The dynamic nature of motor vehicle damage

How the dispute over selling a damaged vehicle arose

For years, the prevailing view in case law was that the injured party could claim from the at-fault party’s third-party liability insurer the reimbursement of repair costs determined on the basis of a cost estimate – regardless of whether they had repaired the vehicle and whether they intended to repair it at all. Insurers challenged this especially where the injured party had sold the car in a damaged condition: since the repair would no longer take place, the hypothetical repair costs did not – in their view – correspond to the actual loss to the injured party’s assets.

The dispute reached the Supreme Court. In its resolution of 8 May 2024 (III CZP 142/22), the Supreme Court held that where it has become impossible for the injured party to repair the vehicle – in particular where the vehicle has been sold or repaired – it is not justified to determine compensation under third-party liability insurance as the equivalent of the hypothetical repair costs. The resolution does not take away the right to compensation, but it does change the way it is determined.

Why damage is dynamic in nature

Damage is not a value fixed once and for all at the moment of the collision. The court assesses its extent as at the date of the ruling, and therefore takes subsequent events into account: the repair and its actual cost, the sale of the vehicle in a damaged condition, a partial repair or continued use of the car without repair.

If the injured party had the car repaired for less than the cost estimate indicates, the insurer may rely on the actual cost of repair. If they sold the vehicle without repairing it, the point of reference becomes the difference between the value of the vehicle before the damage and the value of the damaged vehicle, which in practice is reflected in the price obtained. The principle of full compensation (Art. 361 § 2 and Art. 363 of the Polish Civil Code) still applies: compensation is intended to make good the loss, but it must not lead to the enrichment of the injured party.

What this means in practice for the injured party

• Before you sell a damaged vehicle, secure the documentation: the cost estimate, photographs of the damage, the insurer’s inspection report and the sale agreement stating the price.
• If you are having the car repaired, keep the invoices – the actual cost of repair using parts of appropriate quality is the basis of the claim.
• It is worth seeking advice before deciding to sell the vehicle without repairing it: this decision affects how compensation is determined and may reduce its amount.
• The insurer may not refuse payment merely because the vehicle has been sold – it is obliged to determine the damage according to the current circumstances.
• You can file a complaint against a decision that understates the compensation and then take the matter to court. Claims under third-party liability insurance are, as a rule, time-barred three years from the day on which the injured party learned of the damage and of the person obliged to redress it. Under the provisions currently in force, the limitation period ends on the last day of the calendar year.

E&S Law Firm handles compensation cases at every stage – from reporting the damage, through claims handling and court proceedings, to enforcement – including disputes over the method of determining compensation after the vehicle has been sold or repaired.