen that despite payment of the premium for a certain period and the feeling that for this particular time it is, so to speak, “in the clear”, we are debtors precisely in this period. Less active insured persons should also be warned that in the case of non-payment of premiums the insurer will claim premiums from the current insured person within court proceedings and the argument that the vehicle was sold in the meantime will not be able to lead to dismissal of the action.
Another legal event when insurance terminates is connected with the day when the vehicle ceased to physically exist as a vehicle. In practical life it is therefore desirable that after the funeral of a beloved vehicle at one of the numerous scrapyards we take the death notice confirming the demise of the vehicle immediately to the relevant insurer and notify it of the demise of the vehicle so that we are spared the obligation to continue paying premiums for a non-existent vehicle.
Insurance also terminates on the day of deregistration of the domestic vehicle from the vehicle register maintained by the locally competent municipal authorities. A document on deletion of the vehicle from this register is a necessary prerequisite for us to be released from the obligation to continue paying premiums. In this context, however, it must be noted that it is not advisable to drive onto public roads with a vehicle that has been deleted from the relevant register, so that we do not risk confiscation of our driving licence and a hefty fine.
A very unpleasant event during which insurance terminates is theft of the vehicle, but given the following it could be sarcastically said that the owner has good fortune in misfortune here. This is one of the few cases where our vehicle is unlawfully used by another person in which the insurance company provides insurance performance. The day when insurance terminates is then at the latest the day when the Police of the Czech Republic received notification of the theft of the vehicle.
In the case of this event, cases occur in practice where the insurer refuses to recognise the termination of this insurance because in its opinion theft of the vehicle cannot be spoken of. These are primarily situations where the owner of the vehicle is unable to provide the insurer with the required documents, usually the Certificate of Vehicle Registration and vehicle keys, and the facts undoubtedly do not suggest that it was a theft but, for example, fraud or embezzlement; in such cases it is possible that insurance will not terminate. Despite the factual impossibility of using the vehicle, the owner of the vehicle is thus still obliged to pay premiums. This state can only be terminated by a resolution of the Police of the Czech Republic in which it will be stated that the vehicle was actually stolen and it is not, to use the words of a former prime minister, a “roguish claim”. If we do not wish to provide the perpetrator of the criminal offence also with the luxury of paid insurance, it is necessary to “press” the relevant police authorities so that the required resolution is issued as soon as possible. It is an established custom that from the moment we find an empty parking space until the opening of an envelope with such a resolution, a considerable time may pass. If you therefore entrust your car to an acquaintance who fails to return it to you on time, it is good to bear in mind that you bear responsibility for damage on your shoulders, as well as the obligation to properly pay the prescribed premium.
As the saying goes, agreement “makes things certain” and is certainly one of the most pleasant ways to terminate an insurance contract; however, it is not advisable to forget the conditions established by law, which are determination of the moment of termination of insurance and also the method of mutual settlement of obligations.
In the event that we decide not to pay the premium or simply forget this unpleasant obligation, it is good to reckon with the fact that this also leads to termination of insurance in certain cases. By law, insurance terminates on the day following the fruitless expiry of the time limit set by the insurer in a reminder for payment of the premium or its part delivered to the policyholder; this time limit may not be shorter than 1 month and the insurer’s reminder must contain a warning of termination of insurance, otherwise termination of insurance would not occur.
Another relatively problematic reason for termination of an insurance contract is notice, which is regulated by Act No. 37/2004 Coll., on Insurance Contracts, as amended. This Act establishes the moment of termination of insurance at the end of the insurance period, with the condition for validity of notice being its delivery to the other party at least 6 weeks before the expiry of the insurance period. By insurance period we mean the period bounded by the moment at which the premium is payable. This means that if this period ends for us on 31 December, notice must be delivered to the other party no later than 19 November. Another possibility is giving notice within 2 months of concluding the insurance contract, for example if we changed our mind about purchasing the vehicle, whereby from delivery an eight-day notice period begins to run. Insurance therefore terminates only upon expiry of this period. The third possibility is then the possibility to give the insurer notice within 3 months of delivery of notification of the occurrence of an insured event, whereby the legislature apparently wished to give the insurer a chance to rid itself of the greatest sinners. Here the notice period is set at 1 month. In practice, the least used will probably be the policyholder’s possibility to terminate the contract if the insurer informs him that his contract has been sold to another insurer, which the law calls transfer of insurance portfolio, or if he learns that the insurer has lost its licence. In such a case, the policyholder is entitled to terminate insurance within 1 month of revocation of the insurer’s authorisation to conduct business or transfer of the insurance portfolio (part thereof) with an eight-day notice period.
If the insurance contract is concluded for a fixed term, it terminates upon expiry of the period for which liability insurance was agreed.
Conclusion As already noted above, the authors were led to write this article primarily by the effort to describe the issue of liability for damage caused by the operation of a vehicle, known to the wider public as so-called compulsory liability insurance. Due to limited space, they focused primarily on termination of compulsory liability insurance. However, the constantly changing rules in road transport guarantee that the issue of compulsory liability insurance will also be continuously changed by the creative activity of various authorities of the Czech Republic and it can therefore be more than recommended to the lay public that they pay increased attention to the topic of compulsory liability insurance.
This text was translated from Czech to English using an AI translator.