Applying the methodology for settling claims for compensation for damage

A frequently disputed issue is whether compensation must be determined using the methodology approved by Ordinance No. 24 of 8 March 2006 on compulsory insurance. The courts refer to the Supreme Court of Cassation’s case law, including Decision No. 52 of 8 July 2010 in commercial case No. 652/2009, First Commercial Division, on when the methodology for settling claims for damage to motor vehicles applies. The methodology was introduced by Article 1(3) of Ordinance No. 24 of 8 March 2006 of the Financial Supervision Commission. The Supreme Court compared Articles 2 and 4 of the methodology with the statutory rule that compensation under compulsory motor third-party liability insurance covers the actual value of the damage (Article 273(2), first limb, of the repealed Insurance Code; now Article 386(2) of the Insurance Code), up to the sum insured under the contract (Article 386(1)). It held that the methodology neither displaces the Insurance Code nor limits the insurer’s liability.

Where an insurance claim is brought before a court, the court should assess compensation by reference to the actual value of the damage when the insured event occurred (Article 386(1) of the Insurance Code). The amount should equal the loss on that date. It may not exceed the actual value of the insured property in the event of total loss, or its reinstatement value in the event of partial damage. The first is the amount required to purchase property of equivalent quality in place of the insured property (Article 400(1)); the second is the cost of restoring it to the same condition, including all associated delivery, construction, installation and other costs. A separate depreciation factor should not be applied in calculating compensation, because depreciation is already reflected in actual value. See also Supreme Court of Cassation Decision No. 209 of 30 January 2012 in commercial case No. 1069/2010, Second Commercial Division; Decision No. 79 of 2 July 2009 in commercial case No. 156/2009, First Commercial Division; and Decision No. 6 of 2 February 2011 in commercial case No. 293/2010, First Commercial Division, among others.

This article is not a legal opinion of attorney Elitsa Markova, attorney Mihail Tomov or a lawyer at Markova, Tomov and Partners, or advice concerning a particular situation or person. For legal assistance after a road traffic accident involving property damage to a motor vehicle, consult a lawyer who handles tort and road traffic compensation claims.