Prospects of success in coverage proceedings must be assessed in accordance with current supreme court case law
The Bundesgerichtshof (BGH, Federal Court of Justice) has clarified the relevant time for assessing the prospects of success of an action under legal expenses insurance (BGH, judgment of 28 October 2026 – IV ZR 155/25 (case number)). If clarifying supreme court case law is issued after the application is ready for determination, insurance cover depends on the prospects of success as at the close of the final oral hearing before the appellate court. This also applies if the case law initially develops in favour of the policyholder and subsequently changes again to the policyholder’s detriment.
Coverage dispute following alleged manipulation of the emissions control system
Action against the vehicle manufacturer
In June 2013, the claimant had purchased a new diesel-powered passenger vehicle from the manufacturer for EUR 50,655.66. Due to alleged manipulation of the emissions control system, he brought court proceedings against the vehicle manufacturer. Among other things, his action sought repayment of the purchase price less compensation for use, concurrently with the transfer of title to and surrender of the vehicle.
The defendant legal expenses insurer granted cover for the proceedings at first instance. However, the Landgericht (Regional Court) dismissed the action against the manufacturer.
Refusal of cover for the appeal proceedings
On 26 March 2021, the claimant applied for cover for his intended appeal. The insurer rejected the application in March and April 2021. It stated as its reason that the appeal did not have sufficient prospects of success.
The insurance contract was governed by the Allgemeine Bedingungen für die Rechtsschutzversicherung 2010 (2010 General Conditions for Legal Expenses Insurance). Under § 18, the insurer was required to provide immediate notification in text form, stating its reasons, of any refusal based on insufficient prospects of success or vexatiousness. In the cases specified in the conditions, cover could be refused due to insufficient prospects of success if the pursuit of the legal interests did not offer a sufficient prospect of success.
Course of the coverage proceedings
Different scopes of insurance cover awarded
According to the press release issued by the Bundesgerichtshof, the Landgericht found that the defendant was required to provide cover for the second-instance proceedings relating to the purchase of the vehicle, based on the purchase price.
On the insurer’s appeal, the Oberlandesgericht (Higher Regional Court) partially amended this decision following the oral hearing on 8 May 2025. It found that the insurer was required to provide cover for the appeal proceedings only on the basis of an amount in dispute of EUR 7,598.50 and dismissed the appeal in all other respects.
In the opinion of the Oberlandesgericht, there were prospects of success only in respect of damages based on the difference in value, amounting to no more than 15 per cent of the purchase price. There had been no sufficient prospects of success for a claim seeking full restitutionary damages, either when the coverage request was first decided at the end of March 2021 or at any later time.
Claimant’s appeal on points of law
The claimant continued to pursue his claim by way of an appeal on points of law to the Bundesgerichtshof and sought reinstatement of the judgment at first instance. His appeal on points of law was unsuccessful.
The press release issued by the Bundesgerichtshof identifies the lower courts as the Landgericht Düsseldorf (Düsseldorf Regional Court), judgment of 23 June 2022 – 9 O 322/21 (case number), and the Oberlandesgericht Düsseldorf (Düsseldorf Higher Regional Court), judgment of 18 June 2025 – I-15 U 11/25 (case number).
Relevant time for assessing the prospects of success
Principle of readiness for determination
In principle, the decisive factor when assessing whether the intended pursuit of legal interests has sufficient prospects of success is when the coverage request is ready for determination. This means the time at which the legal expenses insurer decides on the application.
According to the Bundesgerichtshof, the application in this case was ready for determination on 31 March 2021. At that time, it was established supreme court case law that § 6(1) and § 27(1) EG-FGV (German EC Vehicle Approval Ordinance) were not protective statutes within the meaning of § 823(2) BGB (German Civil Code).
Subsequent clarification by supreme courts
An exception to this general rule regarding the relevant time applies if, after the application is ready for determination, a supreme court provides clarification in favour of the policyholder. In that event, the prospects of success must be assessed according to the legal position as at the close of the final oral hearing before the appellate court.
In doing so, the IV. Zivilsenat (Fourth Civil Panel) continues the approach adopted in its judgment of 5 June 2024 – IV ZR 140/23 (case number). Accordingly, the following timing considerations are particularly relevant to coverage proceedings:
- In principle, the starting point remains the legal position when the coverage request is ready for determination.
- A subsequent clarification by a supreme court in favour of the policyholder shifts the assessment to the close of the final oral hearing before the appellate court.
- The relevant case law is then the case law existing at that later time, taking account of its entire development.
- This also applies if supreme court case law is initially more favourable but changes again to the policyholder’s detriment by the time of the final appellate hearing.
Claim for damages had prospects of success in principle
Insurance cover existed for the insured event in question, namely the purchase of the vehicle. The intended pursuit at second instance of claims for damages against the manufacturer under § 823(2) BGB in conjunction with § 6(1) and § 27(1) EG-FGV also had prospects of success in principle.
At the oral hearing before the appellate court on 8 May 2025, the judgments of the Bundesgerichtshof of 26 June 2023 had to be taken into account. According to those judgments, the purchaser of a motor vehicle equipped with an unlawful defeat device falls within the class of persons protected by § 6(1) and § 27(1) EG-FGV in conjunction with Article 5 of Regulation (EC) No 715/2007.
However, EU law does not require the purchaser to be placed in the same position as if the purchase agreement had not been concluded. The purchaser is entitled to claim from the vehicle manufacturer only damages based on the difference in value. These must be determined in accordance with the difference method.
Entitlement to cover limited to damages based on the difference in value
The subsequent case law of the Bundesgerichtshof following the decision of the Gerichtshof der Europäischen Union (Court of Justice of the European Union) had clarified the implications for national law by the time of the final appellate hearing. The amount of the claimant’s entitlement to cover was therefore limited to damages based on the difference in value.
According to the decision of the Bundesgerichtshof, there was no entitlement to full restitutionary damages at either of the two relevant times:
- On 31 March 2021, no such claim existed when the application became ready for determination.
- Nor did any entitlement to full restitutionary damages exist at the close of the final oral hearing before the appellate court on 8 May 2025.
The intervening development of supreme court case law therefore did not result in broader insurance cover. The decisive factor was the extent to which prospects of success existed in light of the development of the case law as concluded by the time of the final appellate hearing.
Significance for contractual claims for insurance cover
The judgment demonstrates that, when interpreting legal expenses insurance contracts, the legal position at the time of the original coverage decision is not invariably the sole decisive factor. If a supreme court subsequently provides clarification, the legal position at the close of the final appellate hearing may determine the scope of the entitlement to cover. Both favourable developments and subsequent unfavourable developments must be taken into account.
The timing of supreme court decisions and the scope of contractual confirmations of cover may raise complex questions of distinction in individual cases. MTR Legal Rechtsanwälte advises companies and private individuals on related matters as part of its contract law advisory services.
