In a recent case (BGE 142 III 671, 4A_10/2016, September 8 2016) the Federal Supreme Court had to decide, in the context of loss of earnings insurance, whether sickness or the inability to work due to the respective sickness constitutes an insured event and therefore triggers the insurer's duty to provide insurance benefits.
A company had taken out group loss of earnings insurance in case of employee sickness. The manager of the company became ill and approximately six months later found himself unable to work for several months as a consequence of his illness. Shortly before he became unable to work, the company (ie, policyholder) had defaulted on payment of the insurance premium. The insurance coverage was therefore suspended. The insurer declined coverage because it was suspended when the inability to work arose.
The insured filed a complaint, which was dismissed by the first-instance court. The appellate court annulled the decision and affirmed the insurers' obligation to provide insurance cover. The insurer finally appealed to the Federal Supreme Court.
It was disputed whether the insured event had occurred during the time when coverage was suspended due to premium payment default. Whereas the insured asserted that the occurrence of the illness qualified as an insured event, the insurer argued that the insured event took place only when the inability to work due to the sickness arose. In previous case law, the court had predominantly viewed the inability to work as an insured event in loss of earnings insurance. In this case, the court finally confirmed the insurer's position.
The court noted that there are doctrines according to which an insured event cannot be equated a priori with the inability to work. Rather, these doctrines differentiate between the primary event (ie, the illness) and the secondary event (ie, the inability to work), and argue that the insured event occurs when the primary event takes place.
However, the court defined an 'insured event' as materialisation of the risk against which insurance has been taken out. Considering that the present insurance agreement and applicable general conditions of insurance, the court found that the term 'loss of earnings insurance in case of sickness' indicated that the insurance benefits were intended to cover income which the insured was no longer able to earn because of his inability to work due to sickness. Therefore, the court ruled that in the case of loss of earnings insurance agreements, the inability to work generally constitutes the insured event.
In the present case, the coverage was suspended when the inability to work arose for the first time. It follows that the insurer had no duty to provide insurance benefits. This also applies in particular to the inability to work, which might persist beyond the termination of the suspension of cover.
With the present decision, the court has rejected the stage model in the context of loss of earnings insurance. Thereby, it has abandoned its existing case law (eg, BGE 127 III 21) in which it had appraised the sickness as a primary event for the determination of when the insured event had occurred – but not for the determination of the triggering factor for the payment of insurance benefits.
The question of the triggering factor for insurance benefits and the 'stage model' legal figure will likely be an issue in future insurance cases in other lines of business (eg, accidents which lead to subsequent inability to work).
For further information on this topic please contact Markus Dörig or Alexandra Bösch at BADERTSCHER Rechtsanwälte AG by telephone (+41 44 266 20 66) or email ([email protected] or [email protected]). The BADERTSCHER Rechtsanwälte AG website can be accessed at www.b-legal.ch.
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