Going in blind - Consequences of no opportunity to read insurance terms: CJEU in Occidental (C-263/22)

Last week, on 20 April, the CJEU issued a judgment in the case Occidental - Companhia Portuguesa de Seguros de Vida (C-263/22) interpreting further provisions of Articles 3-6 of the Unfair Contract Terms Directive.

By Ryoji Iwata on Unsplash 

The case concerned a bank loan taken by a Portuguese couple, who joined a group insurance contract between the bank and Occidental, an insurance company. Occidental was to guarantee repayment in the event of the consumer's permanent incapacity. When consumer became permanently incapacitated, the insurer refused re-payment, invoking invalidity of the insurance contract due to incorrect and incomplete health declaration by consumer. The insurance contract also excluded from the cover any permanent incapacity resulting from illness that consumers suffered from prior to the contract's conclusion. Consumers claimed, however, that they were never informed about this exclusion clause and that they also did not provide their own health questionnaire to the insurer, as a bank employee completed it for them. 

Portuguese court struggled with two strands approach to the above situation in Portuguese case law, either recognising the insurers' duty to notify policy terms to policyholders or not, and the compliance of the second approach with the UCTD.

Opportunity to read

The first and second questions are interpreted as inquiring about the scope of obligation to create an opportunity to read terms and conditions for consumers. The CJEU reiterates the compliance rules with the principle of transparency, including the need to provide relevant information to consumers before the conclusion of the contract (para 27). Importantly, the CJEU draws attention the fact that with linked contracts (consumers concluding loan and insurance contracts simultaneously) consumers 'vigilance regarding the extent of the risks covered by that insurance contract' will not be the same as when they are concluding loan and insurance contracts separately (para 28). Consumers will need also to have access to all terms of a contract before its conclusion (para 29), regardless whether these are core contract terms (paras 30 and 31), incl. receiving information on 'the specific features of the arrangements for covering the loan repayments' in the event of permanent incapacity to work (para 28). After all, transparency means being able to evaluate economic consequences flowing from the concluded agreement.

To sum up, if consumers did not have access to full terms and conditions prior to concluding the contract, they could invoke UCTD protection against the trader/service provider. Further, the attention drawn by the CJEU to the increased need for transparency when linked contracts are concluded could result in service providers needing to re-evaluate their disclosures in such circumstances.

Consequences of lack of opportunity to read insurance terms on insurance cover

Since consumers had no chance to read the terms of the insurance cover on possible exclusions from the cover's scope, this lack of transparency would weigh in on the evaluation of unfairness (paras 40-41). The CJEU proceeds to outline in details how national court should conduct the unfairness test, i.e. assessing good faith and checking for a significant imbalance in parties rights and obligations to the contract. Importantly, the CJEU draws a conclusion that '(...) by not allowing the consumer concerned to become acquainted, prior to the conclusion of that contract, with the information relating to those contractual terms and all the consequences of the conclusion of that contract, the seller or supplier places that risk, arising from any permanent incapacity, in whole or at least in part, on that consumer' (para 50). If, consequently, the national court would find that consumers would not accept these terms in individual negotiations, then the seller/supplier should be seen as acting not in good faith and the term as unfair (para 51). The term would then be void and not enforceable against consumers (paras 52-53). This legal status  of unfair terms could not be changed by national legislation regulating civil liability of insurers for failure to notify policyholders (para 53). Such a civil liability could be pursued separately by consumers (para 55).

To sum up, the fact that consumers had no opportunity to read the term does not lead to a consequence of that term being automatically void under EU consumer law. This circumstance weighs in though, rather heavily, on the unfairness test. Only when the term is declared unfair, it needs to be considered as void, with all the consequences attributable to this.

Consumer law webinars in May

On May 9 ELI Austrian Hub and the University of Innsbruck hold an online evening lecture by prof. Christiane Wendehorst on the topic of a potential direct claim against the producer ("Do we need a direct claim against producers?"). To register your attendance visit this website.

