EFTA-Court establishes extensive information duties concerning unit-linked life insurances

The claimants had concluded unit-linked life insurances with Swiss Life (Liechtenstein) AG. The insurance premiums had partly been loan financed by the depositary bank. In the wake of these contracts the insurance holders claimed damages because the risk of the investment had been unpredictable and the product itself had not been transparent. Furthermore the defendant had charged excessive fees through which the assets had been depleted in short time.

The district court of Liechtenstein had requested a preliminary decision of the EFTA-Court. Among other questions the request concerned the scope of unit-linked life insurances as well as information duties of the insurance company vis-à-vis the insurance holder stipulated by European law.

In its recent decision (E-11/12) the EFTA-Court stated that the products underlying the contracts formed a joint product consisting of the three elements credit, bonds and life insurance. Such a classification by the EFTA-Court as joint product according to Schwärzler Attorneys at Law consequently leads to a joint liability of the involved companies, therefore the insurance company, the loan granting depositary bank, the asset manager as well as the insurance intermediary.

Furthermore the court concluded that the insurance company was obligated to provide extensive information to the insurance holder. Therefore the insurance company before conclusion of the insurance contract has to provide the insurance holder with written information which has to be complete, clear and detailed and which contains specifications about the investment (in units of account) to which the output is connected and by which the underlying assets can be sufficiently described. The future insurance holder thereby must be enabled to choose the corresponding contract which fits his needs best as well as to assess the policy concretely. As an example for the sort of information the insurance company has to provide, the court mentions a prospectus or other information material.

According to Schwärzler Attorneys at Law the court thereby de facto establishes a securities prospectus requirement. Since the court clearly speaks of written information, verbal information will therefore most probably not be sufficient. 

Schwärzler Attorneys at Law see good chances that in the numerous court proceedings against Swiss Life pending at courts in Liechtenstein the obligation to information will be regarded as breached. This is because concerning the underlying investments the insurance holders were only provided with advertising brochures and not securities prospectuses. From these advertising brochures no specific risk concerning the investments can be derived but instead the product is advertised in a deceiving way by alleged historic rates of return as well as by utterly unrealistic future expectancies of return rates and also by alleged security which also did de facto not exist. The Constitutional Court of Liechtenstein already identified these brochures as improper in the proceeding StGH 2012/36. Ultimately also the Supreme Court of Liechtenstein in the second process in the proceeding 01 CG.2009.62 has found the insurance company liable. Therefore the pending proceedings in which Schwärzler Attorneys at Law are involved continue to look promising from the perspective of the insurance holders.