Problems of legal regulation of MTPL insurance in the Russian Federation

Rybka Oleg Sergeevich ORCID: 0009-0009-9609-7727 Master's Degree; Law School; Far Eastern Federal University 112a Oceansky Ave., Vladivostok, Primorsky Krai, 690922, Russia oleg.sergei4.rybka@gmail.com Other publications by this author

Lyapustina Natalya Aleksandrovna ORCID: 0009-0001-2559-367X Master's degree; Law School; Far Eastern Federal University 690922, Russia, Primorsky Krai, Vladivostok, Oceansky Ave., 20 natasha290900@mail.ru

Compulsory liability insurance for vehicle owners (hereinafter referred to as CTP) is one of the most used insurance products nowadays. This is directly related to the fact that the number of vehicles is increasing every year ^[1], this is a consequence of both an increase in the population and an improvement in the quality of life of citizens.

Despite the fact that CTP has been practiced in the Russian Federation for more than 20 years, this institution has a huge number of problems, including within the framework of legislative regulation of certain issues.

Law enforcement in the field of CTP generates many controversial issues that the state is trying to resolve by amending existing legislation, as well as by officially interpreting the norms. Disputes related to CTP are inextricably linked not only with Federal Law No. 40-FZ dated 04/25/2002 "On Compulsory Insurance of Civil Liability of Vehicle Owners" (hereinafter referred to as the CTP Law) and Regulation of the Bank of Russia dated 09/19/2014 No. 431–P "On the Rules of Compulsory Insurance of Civil Liability of Vehicle Owners" (hereinafter referred to as the Rules CTP), but since 2018 they have been associated with the Federal Law "On the Commissioner for Consumer Rights of Financial Services" dated 06/04/2018 No. 123-FZ (hereinafter referred to as the Law on Financial Institutions), since it regulates the passage of mandatory pre–trial procedure in such disputes if one of the parties is a consumer individual.

The topic of the study was touched upon by many scientists, such as O.L. Konovalenko, L.B. Reidel, A.A. Vorozheikina, N.I. Baturina, A.I. Medvedev and others. This work will address the problems identified by these authors, as well as other issues identified by the authors in the course of professional activity of a lawyer, including in the form of participation in court disputes. It is also worth noting that some of the listed authors consider problems only from the point of view of consumers-insurers, in this work many problems will affect the rights of the insurer.

Before proceeding to the description of the problems of regulating relations in the field of CTP, it is necessary to understand the nature of insurance relations and their differences from other contractual relations. Insurance relations are formed between a financial institution that is obliged to obtain a license to carry out insurance business, that is, the insurer, and an individual or legal entity, that is, the policyholder, regarding the guarantee of preserving the property interests of the policyholder. Naturally, these guarantees have their limits and are provided on a reimbursable basis, that is, the policyholder transfers an insurance premium to the insurer's account in a certain amount, and these guarantees are conditional, they depend on a certain list of events or actions (insured event), as well as on the limit established by law or contract.

The peculiarity of such relations is that the onset of the insurer's obligation to fulfill its part of the contract may not happen, since the insured event may not occur within the time specified in the contract. At the same time, if such a case has occurred, the insurer and the policyholder do not know before the examination to what extent the insurer must fulfill its obligation to pay insurance compensation. Due to this feature, many problems arise in the framework of law enforcement.

One of these problems is the collection of penalties when conducting a re-examination outside the terms of insurance. The financial commissioner, like some others, sought to solve this problem. To implement this task, amendments were made to the Law on CTP, namely paragraphs 2 and 5 of Article 16.1, according to which the execution of the decision of the financial commissioner was the proper fulfillment by the insurer of the obligation, and also exempted the insurer from penalties. It is difficult to imagine a different teleological interpretation of these innovations. Using such tools, the financial commissioner, when making a decision in favor of the consumer (often a new examination was carried out for this and the amount of insurance compensation was changed in connection with this), released the insurer from the penalty, but with the proviso that the penalty may be collected if the insurance company fails to comply with the decision of the financial commissioner on time.

But the solution of this seemingly obvious problem applied by the financial commissioner has lost its effectiveness, and the norms have essentially become dead, since the Supreme Court of the Russian Federation interpreted the norms differently. In the Ruling of the Judicial Board of the Supreme Court dated April 13, 2021, No. 14-KG21-3-K1 of the Supreme Court of the Russian Federation indicated that "in order to release the insurer from the obligation to pay a penalty, it is necessary not only to execute the decision of the financial commissioner, but also to fulfill the obligation in accordance with the procedure and deadlines established by the Law on CTP."

That is, the Supreme Court of the Russian Federation directly requires the impossible: insurance compensation must be made within 20-30 days, while before contacting the financial commissioner, the consumer must send a claim, which the insurer also has the right to consider within 30 days, and then 15 days are given to the financial commissioner to consider the appeal, while when exactly to contact the financial commissioner the consumer decides for the commissioner himself. In such a situation, it is not possible to fulfill what the Armed Forces of the Russian Federation described.

