The District Court in Konin, hearing the case of the borrower, who was supported by the Financial Ombudsman with an important view, dismissed the claim in respect of the entire insurance fee. The Court shared the Financial Ombudsman’s view on the illusory insurance cover of a bancassurance product, i.e. insurance taken out together with a loan agreement. The court found that there were abusive, i.e. prohibited, provisions in the agreement and eliminated the insurance contract from the loan agreement.
Mr Henryk (name changed), an inhabitant of the Wielkopolskie Voivodeship, in 2013 took out a consumer loan from Eurobank S.A. (now Millennium Bank S.A.) in the amount of PLN 104 thousand. To this amount, the bank added insurance (over PLN 25 thousand), which increased Mr. Henryk’s liability to nearly PLN 131 thousand. In 2016, as a result of having suffered a stroke, the borrower experienced paresis. He was unable to work professionally and was in a difficult life situation. As a result, he was unable to continue repaying the loan.
Mr Henryk was convinced that the illness he suffered was covered by insurance taken out with the bank in the event of his death or permanent total incapacity for work. However, the borrower’s illness was not considered a covered event, and the bank, after terminating the loan agreement, brought an action against the borrower for payment of the outstanding loan.
Mr Henryk asked the Financial Ombudsman to provide an important view on the case. After an in-depth analysis, the Financial Ombudsman presented the court with a document containing a number of theses and legal arguments. Firstly, the Ombudsman noted that the payment of the life insurance premium did not constitute the essentialia negotti of the loan agreement (its elementary part), which gives grounds for assessment under Article 3851 §1 of the Civil Code as a prohibited provision. According to the Ombudsman, the provisions concerning the insurance contract in the loan agreement were unclear and were drafted in an ambiguous manner. In one place the contract indicated that the insurance protected the risk of total and permanent incapacity for work, while in another place it indicated that disability. Nor did the wording of the contract contain definitions of these important terms.
The Financial Ombudsman also stressed that the conclusion of this type of insurance contract should be preceded not only by an examination of creditworthiness, but also by an analysis of the application for insurance cover. According to the Ombudsman, the abandonment of the medical interview and the examination of the risk declaration could be evidence of the forced rather than voluntary nature of the insurance, which was de facto intended to safeguard the bank’s interests. The Ombudsman also pointed out that the cost of the insurance is very high in relation to the total amount of the loan and the mechanism for its calculation was not clearly explained to the client. This determined Mr Henryk’s rights and obligations in a manner contrary to good practice, grossly infringing his interests.
The court examining the case shared the Financial Ombudsman’s view, considering the insurance to be illusory, and regarded the related provisions as abusive clauses. The court noted irregularities in the amount of the insurance fee, the forced nature of the insurance and the failure to pay the sum insured.
At the same time, the Court emphasised that such a large disproportion between the amount of the loan made available and the cost of insurance is a sign of a breach of the principles of loyalty and contractual balance. It also shared the Ombudsman’s view that the provision defining the risk was inconsistent in its wording.
The conclusions reached above caused the court, in determining the bank’s claim, to eliminate the insurance contract entirely from the loan agreement, specifying the debt and the amount due without the amount of the insurance fee, and therefore without approximately PLN 25 thousand.
The judgement is not final.
Worth knowing:
The case concerns an insurance contract that falls within the so-called bancassurance distribution channel. To illustrate, bancassurance should be understood as the conclusion by a bank of insurance contracts linked to a bank product where the bank customer, on the basis of a separate agreement, is obliged to cover the costs of the bank’s insurance cover against particular risks covered by such insurance contract.
The Financial Ombudsman, in the context of Mr Henryk’s case described above, reminds that in accordance with the Civil Code, parties entering into a contract may arrange the legal relationship as they see fit, as long as the content or purpose of the relationship does not contradict the characteristics (nature) of the relationship, the Act or the principles of social co-existence. In the context of an insurance contract, the insurance institution indirectly confirms the reliability of the customer concerned and assumes a certain degree of risk associated with the granting of a loan.
Thus, if the structure of loan insurance provisions does not ensure coverage of the bank’s losses in the event of the occurrence of strictly specified events included in the contract, as a result of which the bank’s receivables are not satisfied by the borrower whose debt is insured, or defines them in an ambiguous manner, it may mean that they contain abusive provisions, i.e. prohibited provisions, which by law are not binding on the consumer.
