In Jean-Claude Van Hove v CNP Assurances SA (Case C-96/14) the Court of Justice of the European Union (CJEU) considered Article 4(2) of the Unfair Terms in Consumer Contracts Directive 93/13/EEC (the Directive), in the context of proceedings involving an allegedly unfair contractual term in an insurance contract.
The Directive provides that consumers are not bound by unfair clauses that are set out in a contract concluded with a seller or supplier. However, Article 4(2) provides that the assessment of the unfair nature of the terms shall not relate either to the definition of the main subject-matter of the contract nor the adequacy of the price and remuneration, on the one hand, as against the services or goods supplied in exchange, on the other, insofar as those terms are drafted in plain, intelligible language.
The CJEU has already held that this provision must be strictly interpreted, since it lays down an exception to the mechanism for reviewing the substance of unfair terms.
In its latest decision, the CJEU clarified that terms that relate to the main subject-matter of an insurance contract may be regarded as being drafted in plain, intelligible language, if they are grammatically intelligible to the consumer, and set out transparently the specific functioning of the insurance arrangements so that the consumer can evaluate the economic consequences which derive from it. If not, the national court may assess the possible unfairness of the issue.
Mr Van Hove concluded two loan contracts with a bank. At the time of concluding those loan contracts, he also signed a group insurance contract with CNP Assurances. That insurance contract guaranteed to cover all loan repayments in the event of death, permanent and absolute invalidity, or 75% of such loan repayments in the event of total incapacity for work. Following an accident at work, Mr Van Hove was found by the French social security authorities to have permanent partial incapacity of 72%. The doctor appointed by the insurance company concluded that Mr Van Hove's state of health, although no longer compatible with him returning to his former post, allowed him to carry on appropriate employment on a part-time basis. CNP Assurances therefore refused to continue to cover the loan repayments in respect of Mr Van Hove's incapacity.
Mr Van Hove brought legal proceedings before the French court asking it to declare that the term of the contract between him and CNP Assurances relating to the definition of 'total incapacity for work' and the conditions under which repayments were covered was unfair, and to order CNP Assurances to cover the sums outstanding in relation to the two loans. He argued, in particular, that the definition was unintelligible to a lay consumer, and that the term was worded in such a way as to cause a significant imbalance to the detriment of the consumer.
CNP Assurances considered that, among other things, the term at issue could not be an unfair term because it concerned the subject-matter of the contract. The French court referred the matter to the CJEU.
The concept of the main subject-matter of the contract
The CJEU referred to the nineteenth recital in the preamble to the Directive that, in insurance contracts, terms which clearly define or circumscribe the insured risk and the insurer's liability shall not be subject to an assessment of unfair character, since those restrictions are taken into account in calculating the premium paid by the consumer. The CJEU stated that it could not be ruled out that the term at issue concerned the very subject-matter of the contract, insofar as it seemed to circumscribe the insured risk and the insurer's liability while laying down the essential obligations of the insurance contract. However the CJEU left it to the national court to determine this point, having regard to whether the term laid down an essential component of the insurance contract at issue.
The concept of plain intelligible language
The CJEU ruled that terms that relate to the main subject-matter of an insurance contract may be regarded as being drafted in plain, intelligible language if they are grammatically intelligible to the consumer. In addition, they must set out transparently the specific functioning of the insurance arrangements, taking into account the contractual framework of which they form part, so that the consumer is in a position to evaluate, on the basis of precise, intelligible criteria, the economic consequences for him which derive from it. If not, the national court may assess the possible unfairness of the term at issue. The CJEU did not rule out that the scope of the term defining the concept of total incapacity for work was not understood by Mr Van Hove, but left it to the national court to make a finding on this point.
Relevance of insurance contract and loan contracts being concluded together
The CJEU further noted that the fact that the insurance contract is related to loan contracts concluded at the same time may play a role when examining the requirement of transparency of contractual terms, as the consumer is deemed not to exercise the same vigilance regarding the extent of the risks covered.