Yes, the Polish law grants to insurers rights of recovery. The insurers can exercise their rights on the basis of statutory law.

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1 POLAND Hogan Lovells Kamila Mroz & Beata Balas-Noszczyk 1. Does your jurisdiction grant insurers rights to pursue recoveries in respect of losses suffered by the insured which the insurer has indemnified ( rights of recovery )? 1.1. If the answer is yes, do such rights arise pursuant to statute or case law? Yes, the Polish law grants to insurers rights of recovery. The insurers can exercise their rights on the basis of statutory law. A general rule has been created in Article 518 Section 1 point 4 of the act dated 23 April 1964 Civil Code (unified text: Journal of Laws of 2016, item 380, as amended) (the Civil Code ): a third party who pays off the creditor shall acquire the receivable which has been paid off up to the amount of the payment made: [ ] if it has been provided for by specific provisions. With regard to insurers, these specific provisions include Article 828 Section 1 of the Civil Code, according to which: Unless it has been agreed otherwise, with the day of payment of compensation by the insurer, the claim of the policyholder against a third party liable for the damage shall pass to the insurer by operation of law, up to the amount of the compensation that was paid out. The above-mentioned principles of Article 828 of the Civil Code apply accordingly in case of the insurance contract on account of a third party. Therefore, unless it has been agreed otherwise, with the day of payment of compensation by the insurer, the claim of the insured against a third party liable for the damage shall pass to the insurer by operation of law, up to the amount of the compensation that has been paid out. In addition to the general principles governing the rights of recovery determined in the Civil Code, there is also a specific kind of the right of recovery (often referred as untypical rights of recovery ) provided by the Act dated 22 May 2003 on compulsory insurance, Insurance Guarantee Fund and Polish Motor Insurers Bureau (unified text: Journal of Laws 2013, item 392 as amended) (the Act on compulsory insurance ). The main difference between the rights of recovery as stated in Article 828 of the Civil Code and the rights of recovery laid down in the Act on compulsory insurance is that while the first one can only, as a rule, be addressed to a third person liable for the damage (out of the insurance relation), the latter enables the insurer to pursue claim basically against the policyholder or the insured. 2. What is the nature and scope of the rights of recovery? In particular: 2.1. Which types of rights or claims of the insured can the insurer pursue using its rights of recovery? Article 828 of the Civil Code regards the claim of the policyholder against a third party liable for the damage. This liability for the damage may be based on tort liability or contractual liability (nonperformance or improper performance of the contract). With respect to untypical rights of recovery, according to Article 43 of the Act on compulsory insurance, the insurance company shall have the right to pursue from the driver of the motor vehicle the return of compensation paid out due to third-party liability insurance of motor vehicle owners, if the driver: (a) caused the damage deliberately, in the state of after-alcohol drinking or under the influence of intoxicants, psychotropic substances or substitution means in the meaning of the provisions on combating the drug addiction; 100