In the same definition, the Supreme Court of the Russian Federation writes: "with a different interpretation of these legal norms, the victim who is a consumer of financial services, when resolving the issue of collecting a penalty, will be at a greater disadvantage compared to the victim who is not a consumer of financial services (paragraphs 2 and 3 of paragraph 1 of Article 16.1 of the CTP Law), and the insurance company The company will be able to evade obligations under the CTP agreement for a long time and illegally use the amount of money owed to the victim, who is a consumer of financial services, without the threat of any sanctions before the decision of the financial commissioner is made, which contradicts the purpose of protecting the rights and legitimate interests of consumers of financial services enshrined in article 1 of the Law on the Financial Commissioner.". At the same time, the Supreme Court of the Russian Federation does not consider the situation from the other side, namely, that the consumer may not contact the financial commissioner for a very long time, and thus abuse his right himself ^[2], thereby increasing the amount of penalties.

Thus, the Supreme Court violates the principle of separation of powers and, replacing the legislative branch of government, "mortifies" the norms enshrined in paragraphs 2 and 5 of Article 16.1 of the CTP Law.

Another obvious problem of the legal regulation of CTP is the impunity of non-compliance with the CTP Law and CTP Rules by the consumer. Vivid examples are paragraph 2 of Article 11.1 of the CTP Law and paragraph 3.10 of the CTP Rules.

Paragraph 2 of Article 11.1 of the CTP Law obliges the victim of an accident to send a Euro protocol to his insurer within 5 days from the date of the accident, together with an application for direct compensation for losses. The victim's treatment at such a time could help to investigate the damage to the vehicle as soon as possible and in the condition as close to an accident as possible, since corrosion of damaged parts may occur in a month or more, as well as additional damage during operation, which may increase the cost of repair.

Having paid attention to paragraph 3.10 of the CTP Rules, it is worth saying that both the financial commissioner and the courts ignore the fact that certain documents were not provided by the consumer in a certified form. Thus, in case No. 2-5512/2023 of the Ussuri District Court of Primorsky Krai, the plaintiff did not provide a document certifying the identity of the applicant for insurance compensation, duly certified. A similar situation occurred in case No. 2-4166/2023 of the Pervorechensky District Court of Primorsky Krai.

Failure by applicants to provide identification documents is a violation of paragraph 14 of Article 7 of Federal Law No. 115-FZ of August 7, 2001 "On Countering the Legalization (Laundering) of Proceeds from Crime and the Financing of Terrorism" (hereinafter - Law No. 123-FZ), which obliges clients of financial organizations to provide all information for execution the requirements of this law. In accordance with paragraph 11 of Article 7 of Law No. 123-FZ, the insurance company has the right to refuse to execute the client's order to perform an operation, within the framework of which the documents necessary for recording information in accordance with the provisions of Law No. 123-FZ are not provided.

Thus, the insurance company does not have the right to make a payment to an applicant who has not provided an identity document certified properly. Otherwise, she will be punished in accordance with Article 15.27 of the Administrative Code of the Russian Federation "Failure to comply with the requirements of legislation on countering the legalization (laundering) of proceeds from crime and the financing of terrorism." Thus, the financial commissioner and the courts put the insurance company in a desperate situation in which it will either violate the law and pay insurance compensation, thereby protecting itself from penalties under the CTP Law, but at the same time there is a risk of receiving an administrative fine, or it will comply with the requirements of the law, but the financial commissioner will collect insurance compensation, and the court, ignoring the Plaintiff's abuse, will collect a penalty.

The peculiarity of CTP insurance is that insurance compensation within the framework of this insurance should initially be carried out in kind, namely by organizing and (or) paying for the restoration of the damaged vehicle of the victim, with the exception of some cases specified in paragraph 16.1 of Article 12 of the CTP Law. In this paragraph, the sub-paragraphs are indicated, within the framework of which the law enforcement officer has certain questions.

In subparagraph "g" of paragraph 16.1 of Article 12 of the CTP Law, it is stated: "Insurance compensation for damage caused to a passenger car owned by a citizen and registered in the Russian Federation is carried out by postal transfer of the amount of insurance payment to the victim (beneficiary) or its transfer to the bank account of the victim (beneficiary) if there is an agreement in writing in the form between the insurer and the victim (beneficiary)." It seems that the norm is obvious, but in practice everything is different.

