Susana Rodrigues
SPS PORTUGAL
The legal framework governing compulsory motor third-party liability insurance in Portugal is set out in Decree-Law No. 291/2007 of 21 August. This is a foundational piece of legislation which transposes European Union directives (Directive 2009/103/EC and Directive (EU) 2021/2118 of the European Parliament and of the Council of 24 November 2021—also known as the Sixth Motor Insurance Directive), intended to ensure uniform protection for victims of road traffic accidents across the various Member States. Road traffic accidents are a reality common to all Member States, and victims must be guaranteed effective compensation for the damage suffered, regardless of where the accident occurs, so as to prevent injured parties from being left without protection.
As in other European legal systems, the Portuguese legislature proceeded on the assumption that the circulation of motor vehicles is an inherently risk-generating activity, and that it cannot be separated from the guarantee of effective compensation for damage caused to third parties. Compulsory insurance therefore emerges as an essential mechanism for protecting injured parties, transferring to the insurance sector the civil liability arising from the accident.
Accordingly, Decree-Law No. 291/2007 provides that insurance covers bodily injury and property damage caused to third parties, within the minimum limits established by law, in line with the requirements of European law. This harmonisation is intended to ensure that compensation does not depend on the financial solvency of the person responsible for the accident.
However, the central issue within this regime lies in how compensation is determined. In the Portuguese legal system, the principle of restitutio in integrum applies, under which compensation must, insofar as possible, place the injured party in the position they would have been in had the harmful event not occurred, covering both pecuniary and non-pecuniary losses. In other words, the person who caused the damage bears the duty to restore the situation that existed prior to the injury.
While compensation for pecuniary damage does not generally raise significant controversy, since it is based on quantifiable criteria, the same cannot be said of non-pecuniary damage—particularly physical and psychological suffering, loss of quality of life, or permanent functional limitations.
Decree-Law No. 291/2007 of 21 August imposes on insurers the duty to present a “reasonable compensation proposal” at the out-of-court stage, based on guiding criteria (e.g. disability tables, biological damage, periods of functional impairment, etc.). However, these criteria are not binding on the courts, on the one hand, nor do they exhaust, on the other, the complexity involved in assessing damage.
Despite the efforts of case law, particularly that of the Supreme Court of Justice, to establish reference parameters, the reality is that courts have faced the difficult task of standardising compensation amounts from the perspective of legal certainty and equality, at the risk of reaching decisions that fail to reflect the true extent of the harm suffered by the injured party.
It is precisely here that the greatest challenge arises in the context of compulsory insurance: ensuring that the compensation awarded for the harm suffered is adequate, proportionate, and fair in light of the specific circumstances of each injured party—especially where permanent sequelae and significant impacts on the victim’s life are involved.
Indeed, compensation cannot be merely symbolic or standardised; it must fairly and proportionately reflect the seriousness of the pecuniary and non-pecuniary damage suffered, the permanent repercussions in the personal, family, and professional spheres of the injured party, as well as the principle of full compensation enshrined in the Portuguese legal system.
Thus, although compulsory insurance is an essential instrument for protecting victims of road traffic accidents, it remains difficult in practice to achieve an appropriate balance between the assessment of pecuniary and non-pecuniary damage and the award of fair compensation capable, as far as possible, of restoring the victim’s position prior to the accident. All of this must be achieved without losing sight of the fundamental purpose of the regime: the effective protection of injured parties and the principle of restitution in kind.
