PPA vs BTA: Insurance company refuses to pay for emergency vehicle damages

Police vehicles.
Police vehicles. Source: Siim Lõvi/ERR

The Police and Border Guard Board's (PPA) insurance provider BTA said it will no longer pay for damage caused by police vehicles responding to emergency calls. It is also unclear in the dispute that started this spring who has to pay for damage until the PPA and the insurance company reach a resolution.

Emergency vehicles are not covered by motor hull insurance. The PPA finds that the monthly insurance payment for vehicles that have a high risk of being in an accident would be too high.

However, police vehicles are covered with third party liability insurance. Damage caused by emergency vehicles responding to calls is covered by the insurer. At least that was the case until spring.

For example, the police caused 74 traffic accidents in 2017 for which insurance companies had to dish out over €120,000. Of those, 21 happened during emergency response calls, with total damage of a little over €61,000.

The PPA signed a contract with BTA Baltic Insurance Company in 2018. The latter offered to insure 800 vehicles of which 700 are emergency vehicles. The average annual insurance payment per vehicle is around €200.

The premiums are higher for special vehicles. For example, insuring a water cannon for a year costs a little over €1,500, a crane around €2,000 and a mobile command center truck over €1,000.

BTA: State's responsibility means it has to pay

Everything was working fine until this spring. "However, BTA has, without the PPA's knowledge and for reasons unknown to the agency, considerably altered recent practice since then by refusing to pay for damage caused with the participation of state emergency vehicles that have been exercising their special right," Andres Sinimeri, head of the PPA logistics bureau, wrote last Thursday.

The insurance company explained its conduct in late October. The firm finds that if an accident is caused while the emergency vehicle has on its flashing lights or when the police is responding to an emergency call, the company is exempt from having to pay for resulting damages.

"If a PPA emergency vehicle that is exercising the special right of a representative of public authority causes damage in a public-law capacity, damage caused needs to be compensated pursuant to the State Liability Act and not the Motor Insurance Act," the firm said.

This position is bound to cause a lot of problems for people who get into accidents involving police vehicles if shown to be watertight. For example, if a police emergency vehicle crashes into someone's vehicle while in pursuit of a suspect, the owner will have to tally up the cost themselves, put together a special compensation for damages claim and send it to the PPA. After that, officials have 60 days in which to analyze the application and decide whether to admit culpability and whether the claim accurately represents damage.

"It is our position that BTA is obligated to pay for damage pursuant to the contract," Sinimeri said in a short comment sent to ERR. The PPA representative promised to comment in more detail later on Tuesday.

"Had the PPA known that damage caused by emergency vehicles in the course of duty will not be covered by BTA, the agency would not have entered into such an agreement or made payments for vehicles classified as emergency or alarm vehicles as it would have rendered vehicle insurance insensibly expensive for the PPA," Sinimeri said in his letter to the insurer.

Police: We can ask the company to return payments

The police official suggested that BTA is in breach of a contractual obligation. "All vehicles that are included in the contract need to be insured, including alarm vehicles that exercise special rights," Sinimeri wrote.

Sinimeri added that information according to which insured vehicles would be used to respond to calls and would therefore entail higher risk was included in the tender.

"BTA needs to keep in mind that if it fails to observe contract conditions, the PPA has the right to terminate the contract over breach of obligations," Sinimeri wrote, adding that the PPA will also draw conclusions for future tenders.

"The contracting entity can remove a bidder that has extensively or repeatedly violated a prior contract or contracts where the violation has caused the contract to be terminated, price to be lowered, damages or contractual penalties paid," Sinimeri listed.

The PPA also pointed out that BTA is looking at unjustified enrichment by appealing to its own interpretation of the insurance contract.

"Therefore, the PPA has reason to consider demanding the return of insurance payments based on provisions of unjustified enrichment starting from 2021," the letter reads.

Who will pay for damages while the sides argue?

Head of the Estonian Insurance Association Mart Jesse said that what the PPA and BTA are arguing over is nothing new. While no insurance provider has so far refused to pay for damages based on such grounds, legal experts have been debating the issue in the past.

"We are about to modernize the Motor Insurance Act together with the Ministry of Finance next year and this is one problem that needs to be solved therein to avoid people who suffer damage being left without timely compensation," Jesse said.

He explained that when an emergency vehicle blasting its siren crashes into an unsuspecting motorist, the state is always responsible. What the PPA and the insurer are arguing over is whether the latter is obligated to assume the state's responsibility. Jesse said there are two ways to avoid such disputes.

"The first of which is to have the law clearly provide that motor TPL insurance covers state liability."

Alternative model that of Estonian Defense Forces vehicles

"When an EDF vehicle that is exempt from mandatory TPL insurance causes an accident, the Estonian Motor Insurance Bureau (LKF) pays for damage and then bills the state," Jesse explained.

But what should people who find themselves in the middle of the PPA and BTA dispute and are waiting for compensation for damage do today? Mart Jesse said that the state must uphold its responsibility.

"The most rational thing to do would be to compensate parties for damage and later file a claim against the insurer if there is a dispute," the LKF head suggested. "And should the insurer be ordered to cover the damage in the end, that is what they will do. To make sure people who have nothing to do with any of it would not have to suffer."

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Editor: Marcus Turovski

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