OGH: Construction risk clause in legal protection insurance

Apr 8, 2022 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, OGH) addressed the interpretation of a construction risk clause in a legal protection insurance policy and with the question of whether a legal dispute against a court-appointed expert due to a faulty expert opinion on a construction flaw is related to the typical problems of alterations subject to approval by the building authorities.

The OGH stated that according to Art 7.1.2.2 of the General Conditions for Legal Protection Insurance (Allgemeine Bedingungen für die Rechtsschutzversicherung, ARB), there is no insurance cover for the protection of legal interests in connection with the construction or alteration of land, buildings or parts of buildings owned or occupied by the insured person, which is subject to approval by the building authorities. The rationale of the exclusion is that a complete, usually manageable and definable, typically recurring life circumstance is to be excluded from insurance cover, since the vast majority of insured persons are not affected by it, but the few who are willing to build face an enormous cost risk by default.

For the OGH, the disputed clause in the present case is neither surprising according to Section 879 para 3 of the Austrian General Civil Code (Allgemeines bürgerliches Gesetzbuch, ABGB) nor grossly disadvantageous in the sense of Sec. 864a ABGB. Such a clause, which is common in legal protection contracts, is identified in this case under the heading "What is excluded from insurance coverage?". In addition, it has to be taken into account that general legal protection conditions only cover partial areas in private law as well as in public law due to the difficulty of keeping track of and calculating the legal costs risk. A general assumption of risk, where the need for legal protection of the insured person must be covered by the insurance in every situation, is usually not found in Austrian law.

The plaintiff would like to claim damages against the court-appointed expert. The accusation is the preparation of an incorrect expert report, as a result of which the plaintiff concluded an unfavourable settlement with the contractor. In the view of the OGH, the subject matter of the proceedings is the existence of a construction flaw, so that the action relates to a typical builder's risk, which is realised in the present claim in the same way as through a direct claim against the contractor.

OGH 7 Ob 172/21a