Westfälische: CJEU to Revisit Rome II Choice of Law Rules in Cross-Border Motor Claims

The Court of Justice of the European Union (CJEU) has been asked to consider important questions concerning the application of Article 4 of the Rome II Regulation in a cross-border motor insurance dispute arising out of a fatal road traffic accident in Germany in 2019.

The forthcoming judgment in MYA v Westfälische Provinzial Versicherung AG (Case C-137/26) may provide important guidance on a frequently disputed issue in cross-border claims: how Article 4 determines the applicable law where an indirect victim brings a direct action against a liability insurer. The decision could have significant implications for liability assessment, reserving, quantum evaluation and settlement strategy.

Background

The claim arose from a fatal road traffic accident in Germany involving a German-registered vehicle driven by TMA. Both the driver and his passenger brother, IMA, died in the collision.

Their father, MYA, a Bulgarian national resident in Bulgaria, subsequently brought a direct claim against the German motor insurer, Westfälische, seeking compensation for the non-material loss arising from IMA's death.

Proceedings were commenced in Bulgaria. Jurisdiction was not in dispute. The central issue is the determination of the applicable law.

The Rome II Framework

The Rome II Regulation (EC 864/2007) governs the question of applicable law. The Regulation continues to apply in England & Wales, Scotland, and Northern Ireland as “assimilated law” and hence remains the principal framework for determining the governing law in cross-border tort claims (including in intra-UK conflict cases).

At first instance and on appeal, the Bulgarian courts held that Article 4(1) designated German law as the applicable law because Germany was the country in which the (direct) damage occurred. There was insufficient evidence to establish that both brothers were habitually resident in Bulgaria for the purposes of Article 4(2). MYA appealed to the Bulgarian Court of Cassation, which referred the dispute to the CJEU.

The Key Legal Questions

The referral raises a more fundamental question than habitual residence alone: when proceedings are brought directly against an insurer, who constitutes “the person claimed to be liable” and “the person sustaining damage” for the purposes of the common habitual residence exception at Article 4(2)?

More broadly, the referral raises three principal questions: the correct interpretation of Article 4; the relationship between Articles 4(1) and 4(2); and the operation of the escape clause in Article 4(3).

Direct Actions Against Insurers

A particularly significant aspect of the referral is that proceedings were brought directly against the insurer rather than the insured tortfeasor.

The CJEU therefore has an opportunity to clarify how the concepts of “the person claimed to be liable” and “the person sustaining damage” should be understood where a direct action is brought against an insurer.

This issue extends well beyond motor cases to other direct claims against insurers which are associated with an underlying claim in tort (direct actions in holiday accident claims or product liability actions, for example) and may affect recoverable heads of loss, limitation periods, and overall claim valuation.

If the insurer were regarded as the relevant "person claimed to be liable" for Article 4(2) purposes, claimants may seek to argue more frequently for the application of a law other than that of the place of the damage. The Court's analysis may therefore have implications not only for applicable law disputes, but also for the valuation and resolution of cross-border claims.

Existing UK Authorities Point Towards German Law

As discussed in our 2024 article on the operation of Article 4 of Rome II - Applicable law: the step-by-step approach necessary under article 4 of the Rome II Regulation - English courts have generally adopted a structured and sequential approach to the Regulation's choice-of-law framework. 

Authorities such as Winrow v Hemphill [2014] EWHC 3164 (QB) and Marshall v Motor Insurers' Bureau [2015] EWHC 3421 (QB) suggest that, on the presently known facts, an English court would be likely to identify German law as governing the claim under Article 4(1). The cases, Winrow in particular, also indicate that the relevant pair of parties for Article 4(2) purposes is likely to be the tortfeasor and the primary victim, rather than an insurer and an indirect claimant.

Why the Decision Matters

The referral in Westfälische gives the CJEU an important opportunity to clarify the interaction between Articles 4(1), 4(2) and 4(3) and the place of direct actions within the Rome II framework.

The judgment - which is likely to be delivered in 2027 - may also provide welcome guidance on the relationship between the governing law of the tort and the procedural mechanism of a direct action against an insurer. That distinction frequently arises in cross-border claims but has received relatively limited consideration in the existing case law.

Although not binding on UK courts, the judgment is likely to be highly persuasive given the continuing application throughout the United Kingdom of Rome II as “assimilated law”.

Implications for Insurers and Compensators

Depending on the Court's approach, the judgment could influence applicable law assessments undertaken at first notification of loss, reserving assumptions, limitation assessments, identification and valuation of recoverable heads of loss (both pecuniary and non-pecuniary), and claim settlement strategy and litigation risk.

For claims handlers, earlier certainty regarding the applicable law may enable more accurate reserving, improve quantum forecasting and reduce disputes concerning the scope of recoverable damages.

Conclusion

The significance of Westfälische extends beyond motor insurance. The case offers the CJEU an opportunity to clarify how Article 4 should be interpreted to determine the applicable law to a cross border claim made directly against a liability insurer providing cover in respect of loss and damage caused by the tortious conduct of its insured. A principled explanation of whether, and if so why, that might differ from the analysis of the claim between the direct victim and the insured tortfeasor would also be welcome.

For insurers and compensators managing cross-border claims, the judgment has the potential to become a significant authority on the operation of Article 4 of Rome II, helping to bring greater certainty to disputes that can materially affect handling strategies, reserving decisions and ultimately the cost of claims.