BGH bolsters consumer rights when withdrawing from pension schemes and life insurance policies

The Bundesgerichtshof (BGH), Germany"s Federal Court of Justice, has once again strengthened the rights of consumers when withdrawing from pension schemes and life insurance policies with its ruling of October 14, 2015 (Az.: IV ZR 284/12).

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: If the policyholder was not properly informed about his option to withdraw when taking out a life insurance policy or pension scheme in accordance with the so-called "Policenmodell" (policy model), it remains possible to unravel the life insurance policy or pension scheme (http://www.grprainer.com/en/legal-advice/capital-markets-law.html) even years after its conclusion. This is sometimes referred to as a perpetual right of withdrawal due to the fact that the withdrawal period never commenced. This all comes from another consumer-friendly ruling delivered by the Bundesgerichtshof.

The case came before the 4th Civil Panel of the BGH. A policyholder had concluded a unit-linked pension plan in 2003 pursuant to the so-called "Policenmodell". In February 2008, the policyholder announced his withdrawal from the plan and, in the alternative, gave notice of termination. The insurer only acknowledged the termination notice and paid out the corresponding surrender value. The consumer brought a legal action against this, demanding reimbursement of all of the premiums he had paid to date. Despite the initial lack of success before the courts of lower instance, the action was ultimately successful before the BGH.

The Panel held that the policyholder had not been properly informed about his option to withdraw, as the guidance used concerning the right of withdrawal made the commencement of the withdrawal period conditional solely on receipt of the certificate of insurance. It went on to say that it was also not adequately typographically emphasised. While sec. 5a (2) sentence 4 of the VVG a.F. (Versicherungsvertragsgesetz, alte Fassung) [German Insurance Contract Act, old version] stipulates that the right of withdrawal expires no later than one year following payment of the first premium, the ECJ and BGH have ruled that this provision violates European law. Accordingly, the right of withdrawal continues to exist and it remains possible to withdraw from the policy even years after its conclusion if the guidance on the right of withdrawal was flawed. The Panel also stated that giving notice of termination in the alternative does not preclude this.

In light of the BGH"s case law, consumers who took out a life insurance policy or pension scheme between 1994 and 2007 pursuant to the "Policenmodell" have a good chance of being able to successfully withdraw from and therefore rescind their insurance policies. Consumers can turn to a lawyer who is versed in the fields of banking law and capital markets law to enforce their claims.

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