What the Federal Court of Justice's ruling of May 13, 2026 means for insured persons with daily sickness allowance insurance.
Has your daily sickness benefit been reduced due to decreased income? Then it's worth taking a close look at your policy terms. The Federal Court of Justice ruled on May 13, 2026 (Case No. IV ZR 27/25) that an insurer cannot simply replace an invalid reduction clause with a new one. Rogert & Ulbrich will review whether your reduction was legally valid.
The issue at hand: Reduction of sick pay in cases of decreased income
Daily sickness allowance insurance is intended to compensate for lost earnings during periods of incapacity for work. Many contracts contained a clause allowing the insurer to reduce the daily sickness allowance and the premium if the insured person's net income permanently decreased. This provision corresponded to Section 4, Paragraph 4 of the standard terms and conditions for daily sickness allowance insurance (MB/KT 2009).
In its judgment of July 6, 2016 (Case No. IV ZR 44/15), the Federal Court of Justice had already declared this clause invalid due to a violation of the transparency requirement (Section 307 Paragraph 1 Sentence 2 of the German Civil Code). For insurers, this meant they could no longer rely on the reduction clause.
Has your insurer reduced your daily sickness allowance due to your income? Check which clause the reduction is based on.
The case: Replacement clauses via adjustment notification
The insurer in the current proceedings reacted to the 2016 ruling. In 2018, it replaced the invalid clause with a new provision and notified its policyholders of this change via an adjustment notice. At the same time, it amended the policy terms and conditions to include rules for determining the relevant net income. The new provisions were intended to allow the insurer to adjust daily sickness benefits again in cases of lower income.
A consumer protection association, recognized as a qualified body, sued to have these substitute clauses invoked, seeking an injunction. The Cologne Regional Court and the Cologne Higher Regional Court dismissed the suit. The Federal Court of Justice overturned these decisions and ruled in favor of the association.
A letter from your insurer informing you of changes to your policy does not necessarily mean that the new terms and conditions are effective. Have such communications reviewed.
The Federal Court of Justice's decision: No effective clause replacement
An insurer may only replace an invalid provision in existing contracts under the strict conditions of Section 164 of the German Insurance Contract Act (VVG). In health insurance, this applies via Section 203 Paragraph 4 of the VVG. Accordingly, replacement is only permissible if it is necessary for the continuation of the contract or if adherence to the contract without a new provision would constitute an unreasonable hardship for one of the contracting parties.
The Federal Court of Justice denied both prerequisites. The main reasons were:
- No need: The contract can be continued effectively even without a reduction clause. A replacement clause requires that adhering to the incomplete contract would be unreasonable for the insurer.
- No undue hardship: Sickness benefit insurance is a lump-sum insurance policy. The fact that the benefit payment and the actual net income may differ does not constitute an undue hardship for the insurer.
- Premium ratio unchanged: The ratio of performance to contribution remains unchanged by the removal of the clause.
- Review in the association procedure: Consumer associations can have a court clarify whether an amendment to the terms and conditions was valid. This protects policyholders from being bound by invalid terms only in appearance.
The insurer may no longer rely on the disputed clauses insofar as it has incorporated them into existing contracts by way of an adjustment to the terms and conditions.
Is your insurer citing new terms and conditions from an adjustment notification? Have it checked whether these are actually binding on you.
What the ruling means for your sick pay
The ruling does not mean that every income-related reduction in sick pay is inadmissible. The decisive factor is the basis on which the reduction was made. The following points should be examined:
- Original contract: What conditions applied at the time the contract was concluded? Did the contract already contain the old reduction clause?
- Subsequent change notifications: Were the terms and conditions subsequently changed by an adjustment notification?
- Basis for the reduction: On which clause does the insurer base the reduction?
- Time of the reduction: When was the daily sickness allowance reduced and by how much?
- Agreed new regulation: Has the insured person expressly agreed to a change in the contract?
If the reduction was based on an invalidly replaced clause, you may be entitled to previously unpaid sick pay. An adjusted premium may also need to be reviewed. Further information can be found on our website. Lawyer for daily sickness allowance insurance.
Potential claims for additional payments are subject to a statute of limitations. Don't wait too long to review them.
Does the ruling also affect other insurers?
The ruling is directed against the defendant insurer and the clauses it uses. Following the 2016 decision, other health insurers have also revised their terms and conditions regarding the reduction of daily sickness benefits. The standards established by the Federal Court of Justice for replacing clauses under Section 164 of the German Insurance Contract Act (VVG) apply generally.
Whether a reduction in your insurance premium is contestable depends on how and on what basis the terms and conditions were changed. Reviewing your policy documents and all notifications of changes will provide clarity. You can find guidance on interpreting insurance terms and conditions on our page about... Contract interpretation and breaches of duty.
Even if your insurer was not a party to the proceedings, a review may be worthwhile. Have your policy documents ready.
Here's what to do if your sick pay is reduced.
First, gather all contract documents: the insurance policy, the terms and conditions in effect at the time of signing, and all subsequent notifications of changes. Also, submit the letter in which the insurer announced or implemented the reduction.
Check whether you have expressly agreed to any contract amendment. A unilateral notification of adjustment is different from an agreed-upon contract amendment. Note when and by how much you are receiving less sick pay.
These documents will help clarify whether the reduction was valid and what amounts, if any, can be reclaimed. You can also find information on how to proceed in case of a dispute with the insurer on our page about... Claims denied by insurers.
Your sick pay has been reduced and you don't know why? Have it checked now.
Rogert & Ulbrich – Your lawyers in insurance law
Rogert & Ulbrich represents policyholders nationwide against private health insurers and daily sickness allowance insurers. The firm is managed by Dr. Marco Rogert and Tobias Ulbrich and has already handled over 40,000 cases. Insurance law We regularly review the effectiveness of insurance terms and conditions and adjustments to those terms.
We will review your contract, all notifications of changes, and the specific basis for the reduction. Out of court, we will pursue back payments and the restoration of the agreed daily rate against the insurer. If necessary, we will also represent you in court.
Has your insurer reduced your daily sickness allowance due to decreased income? Get in touch and secure your claims. Does he/she always demand new documents? Get in touch and secure your claims.
