OGH: Consequences of late withdrawal from a life insurance

May 6, 2022 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, OGH) decided that Section 176 para 1 of the Insurance Contract Act (Versicherungsvertragsgesetz, VersVG) is contrary to EU law if it provides the same legal effects for the withdrawal from an endowment life insurance policy and its termination starting five years after the conclusion of the contract.

In 2008, the plaintiff, as a consumer, and the defendant concluded an endowment life insurance policy. The consumer was neither given a copy of the insurance application, nor the consultation protocol, nor even the binding supplementary declaration with reference to the policyholder's right of withdrawal. In spring 2020, the plaintiff notified the defendant in writing of her withdrawal from the contract and demanded reimbursement of the premiums paid, including interest. The defendant, however, contested the plaintiff's full claim for repayment.

The defendant's objection was based on the new provision in Sec. 176 para 1a VersVG, according to which the plaintiff was only entitled to the surrender value in the event of a late withdrawal after five years. The OGH stated that in the case at hand, Sec. 176 VersVG as amended by Federal Law Gazette (Bundesgesetzblatt, BGBl) I 2018/51 applied, as the withdrawal had taken place after January 1, 2019. Pursuant to Sec. 176 para 1a in conjunction with Sec. 176 para 1 VersVG, the policyholder is reimbursed the surrender value in the event of a withdrawal from an endowment life insurance policy starting five years after the conclusion of the contract.

In the present case, the previous case law applies, as the amendment to the Act only regulates the legal consequences in the case of a "late withdrawal" up to the expiry of the fifth year after conclusion of the contract and has not introduced any regulation for the time beyond that. Since the limitation to the surrender value in the case of withdrawal is therefore inadmissible, Sec. 176 para 1 VersVG must also be qualified as contrary to EU law insofar as it provides for the same legal effects for withdrawal and termination without the European Court of Justice (ECJ) addressing the issue again.

In the case at hand, the plaintiff's withdrawal thus leads to a reversal of the contract under law of enrichment, which is why she is entitled to the repayment of the net insurance premiums she paid.

OGH 7 Ob 185/21p (16.02.2022)