OGH: Risk Exclusion in Legal Expenses Insurance

Dec 8, 2023 Benn-Ibler Rechtsanwälte

A clause in the general terms and conditions of a legal-expenses insurance policy has been declared invalid by the Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH).

The Austrian Association for Consumer Information (Verein für Konsumenteninformation, hereinafter VKI) has sued an insurance company over a clause (Art. 7.1.2. ARB 2020) which the defendant used in their legal-protection insurance conditions. The clause excluded insurance coverage for representing legal interests causally linked to public administration acts such as expropriation, rural land structuring, zoning, land transaction and land registry matters.

The VKI’s argument was that the clause was unclear and therefore in breach of the requirement of transparency as per Section 6(3) of the Austrian Consumer Protection Act.

The defendant argued that the clause was sufficiently clear and in line with normal insurance expectations, arguing that the clause excluded from coverage only certain administrative proceedings and not all legal interests relating to public administration acts.

The OGH, on the other hand, found that the clause was not transparent, as it excludes from insurance coverage the defence of legal interests causally linked to public administration acts. The list then goes on to mention specific administrative matters and a specific matter of ordinary jurisdiction (land registry issues). Contrary to the opinion of the insurance company, this does not mean that only administrative or judicial authorisation procedures are excluded from insurance coverage. The scope of exclusion therefore remains unclear to the average policyholder. The existence of the sample list does not change this fact. An average policyholder would not be sufficiently aware that public liability claims against a legal entity arising from acts of public administration are not to be subsumed under the policy’s risk exclusion.

OGH 7 Ob 92/23i (27 September 2023)