One of the most common issues that arise in the context of Tort Law is the scope of the right of the injured party to be compensated for all damages suffered as a result of an accident.
In Spain, the general principle that governs the full compensation for damage (“restitutio in integrum”) is set out in Art. 1,106 of the Civil Code in the following terms:
“Compensation for damages includes, not only the value of the loss they have suffered, but also that of the gain that the creditor has ceased to obtain, except for the provisions contained in the following articles”
It is clear that this theoretical principle raises many problems when it comes to its practical application, especially in the context of claims for personal injuries (eg: “pretium doloris”, the quantification of moral damages, etc.). However, claims for property damage also present a series of specific problems, such as the replacement value or the scope of the damage mitigation costs, which arise systematically once the loss has occurred.
These issues are analyzed on a continued basis by our Supreme Court in greater or lesser depth. The last time that the Supreme Court ruled in this regard, was in their Judgment 420/2020 of July 14, 2020, in which a claim for damages to a car involved in a road traffic accident was resolved. This ruling, although asserting nothing radically new with respect to the positions that many Appeal Courts and the Supreme Court had been following up until now, in truth represents an effort to try to clarify and unify the conceptual framework for the full compensation for damage principle.
In Judgment 420/2020, the Supreme Court analyzes a specific case in which the Plaintiff claimed the repair of the damaged vehicle despite the fact that the economic cost of said repair was well in excess of the value of the vehicle itself. Thus, for the Supreme Court, the starting point, as it cannot be otherwise, is the principle of the “Restitutio in integrum” as set out in the Civil Code and recognizes the following points:
- That, the injured party generally has the right to proceed with the repair of the vehicle and to pass on the cost of the repair to the person causing the damage.
- In addition, with respect to the already traditional problem of the replacement value, the Judgment indicates that “it is true that the repair may imply a certain advantage for the owner of the damaged vehicle, arising from the replacement of old parts damaged by use by new ones in optimal conditions, but neither is compensation for the injured party capable of being carried out mathematically, so these benefits are tolerable and equitable“.
However, having acknowledged these points, the Supreme Court also clarifies that these rights are not unconditional and the injured party cannot demand “an excessive sacrifice or an unreasonable effort” from the party that has caused the damage. Therefore, the Judgment concludes that “when we are faced with a situation of this kind, which occurs in cases where the amount of the repair is much higher than the value of a vehicle with similar characteristics, it is not contrary to the law that the compensation be carried out by setting compensation equivalent to the price of the damaged vehicle, plus a percentage amount, which has been called a surcharge, a supplement for risk or trust, and that, in our judicial practice, has been generalized with the expression of attachment price or value, that will include the amount of the administrative expenses, difficulties to find a similar vehicle in the market, uncertainty about its operation… ”.
Finally, the Supreme Court confirms that the costs of mitigating the damage by the injured party are also subject to the principle of proportionality. Thus, in the specific case analyzed, the Supreme Court understood that the rental of a replacement vehicle for about a year, far exceeding the cost of repairing the damaged vehicle, was a disproportionate expense that could not be fully recovered from the party that caused the damage.
By way of conclusion, it is important to note that the arguments developed in a very clear and simple way by the Supreme Court in Judgment 420/2020, can be applied to other types of more complex claims in the context of industrial risks (machinery breakdowns, etc.).
Author: David Diez Ramos (Partner)
© ROGERS ABOGADOS SLP – December 2020