– Current ECJ ruling opens up reversal with perpetual cancellation right also for new life insurance policies since 2008 –
The bang of the European Court of Justice (ECJ)
The European Court of Justice ruled (ruling of 19 December 2019, ref. C355/18, C-357/18, C-479/18) that a provision in insurance contract law according to which the policyholder (UN) receives only the surrender value in the same way as in the case of cancellation or withdrawal, violates higher-ranking EU law.
No limitation to the surrender value after incorrect or omitted revocation instruction
After 12 years, the legislator had introduced this restriction on life insurance policies from the second year of the contract onwards, which had now been judged to be contrary to EU law, into the Insurance Contract Act (VVG) in the 2008 VVG reform precisely because the previous regulation from 1994, with its absolute limitation of the revocation to one year after the start of insurance, had already proven to be contrary to EU law – more than 10 years after its introduction.
From the new ruling:
“As far as § VersVG in the version applicable to the main proceedings
for the withdrawal and termination of the contract, the same legal
effects, it deprives the right of withdrawal provided for by Union law
…and thus any practical effect. …
… The answer to the fourth question in Case C-479/18 must therefore be that
Article 15(2) 1 of Directive 90/619, Article 35(1) 1 of Directive 2002/83 and
Art. 185 para. 1 of Directive 2009/138 must be interpreted as meaning that it is contrary to
national legislation under which the insurer is obliged to provide a
policyholder who has withdrawn from his contract, only the
the surrender value.”
Special feature of consumers as policyholders
The insurer (BoD) has numerous information duties. Since 01.07.2008, consumers must also receive a product information sheet, which is then one of the documents relevant for the start of the withdrawal period, § 4 ProdInfo-VO. For non-consumers § 1 of this regulation applies.
It is not yet clear when the Federal Court of Justice will implement the ECJ ruling. It is foreseeable that this will also result in a reversal of the transaction under enrichment law – as was already the case for all affected contracts from the period up to the time before the VVG2008 came into force. In other words, the obligation of the BoD to surrender to the UN, in addition to the full contributions without risk costs, the benefits derived by it, Section 818 BGB.
Forfeiture instead of limitation period
Revocation may be countered by forfeiture – because the insurer’s conduct has led it to believe that the UN absolutely wants to keep the contract. In some cases, courts are satisfied if the UN has contradicted dynamics in dynamic contracts or has accepted them without contradiction.
Or has always paid the contributions on time – but even more so if he has started again after suspension of payment. In other words, every sign of life from the UN, every action or omission shows some courts that the UN absolutely wants to implement the contract and has thus forfeited its right of revocation.
Not all courts apply such “strict” standards as in the case of revocation after termination of the contract by the UN at a time many years after receipt of a surrender value already higher than the premiums paid “the obvious aim of the objection is a mere increase in yield” (OLG Munich, judgement of 31.08.2018, file no. 25 U 607/18). The Federal Court of Justice (BGH) has so far demanded stricter requirements, for example for abuse of rights “malicious or harassing conduct” (BGH, ruling of 16.03.2016, ref. VIII ZR 146/15) – but its case law can still evolve.
Liability insurance and other non-life insurance
Until the end of 2007, the rule applied in this respect that the right of revocation expires one year after (first) premium payment if insufficient information was provided, § 5a II 4 VVG old version. From 2008, the legislator has improved this in favour of all policyholders, because the right of revocation no longer expires with the passage of time: Prepaid premiums since revocation must be refunded, as well as an annual premium, § 9 I 2 VVG, if no claim has yet been made.
Cunning UN could, under given circumstances, first try to re-cover (i.e. change the VR) and then revoke it.
How to finance cancellation via legal expenses insurance (RSV)?
If you have a more recent RSV contract, you will find in the insurance conditions (ARB) the revocation of insurance contracts de facto as excluded from cover, possibly only for life insurance. However, even if the RSV would be subject to the obligation to join, additional costs of the UN itself must be expected – in particular due to the high expenditure of time and actuarially expert preparation and process support by an actuary.
Insolvency risk due to revocation – for company pension schemes or subscription rights
If someone benefits from a subscription right – even irrevocable – in a life insurance policy, the benefit is lost through the revocation – payouts could still be refundable after decades. It is really unlucky for the BoD if it has already paid out the benefit of a life insurance policy that is still revocable to another beneficiary – then there is a risk of double payment.
For example, the heirs could then demand the full premiums plus the benefits less the risk costs in the event of revocation from the BoD; and the insurer would itself have to approach the irrevocable or revocable beneficiary in order to claim back from him the surrender value (RKW) paid many years ago or the death benefit.
If an employer becomes insolvent, the bankruptcy trustee will endeavour to increase the insolvency assets by revocation: All of a sudden, the company pensioner is supposed to reimburse the pension payments – current pensions are simply stopped. Direct insurance policies will no longer be paid out after revocation. The company pensioner can file his claims against the employer for insolvency – the Pensionssicherungsverein, however, is not interested at all.
In addition, even non-employees have the opportunity to contest the payment of the BoD under the Act on Avoidance or the Insolvency Code – even without revocation, of course.
Only experts are aware of the fact that any assignment, pledge and even irrevocable subscription right is eliminated by revocation with the contract and many banks therefore have worthless securities. The fact that they may then have to repay the proceeds from collateral already realised in the form of RKWn is added to this. In the event of subsequent insolvency, the insolvency administrator will often still be able to revoke such life insurance policies and in doing so will be able to try not to have the proceeds offset against the RKW paid out to other persons.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.experten.de (published on 14.01.2020)
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About the author
PhD, MBA, MM
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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