When does legal expenses insurance not pay?

Guide figures from published tariff examples and from cost calculators based on the German lawyers' fee act, so you can see what a refusal really costs.

A German legal expenses insurer does not refuse at random. Almost every refusal rests on one of a handful of clauses in the policy wording, the Allgemeine Bedingungen für die Rechtsschutzversicherung or ARB. Once you know these reasons, you can see immediately whether the no holds up or whether it is worth pushing back.

The table lists them in the order in which they appear in practice. The right hand column says what you can still do.

What decides everything is when the insured event is deemed to have occurred. It is not the day you go to a lawyer, and not the day you notice the problem. It is the first breach of a legal duty that you accuse the other side of. Where there are several breaches, the first one counts. If that breach falls before the policy start or inside the waiting period, the policy pays nothing, even if the court case only runs years later.

Three examples make it concrete. With a dismissal by your employer, the breach is the day the written notice reaches you, not the first meeting with HR. With a defect in a rented flat, it is the day the landlord failed to repair after you reported it, not the day the mould appeared. With a wrong invoice, it is the day the faulty invoice arrived. So always write a timeline with dates and evidence. Insurers very often set the start too early because they mix up the back story with the breach, and that is where refusals are overturned most often.

The insurer may refuse cover if it considers your case hopeless or frivolous. For exactly this dispute, section 128 of the German Insurance Contract Act (§ 128 Versicherungsvertragsgesetz) requires an impartial expert procedure in the contract. Which one applies is written in your wording. Older wordings use the Stichentscheid: your own lawyer gives a reasoned opinion, and that opinion binds the insurer unless it obviously departs substantially from the factual and legal position. Newer wordings instead use an arbitration opinion by an independent third party.

The sentence that matters most for you: if the insurer does not tell you about this procedure and the deadline in its refusal, or if the contract does not provide for it at all, cover is deemed to be granted in that case. So check the refusal letter for that notice first. In most wordings the insurer bears the cost of the Stichentscheid, so you risk little. Demand it in writing and have your lawyer set out in detail why the claim has a real chance.

If the no stands, the insurance ombudsman (Versicherungsombudsmann) is the next step. The procedure is free for you. Up to a dispute value of EUR 10,000 the ombudsman decides, and that decision binds the insurer. Between EUR 10,000 and EUR 100,000 the ombudsman issues a recommendation, which does not bind but carries weight. After that comes, if necessary, a claim in court against your own insurer for cover.

The order matters. Do not instruct a lawyer for the main case and do not start proceedings while the confirmation of cover (Deckungszusage) is missing. And let a broker help: we know the wordings and frame the request so that the insurer looks at the right module and the right date of breach. NAMMERT works as a managing general agent and handles this correspondence for you.

Even when the policy pays, it does not pay everything. A deductible of EUR 150 to 300 per case is standard, and some tariffs lower it after claim free years. Dropping it altogether costs around EUR 85 more a year according to published calculations, and since most policyholders report no claim in ten years, that rarely pays off.

The cover limit should be at least EUR 300,000, and many good tariffs pay without a limit inside Europe. There are also sub limits: for mediation, for criminal bail, for cases abroad. And what is reimbursed is always the statutory fee scale (Rechtsanwaltsvergütungsgesetz). If your lawyer agrees an hourly rate above that, you pay the difference yourself, even with full cover confirmed.

Honestly, the insurer is often right. If you take out the policy because the dismissal is already on the table, you get nothing, and that is fair, otherwise everyone else would pay for it. The same goes for the building contract on your own house and for an investment that went badly.

So the fight is worth it above all for two reasons: the date of the first breach and the prospect of success. Those are the refusals that are overturned most often. Where an exclusion is clear, save yourself the effort and check instead whether state legal aid or a settlement is the better route.