Official Position on the Application of Article 22, Paragraph 1 of the Mandatory Traffic Insurance Act

Croatian Financial Services Supervisory Agency (hereinafter: Hanfa) received on March 8, 2021 a request regarding the interpretation of Article 22, paragraph 1 of the Act on Mandatory Traffic Insurance (Official Gazette nos. 151/2005, 36/2009, 75/2009, 76/2013, 152/2014, hereinafter: ZOOP) which reads: whether an insurance company is obliged to compensate a leasing company (lessor), as the insured party under the insurance contract, for damage to a vehicle, in the event that the leasing recipient (vehicle user) is not liable for the traffic accident causing damage to a vehicle owned by the same leasing company (lessor).

Given that the aforementioned request refers to the necessity of promoting, organizing and supervising measures for the effective functioning of financial markets in terms of harmonizing the actions of supervisory bodies under Article 2, point 2 of the Act on the Croatian Financial Services Supervisory Agency (Official Gazette nos. 140/05 and 12/12), the following is provided.

Based on Article 15, point 4 of the Act on the Croatian Financial Services Supervisory Agency, Hanfa adopted at its Management Board meeting held on April 22, 2021 the OFFICIAL POSITION

I. Article 2, paragraph 1, point 2 of the ZOOP stipulates that one of the mandatory traffic insurances is the insurance of the vehicle owner, or user, against liability for damages caused to third parties (hereinafter: AO insurance).
The term vehicle owner is not defined by the ZOOP provisions, and therefore for the purposes of the mandatory AO insurance regulations it does not have a special meaning and should be interpreted in light of the provisions of general civil property law. It is presumed, unless proven otherwise, that the vehicle owner is the person listed in that capacity in traffic documents and public law instruments regarding the vehicle1. According to Article 4, paragraph 1 of the ZOOP, the owner of a means of transport is obliged to conclude an insurance contract for the insurance of the vehicle owner, or user, against liability for damages caused to third parties, prior to using the means of transport in traffic, and to renew it as long as the means of transport is in traffic. The term user of a means of transport is defined by the ZOOP as a natural or legal person who, with the consent of the owner, actually exercises control over the means of transport2. This term, therefore, potentially covers a very broad range of persons who might be in possession of a vehicle, e.g., based on lease or rental agreements, subsequently based on loan for use or deposit, etc. Following the above, there is no doubt that the leasing recipient should be considered a vehicle user in relation to a leased vehicle, given that the leasing company as the vehicle owner transfers possession of the vehicle and the right to use it to the leasing recipient for the duration of the lease agreement3.

1 Ćurković, M., Mandatory Traffic Insurances, Engineering Bureau, Zagreb, 2007., p. 63 2 Article 3, paragraph 1, point 3 of the ZOOP 3 Radionov, N., Vincenca Padovan, A., Vehicle Accidents Owned by the Same Leasing Company and the Problem of a Third Party from AO Insurance, PFZ Proceedings, 62, (4) 1043-1076 (2012), p. 1055

In this regard, reference is made to paragraph 3 of the same article according to which, if the means of transport is registered with the user of the means of transport in accordance with registration regulations, the provisions of that law applicable to the owner of the means of transport are applied accordingly to the user of the means of transport. Furthermore, regarding the injured party, Article 3, paragraph 1, point 8 of the ZOOP defines the term injured person as any person who has suffered damage to property and/or persons, and who under that law has the right to submit a compensation claim.
Article 22, paragraph 1 of the ZOOP stipulates that the vehicle owner is obliged to conclude an insurance contract against liability for damage caused by using the vehicle to third parties due to death, bodily injury, impairment of health, destruction or damage to property.
The ZOOP does not provide a definition of third persons but in Article 23 specifies who cannot be a third person:

1. the driver of the vehicle causing damage and his relatives and other natural or legal persons regarding damage due to death or bodily injury of the driver,
2. the owner, co-owner, or joint owner and any other user of the vehicle causing damage, specifically regarding compensation for property damage,
3. a passenger who voluntarily entered the vehicle causing damage and was driven by an unauthorized driver, if the insurer proves that this circumstance was known to the passenger,
4. a passenger who voluntarily entered an unregistered vehicle without visible registration plates on the vehicle, if the insurer proves that this circumstance was known to the passenger,
5. a passenger who voluntarily entered an uninsured vehicle causing damage, if the Croatian Insurance Bureau proves that this circumstance was known to the passenger,
6. an injured person who suffered damage:
   a. due to the use of vehicles at sporting events held on roads or sections closed to other traffic, aimed at achieving maximum or average maximum speed, or during training for these events, b. due to the operation of nuclear energy during the transport of radioactive material,
   c. due to war operations, riots or terrorist acts, with the insurance company in that case being obliged to prove that the damage was caused by such an event.
   Therefore, for the purposes of Article 23 of the ZOOP, the owner, co-owner, joint owner and any other user of the vehicle causing damage cannot in any case be considered a third injured person regarding property damage.

II. Following all the above, in the event that vehicles (leased objects) involved in a traffic accident are unequivocally owned by the same leasing company (lessor), Hanfa is of the opinion that such a leasing company, taking into account Article 23 of the ZOOP, cannot be considered a third party regarding property damage within the meaning of Article 22, paragraph 1 of the ZOOP, regardless of whether the leasing company acts in the insurance contract as both policyholder and insured or only as insured, and regardless of whether the leasing recipient acts as policyholder or not.
Hanfa is of the opinion that, based on Article 22, paragraph 10 of the ZOOP, only the leasing recipient is considered a third party, who is the policyholder and vehicle user, and who is not liable for the traffic accident in which damage was caused to him by a vehicle of the same lessor. According to the aforementioned provision, a leasing recipient considered a third party is entitled to submit a compensation claim which an insurance company is obliged to compensate, and there is no legal barrier for the rights and obligations of the leasing recipient and lessor to be further regulated by a lease agreement.

Following all the above, according to Hanfa's opinion, an insurance company is not obliged directly to a leasing company, as the insured under the insurance contract, regardless of the fact that the leasing recipient (vehicle user) is not liable for the traffic accident in which damage was caused by a vehicle owned by the same leasing company (lessor), to compensate for the damage.

III. This official position is published on Hanfa's website.
CLASS: 008-02/21-03/01
FILE NO.: 326-01-70-72-21-2
Zagreb, April 22, 2021.
CHAIRMAN OF THE MANAGEMENT BOARD dr. sc. Ante Žigman