Loan repayment and endowment insurance
> May 2015

The Federal Court of Justice decided on 05 May 2015 that there is no connected transaction in combination of a consumer loan contract and an endowment insurance for loan repayment (BGH, judgement from 5 May 2015 - XI ZR 406/13). Situation:  
The claimant claimed reversal of a loan contract revoked by her from the defendant bank under inclusion of a repayment reducing endowment insurance.

The claimant and the defendant entered into a contract for a loan that was to be repaid at the end of the term from a concurrently concluded life insurance. The claimant revoked her declaration of will for the conclusion of the loan contract towards the defendant. At the same time, she revoked her contractual statement from the insurance contract.

Decision:
The reasons for the decision are not available yet. However, the press office release (no. 078/2015 from 05 May 2015) suggests that the XI. Civil Senate of the Federal Court of Justice, which is relevant for banking and stock exchange law, decided that a bullet loan for which the debtor only pays interest to the creditor during the term of the loan and an endowment insurance contract taken out in this context that is to be used to repay the loan when due are not connected contracts in the sense of § 358 para. 3 sentence 1 German Civil Code (Bürgerliches Gesetzbuch; BGB) if the insurance premium is not to be paid in the form of a one-time payment that is wholly or partially financed by the loan.

This provision requires that first, the loan is wholly or partially used to finance the other contract, and that second, both contracts form an economic unit. If the insurance premium is not financed from the loan, the first of these two prerequisites is already missing. In this case, the loan does not serve financing of the endowment insurance contract, but the insurance total saved up from other funds is used to repay the consumer loan.