No insurer offers cover for foreseeable burning houses

In its ruling of 4 July 2018, the Federal Court of Justice (BGH, Ref. IV ZR 200/16) ruled

The so-called pre-enforcement clause in § 4 (4) (a) of the German Commercial Code 3 letter a) of the General Conditions for Legal Expenses Insurance (ARB 2008) is not transparent.“, and therefore invalid, § 307 I 2 BGB.


This clause reads “There is no legal protection if >/g> a declaration of intent or legal act made before the start of the insurance cover, the breach … the violation; “.


Disputes that were preprogrammed in the pre-contractual period ?

A corresponding “seed for later litigation” could be that the right of withdrawal was originally incorrectly taught in a credit agreement or life insurance policy; even if the actual case for legal protection occurs later – for example after withdrawal by the customer and refusal by the financial institution to recognise the right of withdrawal and to hand over the enrichment with the benefits drawn. Or if the tenant rents an apartment with unrecognized construction defects, later on, after the effects of which the rent is reduced, and the landlord does not recognize this.


The adoption of a child could also carry the germ of later inheritance disputes after 50 years. And also because of “Therefore my bow shall be in the clouds, that I may look upon it and remember the eternal covenant” (Genesis 9:16) the seed of legal disputes has often already been planted, because because not all have been drowned because of this declaration of will, and therefore they can continue to argue.


According to the Federal Court of Justice, the pre-extension clause “does not clearly and transparently” describe when a causal link (in the pre-contractual RSV period) to a declaration of intent exists, so that a legal act has already triggered the subsequent breach of duty, even if only in the bud.


The Federal Court of Justice (BGH) sees the case of legal protection only in such “declarations of intent and legal acts” which the policyholder (UN) specifically charges to his claimant as a violation of legal obligations by the claimant on which he bases his claim for legal protection cover. Violation within the meaning of the RSV conditions is therefore in the case of fruitless revocation or objection of the loan agreement or a life insurance policy only if the respondent refuses to acknowledge the justification for this contract destruction (BGH, ruling of 24.04.2013, ref. IV ZR 23/12).


No “purpose contract” of a legal expenses insurance (RSV)

Although the incorrect instruction about the right of objection or right of revocation is also a violation of legal obligations to a credit customer or UN of a life insurance policy, the respondent is not accused of this in such a way that RSV therefore requires legal expenses cover.


It would be different, however, if the concrete accusation of the UN was that it was not correctly informed about its right of revocation and, without revocation, this fact is now simply disputed. Then the breach of duty often dates back several decades. If there was no RSV cover at that time, or if the “waiting period” of usually three months had not yet expired, the RSV would not have to pay anything. After correct instruction, the corresponding period for objection or revocation of the property or life insurance policy then begins to run – in the event of non-recognition by the financial institution, i.e. bank or insurance company, this would then be a new case of damage in the present (BGH loc. cit.).


Ineffective clause allows targeted conclusion of an RSV for presumed future damage

The exclusion of risk by a suitably – i.e. transparently – worded pre-enforcement clause could, for example, intervene if the UN specifically concludes an RSV for a risk whose occurrence is already perceptible. “However, the (currently customary) clause is not based on such knowledge on the part of the policyholder. Because the “prognosis of the result of a subsequent subsequent objective-legal assessment of the causation of a pre-contractual declaration of intent or legal act for the legal protection case” is too much for the UN, this clause is not transparent and thus ineffective. The BGH does not interpret this clause here, but explains why it is not transparent, also using the example of possible but ultimately unsuccessful attempts at interpretation.

Accordingly, the UN can also describe misconduct on the part of the other party in the pre-contractual period, without this leading to the exclusion of the risk of an RSV insurance claim during the RSV contract period.


Any pre-contractual breaches of duty by an opponent are no reason for a refusal of cover in the event of a new breach of duty during the term of the RSV and after the expiry of a waiting period, if applicable – because the pre-extension clause is invalid according to the Federal Court of Justice.


