The Court once again upholds the pass-on defense and confirms that the burden of proof regarding the volume effect lies with the claimant
Judgment number 211/2025, dated July 18, issued by the Twenty-Eighth Section of the Provincial Court of Madrid in the decennial insurance case, has dismissed the appeals of the claimant property developers, fully upholding the rejection of the claims. Judgment number 74/2023, dated November 30, 2023, issued by Commercial Court number 11 of Madrid and confirmed by the Provincial Court, had dismissed the claims by accepting the pass-on defense, that is, by considering that any damage would have been passed on to the end customers as a cost of the real estate developments.
This is the second judgment of the Provincial Court of Madrid in the decennial insurance case. Although it is in line with what was already stated by the Court in its first judgment (number 377/2022, dated May 19, regarding a claim filed by another developer and previously analyzed in this Blog), it contains new and interesting pronouncements regarding the pass-on defense.
On the one hand, the judgment rules out that, in order to fulfill the burden of proof incumbent on the defendant in relation to the pass-on defense, it is necessary to provide an econometric analysis in every case. It does so based on the Pass-On Guidelines published by the European Commission, which "establish that the evidence necessary to demonstrate and quantify the passing-on will depend on the circumstances of each case." This pronouncement is in line with what was recently established by the Supreme Court in its judgment number 889/2025, dated June 5, in the envelopes case, regarding the relaxation when addressing the evidence of the pass-on defense.
On the other hand, the judgment confirms that the burden of proving loss of profit (the loss of sales or the "volume effect") that the passing-on of the overcharge may have caused lies with the claimant, again based on the Pass-On Guidelines published by the European Commission (paragraph 21, p. 8). Although the judgment first clarifies that the claimants' claim in this case was limited to actual damages, it also concludes that they have not proven that there was a decrease in their sales.
The above leads the Provincial Court to confirm the first instance judgment and to consider sufficiently proven the passing-on of the decennial insurance overcharge in the sale prices of the houses sold by the claimant property developers. The judgment states that the documentary, testimonial, and expert evidence, as well as the situation of the real estate market at the time of the infringement, allow the conclusion that the sale prices of the houses absorbed the overcharge and, therefore, the claimants did not suffer any damage.