Commentary on the Supreme Court’s resolution of September 11, 2024, case No. III CZP 65/23, concerning the application of the differential method to calculate the amount of compensation under third-party liability insurance in the event of the sale or repair of a vehicle (critical commentary)

Michał Hejbudzki

Abstract

The purpose of this study was to assess whether the resolution in question effectively fulfilled its function of eliminating discrepancies in the interpretation of legal provisions and thereby ensuring uniformity in judicial practice. The analysis concerns cases involving partial damage to a motor vehicle in which, before the determination of compensation, restoration of the vehicle becomes impossible due to subsequent actions by the injured party, such as the sale of the vehicle in its damaged condition or its prior repair. In such circumstances, the central issue is whether compensation payable under the vehicle owner’s third-party liability insurance should be determined based on the hypothetical costs necessary to restore the vehicle to its pre-damage condition.

An analysis of the justification for the resolution in question leads to the conclusion that it failed to achieve the objectives for which it was adopted. The considerations presented therein are general and lack sufficient analytical depth. The position adopted in the ruling gives rise to serious substantive concerns, inter alia, because it equates the repair of a damaged vehicle with its restoration to the pre-damage condition. The Supreme Court appears to overlook the fact that although a repaired vehicle may achieve a level of technical efficiency sufficient to pass mandatory inspections and be approved for use on public roads, this does not necessarily mean that it has been restored to its pre-damage state. This is particularly evident in situations where damaged components are replaced with parts of inferior quality.

In such circumstances, excluding the possibility of determining compensation on the basis of the cost estimate method, as the Supreme Court’s reasoning seems to imply, cannot be regarded as justified. The resolution in question also fails to answer the question of how the amount of compensation should be determined when a damaged vehicle has been restored to its operational condition rather than to its pre-damage state and then subsequently sold. For the above reasons, this resolution did not contribute to eliminating discrepancies in the interpretation of legal provisions and thereby ensuring uniformity in judicial practice. It failed to provide a clear answer to the question whether, in cases of partial damage to a motor vehicle where, before the determination of compensation, restoration becomes impossible as a result of subsequent actions of the injured party – such as the sale of the vehicle in its damaged condition or its prior repair – compensation under the third-party liability insurance of the vehicle owner should be determined as an equivalent of the hypothetical costs of restoring the vehicle to its pre-damage condition.