Monday, 31 August 2015

German BGH "limits and expands" consumer withdrawal rights with a view to mortgages

Late in 2013 the CJEU issued a judgment (Case C‑209/12) following upon a request for a preliminary ruling under Article 267 TFEU from the Bundesgerichtshof (Germany) in which it held that a national provision, under which a right of withdrawal lapses one year at the latest after payment of the first premium, where the policy-holder has not been informed about the right of cancellation, was contrary to EU law. Before 2008 it was standard procedure in Germany that an insuree would  receive the general conditions of assurance and consumer information only upon receipt of the policy document - hence after conclusion of the contract. Upon receipt of the policy documents consumers were granted a 2 weeks (later 1 month) withdrawal period. If the consumer never received the documents, the right of withdrawal was assumed to having lapsed after a year with the contract hence being valid. This judgment was to have effect for insurance contracts for the time period from 1994 to 2007 giving consumers that had not been correctly informed about their rights basically an "eternal right of withdrawal" that is financially far more favourable than a classical cancellation of such a contract. It puts the consumer in the position as if the contract had never been concluded.
Taking into consideration the CJEU judgment the BGH held that such damage payments may be limited given that the insuree has been profiting from the insurance coverage - thereby limiting the effect of the CJEU judgment to some extent. 
The Allianz, one large German insurance company, at the time did not expect a big impact of the judgment as it claimed to be able to prove that it had sent out the policy documents in time to all its customers. Few cases of consumers trying to withdraw their contracts upon the basis of not having received the policy document were, consequently, expected.
It has, however, generally become popular to withdraw insurance contracts due to formal errors of different kinds (German legislation on the formal requirements kept changing). In a recent judgment the BGH has, in line with the previous judgment, once more confirmed the possibility to limit damage payments because the consumer has benefitted from the insurance protection. At the same time the BGH, however, states explicitely that the consumer upon a successful withdrawal can claim back all the acquisition costs - typically a multiple of Euro 1000 - from the insurer. These may not be subtracted.

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