Expenses insurance for legal action

The Higher Regional Court of Hamm has decided that cover of legal expenses insurance consists for an intended action for the granting of a cancellation permit for a land charge after revocation of a loan agreement.

The plaintiffs claimed a declaratory judgment from the defendant, an insurance company, under a legal expenses insurance policy that the defendant had to grant conditional cover for intended actions against two credit institutions for the granting of cancellation approvals for land charges. In 2008, the plaintiffs concluded a loan agreement for a net loan amount of EUR 150,000 to finance the acquisition of a property in addition to owner-occupied real estate. In 2014, they concluded a further loan agreement with Y for a total net loan amount of 165,000 euros, which was intended partly to repay the first loan and partly to finance renovation measures not requiring approval. As security, the plaintiffs created a land charge on the property acquired in 2008. In February 2016, the plaintiffs declared to the defendant the revocation of their declaration of intent to conclude the respective loan agreement, which was rejected by the banks. The defendant declared the cover letter, however limited to the determination of the invalidity of the declarations of revocation.

In the first instance, the defendant had been sentenced as requested. The plaintiffs were entitled to the claim still asserted by them after the partial withdrawal of the action under the insurance contract existing between the parties.

The Hamm Higher Regional Court dismissed the appeal lodged by the defendant.

In the opinion of the Higher Regional Court, an insured event from which such a claim arises has occurred. The contract between the plaintiffs and the defendant included legal protection under the contract. The claim to legal protection arises from the point in time at which the policyholder or another person has committed or should have committed a breach of legal obligations or legal provisions. The breach of duty triggering the legal protection case is determined by the breach of duty accused of by the defendant, from which the policyholder derives his claim. This conduct in breach of duty accused of by the credit institutions does not lie in the use of a possibly incorrect cancellation instruction, but in the rejection of the cancellation declared by the plaintiffs and the associated refusal to reverse the contracts. The question as to whether the credit institutions should return the security in rem after payment of the amount resulting from the reversal and the preceding dispute as to the validity of the revocation do not concern different matters here. Rather, the question of the effectiveness of the revocation is also decisive for the actual dispute between the plaintiffs and the credit institutions about the obligation to return the security in rem. Due to the occurrence of the insured event, the defendant was obliged to grant the plaintiffs cover for the actions they intended to bring for the granting of a cancellation permit. According to the security agreement, the credit institutions were only entitled to a claim to the real security until all claims to which they were entitled under the loan relationship had been satisfied. However, the plaintiffs did not intend to assert anything to the contrary by way of action. With their applications, they sought protection for intended actions aimed at the granting of a cancellation authorisation after full satisfaction of the bank, also with regard to claims from the restitution obligation.

Previous instance

LG Bielefeld, 14.02.2018 – 18 O 273/16

 Source: Newsletter of the Federation of German Consumer Organisations v. 04.03.2019