BGH: Insurer May not Unilaterally Lower Coverage

Mar 28, 2025 Benn-Ibler Rechtsanwälte

The German Supreme Court (Bundesgerichtshof, hereinafter BGH) court has determined that insurance companies providing daily allowance benefits cannot unilaterally lower the insured per-diem rate in the event of a decrease in the policyholder’s net income. A new clause introduced by an insurer provider has been deemed legally invalid.

In the case at hand, the plaintiff signed a sickness insurance policy with the defendant insurance provider. Originally, the contract contained a clause which allowed the insurer to reduce the insured daily allowance in the event of a permanent reduction of the policyholder’s net income. A clause with the same content in the standard terms and conditions of the Verband der Privaten Krankenversicherung (Association of Private Health Insurance Companies) had already been declared invalid by the BGH because it violated the transparency requirement of Section 307 (1) sentence 2 of the German Civil Code (Bürgerliches Gesetzbuch, BGB).

In 2018, the insurer sent out new general terms of business, which included a revised provision on the reduction of sickness benefits. The plaintiff sued for a declaration that his original daily rate would continue to apply, claiming that this clause was unacceptable. He also sought to recover the difference and to recover extrajudicial legal costs.

The Landgericht Koeln (Cologne District Court) largely upheld the claim. On appeal, however, the Cologne Higher Regional Court found in favour of the insurer and dismissed the claim. The plaintiff then appealed to the BGH.

The BGH has now overturned the judgment of the Higher Regional Court and reinstated the decision of the first instance court. The BGH based its decision on the fact that it was not necessary to replace the invalid clause in accordance with Section 164(1) sentence 1 of the German Insurance Contract Act (Versicherungsvertragsgesetz, VVG).

Replacing the clause is only permissible if the invalid clause would require the contract to be reinterpreted. However, according to the BGH, this is only the case if there are no discretionary statutory provisions to fill the gap and it would be unreasonable to expect the insurer to continue the contract without the clause.

The BGH has made it clear that there is no such unreasonable hardship. Although a permanently reduced net income could increase the risk for the insurer, this does not constitute an unreasonable hardship. Health insurance is designed as a sum insurance, so that the insurance benefit is determined independently of the policyholder’s current income.

BGH IV ZR 32/24 (12 March 2025)