The description of the case of damage to the RSV remains decisive

The policyholder can behave as the public prosecutor would describe it with the words “The defendant is the best witness – he talks his head off”. In most cases, the description of the breach of duty is decisive, and in doing so, a look at the ARB – not every RSV tariff contains, for example, legal disputes with insurance companies as content of the RSV coverage. If the relevant “legal area” is insured and the “pre-extension” clause is invalid, RSV must issue your cover note or risk a cover action by the UN. Other exclusions of cover remain conceivable, for example for investments.

Legal disputes specifically in connection with the revocation of contracts concluded before the start of the RSV could also be effectively excluded.


For laypersons, however, the ARBs, as a system of coverage exclusions and exclusions from coverage, are difficult to grasp. In any case, the description of the UN is decisive for the temporal classification of the insured event (BGH, judgement of 05.11.2015, Ref. IV ZR 22/13).


Missed “chance of probation” through interpretation and excessive casuistry

The earlier interpretation of the pre-enforcement clause by courts of first instance or higher courts in individual cases was a chance for a practicable, more limited application, which is now, however, particularly in the mass business of banks and even more so of insurance companies, being “gambled away” by their particularly qualified lawyers and attorneys as well as legal scholars with a great deal of legal argumentation with the aim of winning the case, with much more far-reaching consequences.


Such an interpretation has been attempted here by courts in the past, in different case law, in literature etc., as listed in the ruling of the Federal Court of Justice with different results. Even though this was not easy, and may have led to wrong decisions in some cases, it seemed promising. That other courts – or the literature – had already judged the clause to be non-transparent is not even mentioned.


If the Cologne Regional Court (as the previous instance) has now let itself be carried away with detailed legal justifications in the question and, of all things, in relation to the cases of revocation which are also frequently decided at the Federal Court of Justice and which have already been decided at a very advanced stage, to contradict the Cologne Higher Regional Court and Federal Court of Justice with regard to the evaluation of these cases of legal protection, the Federal Court of Justice has probably lost patience and has now countered this by taking the position that the attempt to interpret the clause (always only on a case by case basis) in a restrictive manner no longer promises success. Rather, it would have led to an unsystematic fragmentation into individual case decisions that would no longer be manageable and not understandable for laypersons. The consequence is ineffectiveness due to lack of transparency. The ruling of the Regional Court of Cologne contradicting the BGH on the basis of the efforts of the VR lawyers has probably proven – for the BGH – that the clause can no longer be meaningfully interpreted. The chance of parole was missed.


Anyone sitting on masses of questionable clauses should, before using guns – in the form of highly qualified law firms (and possibly with the help of scientific legal experts), who sometimes even have every legal means of winning a case – to win legal cases, remember that he is sitting in a glass house. Especially when he may already have been warned. Of course, the consequences of invalidity now go far beyond the insurer concerned and also the cases of revocation – the Federal Court of Justice gives examples of judgements.


BGH mitigates broker liability – through RSV cover for only feared cases ?

While insurance brokers would have had to refer to this pre-enforcement clause more often when rescheduling, their possible liability for this is now defused by the Federal Court of Justice: it is therefore still possible to conclude an RSV because one fears that a dispute could arise in already concluded contracts because of something that is already recognisable. For example, if you have the impression that a termination could threaten, or you discover mould in the apartment and think about the idea of reducing the rent for this reason in the near future, which the landlord – as you assess him – will probably not put up with. So the house is not “burning” yet, but there are some open petrol drums in the yard and the children want to have fireworks in the evening for their birthday.


Some RSV insurers (BoD) had also already waived the application of this clause, for example if the risk in question had already been insured with the same (and/or seamlessly with a previous insurer) for five years. Or even if the initiation of criminal investigation proceedings is considered an insured event – i.e. even if the actual criminal offence occurred before the RSV was concluded. However, this reluctance has not been able to prevent the ineffectiveness.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of (published on 14.10.2019)



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Dr. Johannes Fiala Dr. Johannes Fiala

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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