In order to reduce the problems of the courts in the course of interpreting the norms, the Supreme Court of the Russian Federation in paragraph 38 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated 08.11.2022 No. 31 "On the application by courts of legislation on compulsory civil liability insurance of vehicle owners" clarified that "on the achievement between the insurer and the victim in accordance with subparagraph "g" of paragraph 16.1 of Article 12 According to the Law on CTP, an agreement on insurance payment in cash may be evidenced, among other things, by the choice of the victim in the application for insurance compensation to pay in cash or non-cash form according to the details of the victim, approved by the insurer by transferring insurance compensation in the manner indicated in the application.

Such an agreement must be explicit and unambiguous. All doubts in the interpretation of its terms are interpreted in favor of the victim.". Despite such sensitive attention to this provision, there is still a "window" for possible abuse for the consumer. Such a "window" is the period between the filing of an application for insurance compensation and the payment of this insurance compensation. During this period, the consumer, or the assignee-car lawyer, can file a claim in which he indicates that he is asking to carry out restoration repairs, thereby arbitrarily changing the form of insurance compensation, and, therefore, shortening the period for the insurance company, since initially this application was considered as an application for receiving insurance compensation in cash, possibly Payment orders have even been issued, but the consumer demands repairs without explanation, thus showing that he does not believe that an agreement on the monetary form of insurance compensation has been reached. It seems logical in this case to set an update of the terms for insurance compensation by the insurance company, thereby protecting insurers from such abuse.

Turning to the topic of restoration repairs, I would like to point out that scientists have debated a lot about the advantages and disadvantages of such an innovation, when restoration repairs were only a draft law and in the first year of its introduction ^[3]. Someone believed that the introduction of restorative repairs would help in the fight against assignee car lawyers, including helping to avoid large amounts of penalties that are paid to car lawyers ^[4], and someone - that this would lead to infringement of consumer rights, since the consumer who chooses to pay will receive an amount with wear, although the one who chooses a different form of insurance compensation will receive a great benefit ^[5]. Now we can already draw some conclusions. One of the conclusions that should be outlined is that the introduction of restorative repairs may have partially solved some problems, but also added absurdity to some situations. Such a situation, for example, is the possibility of the assignee to require repair of the vehicle.

Paragraph 70 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated 08.11.2022 No. 31 "On the application by courts of legislation on compulsory insurance of civil liability of vehicle owners" (hereinafter - Resolution of the Plenum No. 31) states that "The transfer of rights to another person on the basis of an assignment agreement in itself is not a basis for replacing insurance compensation in the form of an organization and the payment of the repair of the vehicle for the insurance payment." This decision is controversial. Most likely, the Armed Forces of the Russian Federation proceeded from the fact that during the assignment of the rights of claims, the right to repair the vehicle is also transferred. But this seems illogical, because the assignee does not acquire ownership of the vehicle (hereinafter referred to as the vehicle), so it is unclear why he has the right to repair not his property. This is contrary to common sense.

Also, as part of the restoration work, scientists such as V.V. Erin, V.N. Shelestyukov, A.R. Rybashkova raised the problem of the amount of insurance compensation when choosing its form. It is difficult not to agree that in this situation, when receiving insurance compensation in cash, the consumer is put in an unequal position with those who have chosen restorative repairs, and that this provides opportunities for abuse of the right by the insurance company ^[6]. But at the same time, it is worth noting that the consumer still has the right to recover unpaid funds from the harmer. But then the question arises of violating the rights of the policyholder himself, because he expects that the insurer will protect him from losses within the insurance limit ^[7]. In fact, this norm has its own logic. When choosing a restorative repair by the consumer, the insurer is confident that its funds will be used to purchase new parts to restore the victim's vehicle. When receiving funds to the victim, the insurer cannot be sure that the victim will not repair his car with used spare parts, but simply "put the difference in his pocket". Thus, fraudsters can also act, who can repeatedly smash the same car, changing its owner within a group of people, thereby trying to divert suspicion. So this rule helps to minimize costs when meeting with potential scammers. But this does not negate the fact that the rights of the policyholder are infringed upon. It seems logical, nevertheless, to exempt the policyholder from compensation for damage within the insurance limits and allow the victim to recover from the policyholder (the harmer) only damage that exceeds the limit of 400,000 rubles.

Also, the scientist Y.Y. Kalashnikova mentioned such a problem that "currently, especially in the subjects of the Russian Federation, there is an extremely small number of specialized car services that have the appropriate licenses, equipment and other necessary conditions for the implementation of qualified repair of motor vehicles, which will entail huge queues and violations of the terms of repair."^[4]. In fact, insurance companies can rarely carry out restoration repairs due to the fact that the service station (hereinafter referred to as the service station), with which contracts are concluded, do not fit the CTP Rules, including according to the location criterion, according to which the service station should be located no further than 50 kilometers from the place of residence of the victim. This is a typical situation in the regions of the Far East, where settlements are quite far from each other. At the same time, it is difficult to obtain a refusal or consent from the victim in such a short time, especially in a form that can later be taken into account in court when protecting the rights of an insurance company.