On May 18-19 in Olomouc (Czech Republic) the 16th Year of the International Scientific Conference Juridical Days take place with one session dedicated to challenges of consumer protection, delivered in English and in a hybrid manner, too. To register for the session "Consumer Protection in Times of Global Challenges" visit this website. Zoom link will be sent after registration.

EDPB updated guidelines on right of access to personal data

The European Data Protection Board (EDPB) a few days ago published updated (second version) guidelines on the rights of data subjects, specifically the right of access to personal data. Any person whose personal data is processed is entitled to the right of access under Art. 15 of the GDPR. The right of access to data is considered one of the key rights under the GDPR, as it allows you to maintain control over what personal data is being processed, by whom, on what legal basis, to whom it has been made available, etc. Although the guidelines are primarily addressed to data controllers, they contain valuable tips for data subjects, providing insight into the actual scope of our rights. It's good to familiarize yourself with them, because as consumers, we leave digital footprints almost everywhere, and as a result, it's good to know what rights we have.

Just not to sound groundless, here are some noteworthy points from the guidelines: 

1. If you ask for access to your data the controller should give you access to all your personal data that are processed, unless you expressly limit your request (e.g. to identification data or data concerning a contract concluded on a particular day). The controller is not entitled to narrow the scope of your request arbitrarily, but may ask you to specify the request if he processes a large quantity of data.

2. Before granting access to personal data, the controller should confirm your identity in order to ensure the security of processing and minimise the risk of unauthorised disclosure of personal data. In this regard the EDPB emphasized that "as a rule, the controller cannot request more personal data than is necessary to enable this authentication, and that the use of such information should be strictly limited to fulfilling the data subjects’ request" (p. 25). The GDPR does not precise how to identify the data subject, so it is up to the controller to decide which authentication method is the most appropriate. However, the method must be proportionate to the circumstances of the processing, including the type of personal data being processed (e.g. special categories of data), the context within which the request is being made, potential damage that could result from improper disclosure of data). It happens that controllers fail to meet this requirement and choose methods that are convenient for them, but disproportionate. The EDPB states: "In practice, authentication procedures often exist and controllers do not need to introduce additional safeguards to prevent unauthorised access to services. In order to enable individuals to access the data contained in their accounts (such as an e-mail account, an account on social networks or online shops), controllers are most likely to request the logging through the login and password of the user, which in such cases should be sufficient to authenticate a data subject. [...] Consequently, it is disproportionate to require a copy of an identity document in the event where the data subject making a request is already authenticated by the controller. [...] Taking into account the fact, that many organisations (e.g. hotels, banks, car rentals) request copies of their clients’ ID card, it should generally not be considered an appropriate way of authentication" (p. 27).

3. Information requested as part of data access right should be provided to the data subject without undue delay and in any event within one month of receipt of the request. This deadline can be extended by a maximum of two months taking into account the complexity and the number of the requests that the controller receives. In such a situation the data subject must be informed about the reasons for delay. But the rule is that the controller should act "without undue delay", which means that the information should be given as soon as possible - "if it is possible to provide the requested information in a shorter amount of time than one month, the controller should do so" (p. 50).

4. Sometimes the controller may limit or refuse to give access to personal data. According to Art. 15(4) GDPR, the right to obtain a copy of data shall not adversely affect the rights and freedoms of others. Another restriction results from Art. 12(5) GDPR which enables controllers to override requests that are manifestly unfounded or excessive, in particular because of their repetitive character. These concepts must be interpreted narrowly. Data access right may be exercised more the once, but as it was indicated in recital 63 of the GDPR - "at reasonable intervals". It is not possible to determine in advance how often it is permissible to make requests for access to data, because it depends on processing circumstances. The EDPB remarks that "the more often changes occur in the database of the controller, the more often data subjects may be permitted to request access to their personal data without it being excessive". For example, "in the case of social networks, a change in the data set will be expected at shorter intervals than in the case of land registers or central company registers" (p. 56).

