United We Stand, Divided We Fall? Collective Redress in the EU, its Lack of Regulation in EU Procedural Law, and Its Impact on the Insurance Sector

Abstract

The lack of harmonized collective redress mechanisms in EU private international law results in a substantial increase of litigation risks that are hardly manageable for insurers. Regulation of collective redress mechanisms at EU level is hence desirable. The vertical right to a fair trial as well as the effet utile enables the EU under certain conditions to introduce collective redress mechanisms. The doctrine of implied powers, Art. 114 TFEU as well as Art. 81 TFEU can serve as competence norms in this respect. The introduction of harmonized rules on collective redress mechanisms is hence desirable from the perspective of European insurance law. To cope with the newly emerging risks from the existing incentives-collective-redress-regime, insurers require amending a couple of practices: The risks involving from collective redress in connection with the European law of conflicts require action at European level. In order to avoid litigation risks, the insurance industry requires establishing a steady communication strategy with private intermediaries, who have a special standing in collective redress mechanisms. Insurers might amend their insurance policies in order to cope with these risks. The developmnet of a new insurance product coping with the special litigation challenges from collective redress procedures is advisable.