There is also a problem with the timing of repair work, because due to sanctions from countries that produce many cars and spare parts for them (Japan, South Korea, Germany, etc.), the delivery time in the service station is greatly increased, sometimes not the repair period, but simply the delivery time exceeds 30 days. This problem should be solved promptly by temporarily changing this period for a longer period until the political situation in the world stabilizes.

Another problem that can be considered a tragedy for insurance companies is the judicial practice of collecting amounts in excess of insurance limits. This problem was highlighted in the news feed of the Insurance News Agency. The courts, as well as the financial commissioner, collected these amounts not as insurance compensation, but as losses, in their understanding prescribed in the Civil Code of the Russian Federation, including relying on paragraph 56 of the resolution of the Plenum No. 31. But, apparently, the last sentence of this paragraph was ignored in the course of law enforcement, namely, "Compensation for such losses means that the victim must be placed in the position in which he would have been if the insurer under the compulsory insurance contract had fulfilled its obligations properly." If the insurer had fulfilled its obligation properly, it would still not have made a payment in excess of the limit of 400,000 rubles. The courts of cassation have already begun to correct this problem, for example, this can be seen in ruling No. 8g-5751/2024 of the Second Cassation Court of General Jurisdiction and in ruling No. 88-7262/2024 of the Sixth Cassation Court of General Jurisdiction. Of course, this approach puts the entire CTP market at risk, insurance in this case would be super-profitable, although even turning a blind eye to such situations, it is already such ^[8].

The scourge of the insurance business is the latency of fraud on the part of both consumers and insurers. Many scientists write about this, such as S.L. Denisov ^[9], I.V. Okhrimenko and A.A. Tsyganov ^[10] and others. This topic will be touched upon in this scientific work in passing, since it is worthy of a separate study. At the same time, I would like to note some of the ways that scientists propose to prevent fraud by the insurer.

So, in the scientific work of O.L. Konovalenko, L.B. Reidel and A.A. Vorozheikina "Problems of legislation in the field of CTP and ways to solve them", scientists propose to solve one of the problems associated with fraudulent actions in establishing the authenticity of the declared circumstances of an accident and establishing the fact of an insured event. They propose "to supplement paragraph 20 of Article 12 of Federal Law No. 40 with a new paragraph: "In the case of registration of documents on a road traffic accident without the participation of authorized police officers, the insurer has the right to refuse insurance payment if, at the time of filing the application to the victims, the vehicle of the second participant in the accident was not provided" ^[11].

This decision sees the possibility of violating the rights of the victim, depending on the actions of the perpetrator, which, of course, is unacceptable. The introduction of such a norm may lead to the fact that subparagraph "h" of paragraph 1 of Article 14 of Federal Law No. 40, establishing liability as a recourse claim of the insurer against a person who did not provide a vehicle for inspection at the request, will simply not be needed, since there can be no recourse claim. Thus, scientists have leveled the protective function of CTP insurance in relation to victims of an accident involving high-risk vehicles.

Thus, it should be understood that fraud and deception of the insurer should be combated, but at the same time it is necessary to maintain a balance between protecting the rights of one party and infringing on the other.

Within the framework of this scientific work, many problems were identified within the framework of regulation and law enforcement in the field of CTP, in particular, such problems as:

• collection of penalties during re-examination outside the terms of insurance;
• impunity of non-compliance with the CTP Law and CTP Rules by the consumer on the example of the application of paragraph 2 of Article 11.1 of the CTP Law and paragraph 3.10 of the CTP Rules;
• the ability to change the form of insurance compensation by the consumer at will without any sanctions;
• the assignee's ability to demand repair of a vehicle that does not belong to him;
• infringement of the rights of the policyholder in the context of the issue of the amount of insurance compensation when choosing its form to the victims;
• an extremely small number of specialized car service stations, especially in remote regions of the Russian Federation;
• The service stations with which the insurance company has concluded contracts often do not fit the CTP Rules, and therefore it is impossible to carry out restoration repairs;
• the problem with the timing of the repair due to the delivery time of spare parts against the background of the political situation;
• judicial practice in collecting amounts in excess of insurance limits.

The solution to some of these problems is to amend the current legislation, for example, it is advisable to exempt the policyholder from additional payments within the insurance limits and allow the victim to recover from the policyholder (the harmer) only damage exceeding the limit of 400,000 rubles to solve the problem of infringement of the rights of the policyholder in the context of the issue of the amount of insurance compensation when choosing it forms for victims. It is also necessary to stop violations of the principle of separation of powers by the Supreme Court of the Russian Federation, in which it replaces the legislative power and contributes to the creation of "dead" norms in legislation.

Some of the problems identified in this work were not previously mentioned in the scientific community, which undoubtedly underlines the importance of further studying the practice in the field of CTP more thoroughly in order to quickly identify problems and solve them promptly by amending regulatory legal acts.