These are just a few examples worth keeping in mind. For more, I recommend checking out the guidelines. 

Proposal for Green Claims Directive

The second proposal published on March 22 by the European Commission was for a new Green Claims Directive (COM/2023/166 final - Directive on substantiation and communication of explicit environmental claims).

Boxed Water Is Better on Unsplash

The aim of this proposal is to improve consumer protection against greenwashing and misleading environmental claims, as well as providing consumers with better quality information on the environmental impact of consumer products. This could facilitate consumers making environment-friendly choices. Further, the proposal aims to benefit traders by facilitating fair competition on the environmental sustainability of their products. The envisaged way to achieve this is by introducing common minimum rules on what constitutes a green claim and when traders could make such claims. 

The proposal addresses:

• Explicit environmental/green claims (Article 2(1) and (2))
• Comment 1: This proposal does not contain an independent definition of an environmental claim. It refers here to another proposed Directive (empowering consumers for the green transition through better protection against unfair practices and better information - COM/2022/143 final), which suggested amending Unfair Commercial Practices Directive by adding this definition in its Article 2(o). Empowering Consumers for the Green Transition Directive was proposed a year ago by the Commission but still awaits approval by the Parliament. If it is adopted then environmental claims will be defined as: "any message or representation, which is not mandatory under Union law or national law, including text, pictorial, graphic or symbolic representation, in any form, including labels, brand names, company names or product names, in the context of a commercial communication, which states or implies that a product or trader has a positive or no impact on the environment or is less damaging to the environment than other products or traders, respectively, or has improved their impact over time". We are still awaiting the introduction of this definition, which aims to already prohibit the use of generic environmental claims like 'eco-friendly' or 'green'.
• Comment 2: The above is a very broad definition, but the new proposal aims only to apply to explicit environmental claims. This would be 'an environmental claim that is in textual form or contained in an environmental label'. The explicitness is then related to the form in which the claim is being made, rather than its content. Whilst this test will be easier to apply, providing more legal certainty, it is unclear why, for example, a graphic symbol (logo) on an environmental label will be more explicit than in a company name. This notion also leaves unaddressed overall (misleading) impression of many messages as presenting 'environmentally-friendly' products, e.g. by the communication using green-themed colours and images.
• Substantiation of claims (Article 3)
• Comment 1: One of the recognised issues with greenwashing is the lack of common standards on substantiation of environmental claims. The Commission introduces now various guidelines (para 1), which traders are supposed to follow whilst assessing whether their claims are substantiated and could be communicated. This assessment focuses on the life-cycle of a product, seemingly limiting the option to make green claims related to only part of the product/production process. Additionally, when there is lack of harmonisation in applying the guidelines that creates obstacles for the functioning of the internal market, the Commission reserves the right to adopt delegated acts (paras 4 and 5) further specifying, e.g. materials or processes that contribute or cannot contribute to relevant environmental impacts. Considering the so-far observed lack of harmonisation, we may have expected the proposal to already include some of these further specifications, e.g. in the form of a black list of green claims. Already, the European Environmental Bureau (EEB) commented on the regrettable 'lack of a clear ban on carbon neutral claims and on the use of green claims on products that contain hazardous chemicals' (see here). Similarly, also BEUC called for an outright ban of such misleading claims (see here). Although going forward, it makes sense for the Commission to reserve the right to act quickly on improving the market practices across the EU on substantiating green claims.
• Comment 2: To minimise the information cost for microenterprises, the proposal does not require them to follow the substantiation of claims process, unless they intend to have their green claims verified and certified. This would then be the choice of microenterprises, i.e. whether to follow the procedure from the proposal in light of any expected benefits from certification outweighing its costs.
• Communication of claims (Article 5)
