OLG Vienna on COVID-19-related coverage denials

Apr 21, 2021 Benn-Ibler Rechtsanwälte

The Vienna Higher Regional Court (Oberlandesgericht Wien, OLG Wien) confirmed the decision of the court of first instance that exceptional circumstances clauses in legal expenses insurance were unlawful. The background to the dispute was whether the clause could effectively limit insurance coverage in connection with the COVID-19 pandemic.

This concerned in particular the following clause in the General Conditions for Legal Expenses Insurance: "Unless otherwise agreed, there is no insurance cover for the representation of legal interests in direct or indirect connection with orders under sovereign law which are addressed to a majority of persons due to an exceptional situation".

The court of first instance ruled that the clause was both non-transparent (Sec. 6(3) of the Consumer Protection Act (Konsumentenschutzgesetz, KSchG)) and grossly disadvantageous (Sec. 879(3) of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch, ABGB)). The clause results in an unreasonably wide gap in the insurance cover. The exact meaning of the phrase "with orders under sovereign law, which are addressed to a majority of persons due to an exceptional situation" is also unclear from the perspective of a typical policyholder.

The OLG Wien did not uphold the appeal against this ruling. Formulations contained in general terms and conditions must be formulated as clearly and comprehensibly as possible. The standard for this transparency is the understanding of the typical average customer. However, since the terms "indirect or direct connection", "sovereign orders", "exceptional situation" and "majority of persons" were undefined both individually and in the overall context, the clause as a whole did not meet the transparency requirements.

Furthermore, such a broadly formulated exclusion of risks deviates from the legitimate expectation of a policyholder who would expect coverage in a situation deviating from normal, which also results in a gross discrimination of the insured person in terms of Sec. 879 (3) ABGB.

The verdict is not legally binding.

OLG Wien 5 R 13/21z (17.03.2021)