2 (b) (c) (d) came into possession of the vehicle as the result of the perpetration of a criminal offence; did not have the required licence to drive a motor vehicle, except for the cases where there was saving human life or property or the pursuit of a person taken immediately after perpetration of the offence by this person; or escaped from the event place. According to Article 58 of the Act on compulsory insurance, the insurance company shall have the right to pursue from the perpetrator of damage the return of compensation paid out due to third-party liability insurance of farmers, if they deliberately caused the damage or in the state of after-alcohol drinking or under the influence of intoxicants, psychotropic substances or substitution means in the meaning of the provisions on combating the drug addiction. According to Article 11 Section 3 of the Act on compulsory insurance, the insurance company shall have the right to pursue from the insured or the persons, for which they bear liability, the return of compensation paid out due to third party liability insurance resulting from the provisions of different acts or international agreements ratified by the Republic of Poland, imposing on certain entities an obligation of conclusion of the insurance contract for damages caused by gross negligence of the insured or persons for which they bear liability as well as in case where the damage was caused by the insured or persons for which they bear liability in the state of after-alcohol drinking or under the influence of intoxicants, psychotropic substances or substitution means in the meaning of the provisions on combating the drug addiction. Additionally, according to Article 17 of the Act on compulsory insurance, if the person being covered by the third-party liability insurance or the person lodging a claim, due to intentional fault or gross negligence, has not fulfilled his/her duties as referred to Article 16 of the Act on compulsory insurance and this action affected the establishment of the existence or the scope of their liability or the increase of the seize of damage, the insurance company shall have the right to pursue from these persons the return of the part of the compensation paid out to the entitled or limit the compensation being paid out to those persons. The untypical rights of recovery can also be established in the insurance contract Are there any types of rights or claims of the insured which the insurer may not pursue using its rights of recovery, if so, what are they (in general terms)? In addition to what has already been said in our previous answers, rights or claims that the insurer may not pursue using its rights of recovery in general terms are as follows: There is no right of recovery in relation to personal insurance; If the insurance contract is not a contract on account of a third party Claims of the policyholder against the persons that the policyholder stays in a joint household (further referred in this sentence as perpetrator) shall not pass to the insurer, unless the perpetrator caused the damage intentionally; If the insurance contract is a contract on account of a third party Claims of the insured against the persons that the insured stays in a joint household (further referred in this sentence as perpetrator) shall not pass to the insurer, unless the perpetrator caused the damage intentionally; The rights in terms of rights of recovery are transferred with the existing restrictions. They basically depend on the compensation being paid out in terms of maximum amount and are subject to limitation period; and Contractual waiver of rights of recovery is possible Is there a prescribed time period (for example, a limitation period) within which the insurer must pursue its rights of recovery? 101

3 There is a prescribed time period (limitation period) within which the insurer must pursue its rights of recovery. Pursuant to the judgment of the Polish Supreme Court dated 31 May 1985, Case No III CRN 148/85: The rights of recovery of the insurance company are subject to limitation (Article 117 Section 1 of the Civil Code) in conditions within which acquired claim of policyholder towards a third person liable for damage to the insured property is limited (Article 828 Section 1 of the Civil Code). Therefore, the insurer entering in place of the policyholder (Article 518 Section 1 point 4) of the Civil Code), acquires towards a third person a claim with limited period of limitation, which after deducting the period that passed till this time remained to the policyholder for the day of payment of compensation to pursue towards this person remuneration of the damage caused to him/her. This was recently confirmed with the judgment of the Polish Supreme Court dated 20 January 2016, Case No V CSK 241/15. As regards to the untypical rights of recovery, the legal provisions do not indicate the limitation period other than in Article 819 Section 1 of the Civil Code (three years for the insurance contracts). However, the representatives of the legal doctrine and the courts tend to treat the untypical rights of recovery as not arising from the insurance contract, but a new right of the insurer due to the fact that the insurer compensated the damage. Therefore, although there are also opposite views, it is claimed that the right of recovery is not treated as arising directly from the insurance contract but only connected to the grounds of the insurance contract and arises directly from the provisions of law. As a result, the general limitation periods provided for in the Polish law apply (depending on the subject matter of the claim). 3. What, if any, criteria must be fulfilled in order for the insurer to be entitled to exercise its rights of recovery? In terms of rights of recovery, unless the parties have agreed otherwise, the insurer by operation of law acquires a claim for compensation against the person liable for damage to the amount of the compensation paid out. The mere payment is generally sufficient for the transfer of claim to the insurer. However, rights of recovery will apply only when there is damage and there is a person liable for damage. Consequently, if such liability is excluded or limited, rights of recovery will not apply or will apply in a limited amount. As mentioned in questions 1 and 2, further conditions are required in order to apply the untypical rights of recovery. 4. To which types of insurance do the rights of recovery apply? Please refer to question Against whom can the rights of recovery be exercised? Please refer to question Where an insurer pursues a claim or right against a third party using its rights of recovery, does this alter the rights or defences of the third party? If so how? In particular: Where an insurer pursues a claim or right against a third party using its rights of recovery, this does not alter the rights or defences of the third party. The receivable acquired by the insurer as a result of payment of compensation is the same as respectively the policyholder/the insured in case of the insurance contract on account of a third party had. The transfer of rights shall not affect the scope of legal actions to which the debtor would be entitled in case the proceedings with respectively the policyholder / the insured in case of the insurance contract on account of a third party. In particular, it shall not lead to a deterioration of a debtor s legal situation. The above was confirmed with the judgment of the Supreme Court dated 25 February 2004, Case No II CK 34/03, stating: 102

