In insurance contract law – especially in life insurance – the subscription right refers to the beneficiary. Beneficiaries and policyholders are sometimes identical. When the contract is concluded or at a later date, the policyholder shall record the beneficiary in the insurance contract. Tip: The beneficiary should be clearly identified. Example: “My spouse” is not unique. In the event of a subsequent divorce, this declaration might have to be interpreted by a judge. If the irrevocably entitled person dies prematurely, the claim passes to the heirs. The irrevocable pre-emption right of one of the spouses does not expire in the event of divorce.
Subscription rights in the event of divorce and separation
Policyholders who, when taking out a life insurance policy, had appointed their spouse as the beneficiary, sometimes do not think about changing the subscription right in the life insurance contract after a separation or divorce and a new marriage. Caution: Without informing the insurer that the subscription right has changed, the insurance benefit will be paid to the partner originally appointed. The guiding principle from the BGH judgement of 14. 2. 2007 – IV ZR 150/05 speaks for itself:
The policyholder’s declaration in an insurance application that in the event of his death “the spouse of the insured person” is to be the beneficiary of the insurance benefit is, even in the event of a subsequent divorce of the marriage, normally to be interpreted as meaning that the spouse married to the policyholder at the time of the determination of the beneficiary is to be the beneficiary.
The term “the spouse is entitled to benefit” therefore refers to the partner at the time of conclusion of the insurance contract, and not to the current partner. If the policyholder employs several beneficiaries, and if not all of them are present in the insured event, the remaining beneficiaries receive a higher share of the insurance benefit (cf. § 160 VVG).
Revocable and irrevocable subscription right
According to § 159 VVG (entitlement to benefit), the policyholder is entitled in case of doubt to designate a third party as beneficiary without the consent of the insurer and to appoint another person in place of the third party so designated. A third party revocably designated as entitled to receive benefits acquires the right to receive benefits from the insurer only when the insured event occurs. A third party irrevocably designated as being entitled to receive benefits acquires the right to receive benefits from the insurer as soon as he is designated as the beneficiary.
The subscription right can therefore be revocable or irrevocable. Irrevocable subscription rights are granted, for example, in the corporate relationship among each other to secure shareholders in a partnership. As the name suggests, any amendment to an irrevocable subscription right requires the consent of the beneficiary. If the policyholder wishes to revoke the irrevocable subscription right at any time, this is only possible with the express consent of the person irrevocably entitled to subscribe. If the beneficiary is still a minor, even the guardianship court must give its consent to the annulment.
The “normal” subscription right is the revocable subscription right, i.e. if no corresponding declaration has been made to the insurer, the subscription right is considered revocable. The irrevocability of a subscription right must be expressly stated. If an irrevocable subscription right has been granted, it can no longer be changed without the consent of the beneficiary.
Reverse: Revocable subscription rights can be changed unilaterally and at any time by the policyholder. However, the insurer must be in possession of the declaration on the subscription right before the insured event occurs. Accordingly, storage in a desk at home does not constitute a declaration to the insurer.
Entitlement of the beneficiary
In the event of a benefit claim, the beneficiary has his or her own claim for payment under the insurance contract. As a consequence of the entitlement to benefits, the entitlement to the insurance benefit passes directly to the beneficiary. As soon as the irrevocable subscription right becomes effective, there is a de facto transfer of assets from the policyholder to the assets of the person irrevocably entitled to subscribe. The policyholder retains his “rights of shaping”, i.e. he can cancel the contract, for example. However, only the person irrevocably entitled to receive the insurance benefit payable under the insurance contract is entitled to it.
Irrevocable subscription rights in the company pension scheme
Irrevocable subscription rights are granted for security reasons in company pension contracts, for example when salary components are converted into company pension expenses. The employer is the policyholder of the pension plan contract and the employee is the insured person. The irrevocable subscription right ensures that the benefits provided by the employee are not lost, e.g. in the event of insolvency. This Article deals in particular with the granting of subscription rights in the case of direct insurance in the event of the insolvency of the employer. The article Notes on direct insurance should therefore also be consulted where necessary.
Case law on the irrevocable subscription right in the event of insolvency – right of segregation
In its judgement of 22.09. the Landesarbeitsgericht Hamm approves employees 2006 – 4 Sa 629/06, who are entitled to a limited irrevocable subscription right to a direct insurance policy for occupational pension provision, are entitled to a right to segregation in the event of the insolvency of the employer within the meaning of § 47 of the Insolvency Code (InsO). This means that the employees are not obliged to enable payment of the surrender value of the insurance to the insolvency estate.
The Federal Labour Court took the same position in the judgment of 31.7.2007 – 3 AZR 446/05. If the employer as policyholder has granted the employee as insured an irrevocable subscription right, only the employee is entitled to the rights arising from the insurance contract from the time of granting. In the event of the employer’s insolvency, the subscription right therefore belongs to the assets of the beneficiary and the claims from the insurance contract do not fall within the insolvency estate because the employee has a right to segregation against the insolvency administrator.
From the reasons for the judgment: “As long as the conditions of the reservations are not fulfilled, the restricted irrevocable subscription right is economically and legally equivalent to an unconditionally irrevocable subscription right. If the employer becomes insolvent, it is part of the assets of the beneficiary, in this case the plaintiff. The claims to the insurance benefits do not fall within the insolvency estate (BAG 26 June 1990 – 3 AZR 651/88 – BAGE 65, 208, on 4 of the grounds; BGH 3 May 2006 – IV ZR 134/05 – NJW-RR 2006, 1258, on II 2 of the grounds)”.
Guiding principle of the BGH judgement of 18.07.2002 – IX ZR 264/ 01 regarding the direct insurance of the managing director with revocable subscription right: “If the company has only established a revocable subscription right for him in the direct insurance policy taken out for the benefit of its managing director, the latter shall not be entitled to a segregation right in respect of the rights under the insurance policy before the occurrence of the insured event in the bankruptcy of the company, even if the premiums have been paid out of the remuneration to which he is entitled”.
Contestation of subscription rights in the event of insolvency
Dipl.-Math. Schramm and RA Fiala give the following information on the challenge of the subscription right by the insolvency administrator: A (only) revocable subscription right only means a prospect of later acquisition, because the policyholder can change the subscription right at any time. The assets still belong to the policyholder. In this case, a timely pledge to the beneficiary in the event of insolvency of the policyholder can help, because a right to benefits is only acquired by the beneficiary when the insured event occurs.
If, on the other hand, an irrevocable subscription right is granted, the right to the insurance benefit is acquired by contract for the benefit of third parties between the policyholder and the insurer, which can be independently pledged or assigned. The policyholder, on the other hand, can only assign and pledge if the beneficiary agrees.
The insolvency administrator may contest the granting of a subscription right within four years, thereby legally reversing the process. In practice, it is usually overlooked that in the case of assignments and pledges a written notification of the policyholder is required, in the case of subscription rights a reconfirmation of irrevocability by the insurer or an agreement with the insurer. If the insurer does not react to such declarations of the policyholder, this may lead to liability for damages.
published on 13.12.2012 in Finanztipp
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Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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