Since a decision by the European Court of Justice (ECJ) on 19 December 2013 (Case C-209), insurance customers are increasingly checking whether they can still revoke their insurance policies. The aim is to recover the insurance premiums paid or to unwind insurance policies with negative returns.
Insurance companies have often failed to adequately and effectively inform the policyholder about the right of withdrawal. The ECJ ruled that this right to revoke or object to the insurance contract is not subject to any limitation period and is still possible after termination. In § 5a of the German Insurance Contract Act (VVG), which was valid until the end of 2007, the legislator had set a time limit on revocation, which, according to the new case law, has proven to be a hidden loophole in all contracts of life insurance companies – due to EU law, the time limit therefore does not apply.
Even according to the current legal situation, a policyholder can exercise this right of cancellation in the event of omitted instruction, legally insufficient text of the cancellation instruction or incomplete handover of the insurance documents (§ 8 VVG).
The Federal Court of Justice (BGH, judgement of 07.05.2014, AZ. IV ZR 76/11) clarifies that the statute of limitations for claims for repayment only begins with the exercise of the revocation. The period then concerns three years to the following 31 December of the year. By revocation the insurance contract becomes finally ineffective, so that after enrichment right the back completion of the legally groundless premium payments has to take place (§§ 812 I 1, 818 II civil code (BGB)).
However, the BGH also commented on the legal nature of the insurer’s benefit because it sees the insurance cover provided – and not an insurance benefit received – as an advantage to be offset. This means that the insurer may only keep that portion of the premiums which corresponds to the insurance cover “enjoyed” by the policyholder. Thus, the insurer has the burden of proof to disclose its calculation.
In addition to the repayment of premiums – with the exception of those for insurance cover granted by the insurer – the benefits derived by the insurer must also be surrendered. This also includes retained surpluses or kickbacks from fund investments and the income drawn thereon in the amount of the return on equity, often up to more than 30%.
The correct calculation of the benefits drawn over often more than a decade is an actuarially and also from a legal point of view a demanding task. Even in the case of term life insurance or pure occupational disability insurance, the insurer will not be allowed to retain the entire premium in the event of revocation.
published in GVmanager 09/14
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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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