4 As a result of subrogation (Article 518 Section 1 point 4 of the Civil Code), the situation of the debtor could not deteriorate. The debtor is entitled to all defences towards the insurance company that he/she had towards the policyholder at the time of becoming aware of the subrogation (Article 513 Section 1 of the Civil Code) Are there any additional defences that the third party can raise against a claim brought by an insurer using its rights of recovery, which could not have been raised if the claim had been brought by the insured directly? N/A Are there any defences that the third party cannot raise against a claim brought by an insurer using its rights of recovery, which could have been raised if the claim had been brought by the insured directly? N/A. 7. Does the insurer pursue the rights of recovery in its own name, in the name of the insured, or both? The insurer pursues the rights of recovery in its own name based on provisions of law. 8. Where an insurer pursues rights of recovery in the insured s name: 8.1. Who has control of the claim; and The acquisition of rights by the insurer results in their loss by the previously entitled/the insured who can no longer claim compensation from the third party. This results from the fact that the possibility to seek claims for compensation while such compensation has already been paid by the insurer would lead to an unjust enrichment of the previously entitled/the insured. By virtue of provisions of law, if the rights of recovery applied, a control of the claim is exercised exclusively by the insurer and in his own name Are there any procedural requirements (for example, court filings or execution of specific documents) that the insurer and/or insured must comply with if so what are they? Proceedings on the rights of recovery take place under general principles as defined in the act dated 17 November 1964 the Civil procedure code (unified text: Journal of Laws of 2014, item 101, as amended). Apart from the procedural requirements regarding claiming compensation from the third party and regarding establishment of liability of the third party, the basis of payment of compensation should be added. 9. When exercising rights of recovery, does an insurer owe any obligations to the insured? If so, what are they? No. 10. Does an insured have any duties towards its insurer requiring it to preserve or not prejudice the insurer s rights of recovery. If so, what are they? No. 11. Where an insured has suffered a loss that is only partially insured: Does the insurer still have a right of recovery and if so to what extent; and If the insurer covered the loss only partially, the rights of recovery apply in the scope of this compensated part. If the insurer has covered only a part of the damage, the policyholder/insured in the insurance contract on account of a third party respectively, shall be entitled to priority in satisfaction as to the remaining part of it before the insurer s claim. 103

5 11.1. If the proceeds of any recovery action brought on behalf of both the insurer and insured are insufficient to reimburse both the insurer and the insured in full, how are the proceeds distributed? Please refer to question 11 above. 12. Can insurers and insureds agree that the insurer will have no rights of recovery? If so: In what circumstances might they do this; and Yes, the parties can agree that the insurer will have no rights of recovery. Article 828 Section 1 of the Civil Code, the rights of recovery are applicable, unless it has been agreed otherwise by the parties. The parties are free to decide on the circumstances. The Act on compulsory insurance does not explicitly provide for possibility of exclusion of the untypical rights of recovery. In practice, in many contracts of mandatory professional third-party liability insurance the insurers waive their rights to seek recourse for payment of the additional premium, but application such waiver to all the mandatory insurances would be doubtful and its validity can be questioned Where would evidence of such agreement be found (for example, in the insurance policy or in separate contracts)? The provisions of the Polish law do not specify where such agreement of the parties on the waiver of the rights of recovery should be placed. The evidence can be included in the insurance contract, a separate contract or in a policy. 13. Can an insurer s rights of recovery be invalidated or restricted in any other way? If so, please describe how. The legal provisions do not provide for detailed specifications of invalidation or restriction of the rights of recovery other than the general provisions of law regarding the invalidity or restrictions in respect of making statements of will or contractual freedom. 14. Please specify any important issues regarding rights of recovery in your jurisdiction, which are not covered by these questions. Based on the judgments of the Polish courts: The insurance company acquires the rights of recovery, not return of compensation paid out in full; and Rights of recovery exclude the possibility of the acceptance by the insurance company the claim of the creditor to a bigger extent than the paid out compensation. 104