An individual held private accident insurance with an insurer. On 1 October 2008 a wooden beam fell on the assured’s head, causing him to suffer a craniocerebral trauma with bruising of his skull. The assured claimed that he had a 30% disability rating and demanded €21,000 in compensation. The insurer declined coverage and left it to the assured to challenge its decision using expert opinions.
In 2015 the insurer offered the assured €4,000 by way of an amicable settlement.
In 2017 the assured commenced legal proceedings, requesting the €21,000 in compensation; however, he lost at first instance and appealed to the Dresden Higher Regional Court.
Pursuant to Section 199(1) of the Civil Code, the three-year limitation period started on 31 December 2008 (ie, at the end of the year in which the insured event occurred). However, pursuant to Section 203 of the code, a limitation period is suspended during negotiations until one party refuses to continue the negotiations; in insurance cover cases, the denial of cover often constitutes such an end.
In this case, the insurer agreed to an examination of the claim several times, thereby negotiating, until it finally rejected coverage, in a letter of 20 December 2011, based on a medical opinion of 16 November 2011. The Dresden Higher Regional Court held that there had been no need for an express refusal to engage in a new examination, even if the situation had changed. Hence the suspension of limitation was lifted due to the denied coverage.
However, in a letter of 6 January 2012, the insurer informed the assured that he could submit other medical certificates for examination. According to the court, this letter constituted a resumption of negotiations and the insurer could have expected a response from the assured within two months. During this period, the limitation was again suspended; since the assured took no action, after two months, the negotiations were considered to be abandoned and the suspension was lifted. Therefore, the coverage claim finally expired on 5 March 2015. The insurer’s reasons for agreeing to a new exam and submitting a €4,000 settlement offer in a letter of 1 December 2015 were irrelevant – the negotiations were unsuitable to revive the time-barred claim.
Section 203 of the Civil Code applies only to claims which were not already time barred before the start of negotiations. The resumption of interrupted negotiations does not lead to a retroactive suspension of the statute of limitations to the beginning of the negotiations. In any event, the coverage claim had been time barred when the assured started legal proceedings in 2017.
German law provides several circumstances in which the limitation period in an insurance coverage dispute may be suspended, subject to the case facts. However, to avoid the risk of an insurance claim becoming time barred, assureds should pursue claims diligently. Suspending the limitation period due to negotiations requires that the insurer is actively involved in the matter. Further, negotiations may be discontinued – thereby lifting the suspension – if an insurer refuses coverage based on the knowledge that it has to hand. When declining coverage, an insurer need not exclude future negotiations with the assured; negotiations are deemed to be discontinued based on such a refusal.
If a claim is time barred and the insurer makes a goodwill offer to pay a small part of the claim without recognition of a legal obligation but the policyholder rejects it because it continues to demand the total amount, there is no implied waiver by the insurer to raise the objection of limitation.
ILO International Law Office, 03.09.2019
This article was originally edited by, and first published on, www.internationallawoffice.com
For further information on this topic please contact Karen Lorenz or Dieter Schwampe at ARNECKE SIBETH DABELSTEIN by telephone (+49 40 31 779 70) or email (firstname.lastname@example.org or email@example.com).