BMJ adjusts late withdrawal for life insurance policies

May 20, 2022 Benn-Ibler Rechtsanwälte

The Austrian Federal Ministry of Justice has presented a government bill to amend the Insurance Contract Act (Versicherungsvertragsgesetz, VersVG). It is now to be clarified that in the event of a late withdrawal from a life insurance policy, all premiums paid are to be refunded.

Section 5c para 3 VersVG is intended to clarify that "information on withdrawal that is so faulty that it deprives the policyholder of the possibility of exercising his right of withdrawal under essentially the same conditions as if the information had been correct [is] to be regarded as equivalent to incorrect information".

Pursuant to Sec. 176 para 1 VersVG, the policyholder is reimbursed the surrender value in the event of withdrawal, termination or contestation of a life insurance contract. Sec. 176 para 1a VersVG in the version still in force provided for a staggered regulation for the extent of the repayment obligations in the event of a withdrawal if not all requirements of Sec. 5c para 2 VersVG are met ("late withdrawal"). However, as a consequence of the ECJ decision "Rust-Hackner" (ECJ, 19.12.2019, C-355/17 to C-357/18 and C-479/18), the Austrian Supreme Court (Oberster Gerichtshof, OGH) no longer applied Sec. 176 para 1a in cases of late withdrawal and ordered the reversal under the law of enrichment.

Now, Sec. 176 para 1a VersVG is intended to clarify that Sec. 176 para 1 VersVG is no longer applicable in the case of a withdrawal under Sec. 5c VersVG. This has the consequence that the repayment in case of a late withdrawal is now no longer limited to the surrender value, but - in accordance with the case law of the OGH - a reversal under the law of enrichment takes place. Policyholders will therefore receive back all premiums paid.

The new provisions are to enter into force on 01.08.2022 and are applicable to cases in which the rescission was declared as of 01.01.2019.

1446 d.B. XXVII GP - Government bill