• Comment 1: Green claims communicated to consumers are not only to be substantiated following the set requirements (incl. reliance on scientific evidence), but also be significant from a life-cycle perspective of a product. This should limit the amount of green claims used by traders, introducing more transparency and minimising the potential for misleading consumers. 
• Comment 2: Consumers should receive information on how to use the product to achieve its expected environmental performance, where the product use influences environmental impacts (e.g. waste sorting, use patterns impacting product longevity - Recital 34). This information should accompany the claim and could allow consumers (as well as competitors and enforcers) to easier assess the veracity of the claim. 
• Comment 3: There are additional rules specifying how green claims are to be communicated. Any claim related to future environmental performance (e.g. traders joining initiatives that will improve circularity of their products) should include a time-bound commitment for improvements of trader's operations and value chains, rather than rely on overall offsetting of negative environmental impacts, not only following from traders' own actions (Recital 35). This aims to counteract confusing climate-related claims, but as noted by the BEUC and the EEB will not be as effective as an outright prohibition of such claims. Para 6 specifies in detail what substantiating information should accompany a green claim and how it should be made available to consumers. There is a question here as to the impact that this detailed information may have on consumers' attentiveness and understanding thereof, as well as to the feasibility of placing all this information on product packaging.
• Environmental labelling (Article 8)
• Comment 1: To limit the proliferation of environmental labels, para 3 prohibits further adoption of national or regional environmental labelling schemes. Previously existing labelling schemes may continue their operation in the EU, provided they are in compliance with the proposal. New environmental labels awarded in third countries will require approval of the Commission prior to products carrying them entering the EU market (para 4). Details of all these approval processes are still to be determined.
• Comment 2: The proposal addresses also the issue of private environmental labelling schemes. These may only exist if they 'provide added value in terms of their environmental ambition' compared to existing EU, national and regional schemes, and if they are compliant with the proposal. This suggests that the new proposed private environmental labelling schemes will not be able to simply replicate environmental assessments already conducted by other available labelling scheme providers.
• Verification of claims (Articles 10-11)
• Comment 1: It is up to the Member States to set up procedures allowing for the green claims' verification. This means that the verification process will vary across the EU, in costs and procedure. However, it will need to take place before the green claim is communicated to consumers. Any self-certified environmental labels will constitute an unfair commercial practice (Recital 42). This suggests that traders will not be made able to make environmental claims spontaneously.
• Comment 2: Verifiers will be accredited third-party conformity assessment bodies, independent from traders or products whose green claims they are assessing. They will issue a certificate of conformity, where appropriate, upon verifying the claim. This certificate is not, however, guiding for the assessment of the environmental claim by authorities or courts. The proposal does not address the issue of the liability of verifiers for incorrectly verifying/certifying certain claims.

It excludes from its scope:

• Claims covered by existing EU rules 
• Comment 1: The proposal contains a long list of already binding EU rules that address various aspects of traders making environmental claims, such as the EU Ecolabel, the organic food logo, energy labelling, ecodesign requirements. It also anticipates, in its Article 1(2)(p), the adoption of future EU rules further addressing explicit green claims and excludes them a priori from its scope of application (e.g. the forthcoming 'Count Emissions EU', see Recital 13). Whilst from the legislative perspective this solution is the easiest to implement, it may not provide the necessary transparency in the market. For consumers and traders both, it will be handy to have comprehensive  graphs/illustrations/tables prepared outlining which rules apply to which products or claims, what the main differences are in these.

The proposal aims to provide more details related to enforcing the UCPD against unfair environmental claims of traders. It also foresees that consumer organisations will be able to act on the Representative Actions Directive in enforcing collective consumer interests in having access to non-misleading green claims (Article 24). The sanctions that traders could expect for making unsubstantiated green claims may be severe: up to 4% of profits, confiscation of profits and a ban from public procurement contracts, access to public funding for up to 12 months (Article 17).