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A Munich-registered car is struck near Salzburg by an Austrian-registered van driven by an Austrian resident. The owner obtains an expert estimate of EUR 6,800 net, decides not to repair the vehicle and claims on that estimate. A German claims handler would usually pay the net figure, up to the replacement expenditure (replacement value minus residual value). § 249(2) BGB entitles the claimant to the amount needed to restore the vehicle to its pre-accident condition, so the repair costs are payable without any repair; VAT is excluded unless actually incurred. An Austrian claims handler may reach a substantially lower figure. As a rule, the Oberster Gerichtshof limits a claimant who does not repair to the objective diminution in the vehicle's market value and treats the estimate as the upper limit. Which figure is right depends on the law that governs the claim.

In this example Austrian law governs, and it does so by two different routes. An Austrian court applies the Hague Traffic Accident Convention of 1971: the vehicles are registered in different states and the accident happened in Austria. A German court hearing a direct action against the liability insurer at the owner's domicile gets there through Article 4(1) Rome II, since owner and driver live in different states. Settling on the German model would overpay whenever the diminution in value is below the net estimate.

Money instead of repair

Most of the European systems examined let the injured party take money instead of a repair, although Austria, Switzerland and Hungary tie recovery more closely to the actual loss. Belgium has put it into its Civil Code: for events from 1 January 2025, Article 6.39 makes the amount independent of what the injured person does with it. Article 148(1) of the Italian Codice delle assicurazioni private preserves the claim where the insured does not repair, and in Coles v Hetherton (2013) the English Court of Appeal held that a claimant need not repair to recover. French courts reach the same result, as did the Polish Supreme Court in 2007.

VAT shows the sharpest differences. On the EUR 6,800 estimate, VAT at the German or Austrian rate alone is worth some EUR 1,300 to 1,360. Germany pays it only once it has actually been incurred. Belgian case law since 1988, as reported and not yet tested under the new Civil Code, awards it to claimants who cannot deduct VAT even where the vehicle was never replaced. The Corte di cassazione confirmed again in 2026 that Italian claimants recover VAT on repairs not yet carried out unless they can reclaim it. Hungarian claimants must prove that it has arisen.

Ceilings differ as well. Most systems stop at the vehicle's replacement value. German law allows up to 130 per cent of that value only after a full, professional repair, and normally requires six months' further use as evidence that the owner wants to keep the car. The Czech Supreme Court accepts repair costs approximately 30 per cent above the usual price, and Portugal fixes total-loss thresholds of 100 and 120 per cent by statute, though only for the out-of-court offer. In 2020 Spain's Tribunal Supremo refused the cost of a repair at nearly twice the market value and awarded the market value with a 30 per cent premium.

Austria is not alone in asking whether the car was repaired at all. The Swiss Federal Supreme Court follows the difference theory and, in a case not involving a vehicle, has left open whether hypothetical repair costs are recoverable without repair. In Poland, conflicting resolutions of 2024 and 2025 on whether such costs survive an actual repair or sale are now before the full Civil Chamber of the Sąd Najwyższy (III CZP 17/26), which had not decided the case by 12 October 2026; its answer may affect a large number of pending claims.

What EU law leaves to national law

More than fifty years of motor insurance directives have not produced a common European measure of property damage. Article 15(c) Rome II leaves the existence, nature and assessment of damage to the applicable law, and VAT and ceilings follow it; Article 8 of the Hague Convention does the same in its contracting states. The Motor Insurance Directive sets a three-month deadline for a reasoned offer but says nothing about the measure of damage, so the claims representative settles under the applicable substantive law.

The place of the accident is only one connecting factor. Depending on the forum, the conflict rules may point elsewhere. Twenty-one states apply the Hague Convention, including 13 EU member states; among them are Austria, Belgium, France, the Netherlands, Poland, Spain and Switzerland. Courts in these states still apply the Convention, not Rome II, to accidents after 2009, including accidents between two EU member states: Article 28 Rome II leaves it in place because third states are also parties, as the French Cour de cassation confirmed in 2014. Germany, Italy, Ireland, Hungary, Sweden and Finland apply Rome II, and Denmark, bound by neither instrument, applies its own conflict rules. Where the injured party can sue the liability insurer at home, as is usually the case within the EU, the choice of forum can change the result, for instance where all vehicles are registered in one state and the accident happened in another.

Practical consequences

• Determine the applicable law before the estimate is reviewed, and record the reasoning, including the forum in which a claim is likely to be brought.
• Ask early whether the vehicle has been repaired, sold or replaced; in Austria and Poland the answer can change the measure of loss, and in Switzerland it may.
• Establish the claimant's VAT position and the VAT rule of the applicable law before any offer is made.
• Set the replacement-value ceiling and any total-loss threshold under the applicable law, whatever the location of the handling office.

The Salzburg file shows the wider pattern: across Europe the same estimate is worth different amounts, and the governing law largely determines which amount is owed.

Read the full country-by-country analysis, with case law and statutory sources for each jurisdiction, in the IETL members' area.