On the Justification of the Supreme Court’s Resolution Regarding the Calculation of Damages
In the resolution of September 11, the Supreme Court directly and unequivocally addressed the situation presented in the Financial Ombudsman’s question. In this case, the expectation for the justification was not as exciting as it has been in the past. Nevertheless, it is worth familiarizing oneself with the content.
Differences in Case Law
Let us recall—the resolution adopted by the Supreme Court in case III CZP 65/23 reads:
“If the repair of the vehicle by the injured party has become impossible, particularly in the event of the sale or repair of the vehicle, it is unjustified to determine the amount of compensation from the liability insurance for motor vehicle owners as the equivalent of hypothetical repair costs.”
In its justification, the Supreme Court briefly discussed two diverging lines of case law. The first, which accepted that the eventual repair of the vehicle does not matter in the context of claims against the insurer. This line of case law is traced back to 1988.
The second line began to take shape with the Supreme Court’s ruling of July 17, 2020 (V CNP 43/19), where the opinion was expressed that in the event of vehicle repair, the loss of the injured party’s property is typically reflected in the reduction of the property value due to the out-of-pocket repair costs and, potentially, in a so-called “commercial damage,” which manifests as a decrease in the vehicle’s resale value. This view was subsequently expressed in several further rulings, including the decision of September 11, 2020 (IV CNP 26/19), the judgment of June 10, 2021 (IV CNPP 1/21), the judgment of December 8, 2022 (II CSKP 726/22), and the judgment of December 15, 2022 (II CNPP 7/22).
This view was grounded on Article 316 of the Civil Procedure Code, which stipulates that when determining the amount of compensation in judicial proceedings, the court should take into account the state of affairs existing at the time the trial is closed.
Supreme Court’s Reasoning Regarding the Resolution
The reasoning presented in the justification of the resolution is as follows:
Damage is a dynamic category. From the moment it arises until the moment it is repaired, both the form and the extent of the loss may change.
According to the principle of compensation, the compensation cannot exceed the amount of the loss.
If the injured party has already repaired the vehicle, the amount of the damage is essentially known and is reflected in the costs incurred by the injured party for the repair and, additionally, possibly in the loss of the vehicle’s market value after the repair.
If the vehicle has been sold, the loss is reflected in the difference between the price obtained for the sold, unrepaired vehicle and the amount the injured party could have obtained from the sale of an undamaged car.
Payment of compensation exceeding the actual costs spent on repairing the vehicle would lead to unjust enrichment of the injured party.
The Supreme Court also pointed out the ease of proving the amount of damage: “Proving the damage in such situations should not cause the injured party undue difficulties, as it often comes down to presenting documents showing the costs incurred or proving the sales price.”
The Supreme Court also referred to judgments of the Court of Justice of the European Union supporting this position: judgment of March 25, 2021, C-501/18, BT v. Balgarska Narodna Banka, and judgment of March 21, 2023, C-100/21, Mercedes-Benz Group (Liability of vehicle manufacturers with invalidation devices).
Finally, the Supreme Court reiterated that compensation cannot exceed the amount of the damage and reminded that Article 316 of the Civil Procedure Code requires the court to take into account the state of affairs at the time the trial is closed.
Law vs. Practice
The Supreme Court’s reasoning is convincing. Indeed, the fundamental principle of the law of obligations is that compensation cannot exceed the damage. Additionally, the court must rule based on the state of affairs at the moment the trial concludes. Also, in terms of evidence—the invoice for the vehicle repair clearly proves the incurred damage. The repair estimate is evidence but is merely a hypothetical calculation—using it seems appropriate only if the amount of damage cannot be exactly demonstrated.
Unfortunately, in common courts, there are still instances where rulings are made without considering the aforementioned resolution and the line of case law it supports. There are situations where judges disregard the actual repair of the vehicle or its sale as irrelevant to the case’s resolution and omit evidence related to these matters. However, in light of the already established line of case law by the Supreme Court, it seems that the adjustment of common courts is a matter of time—and consistent appeals against judgments that starkly contradict the Supreme Court’s resolution of September 11.