For lawyers, the assumption that a client’s legal expenses insurance (Rechtsschutzversicherung) will cover all costs is a dangerous gamble. A recent ruling by the German Federal Court of Justice (BGH) clarifies that when a client discloses the existence of such insurance, the attorney must assume the client only wants work performed to the extent that costs—excluding any deductible—are fully covered by the insurer.
This decision underscores a critical duty of disclosure and warning, particularly in mass litigation. Failure to adhere to these standards can leave a lawyer unable to collect their fees, even if the work was performed in good faith.
The Core Conflict: Insurance Coverage and Attorney Mandates
The dispute centered on a case tied to the “Diesel scandal” mass litigation. A client mandated a lawyer to pursue claims against a vehicle manufacturer in 2020. While the lawyer requested coverage from the client’s legal expenses insurance, they simultaneously initiated out-of-court actions against the manufacturer before receiving a confirmation of coverage.
When the insurance provider eventually denied coverage for certain activities due to a lack of prospects of success and statutes of limitation, the lawyer sought to recover the unpaid fees directly from the client. While a lower court initially sided with the lawyer, the BGH overturned this, ruling that the lawyer had breached their duty to inform the client of the cost risks.
Understanding the “Dolo Agit” Defense
The BGH applied the legal principle of dolo agit, qui petit, quod statim redditurus est (he acts deceitfully who demands that which he must immediately return). Under § 242 of the German Civil Code (BGB), this means a creditor’s claim is unenforceable if the debtor has a counter-claim of the same amount that would effectively cancel it out.
In this instance, the client had a claim for damages against the lawyer for violating professional disclosure and warning obligations. Because the client’s claim for damages equaled the lawyer’s claim for fees, the lawyer’s demand was blocked by the dolo agit defense. Essentially, the lawyer could not collect fees for work the client never explicitly agreed to pay for out-of-pocket.
The Diesel Litigation Precedent: Why Power of Attorney Isn’t Enough
The ruling provides a stern warning for those handling mass litigation. The court established that in “Diesel-style” mass proceedings, a general power of attorney (Vollmacht) does not exempt a lawyer from their duty to disclose costs.
Lawyers must explicitly inform clients about any measures that generate costs when coverage from the insurer is unclear. To proceed, the lawyer must obtain the client’s express consent for these specific expenses. Without this targeted disclosure, the lawyer assumes the financial risk of any work that the insurer later refuses to cover.
Key Takeaways for Legal Professionals
- Assume Coverage Limits: If a client has insurance, assume they only want work that is 100% covered (minus the deductible).
- Explicit Consent is Mandatory: In mass litigation, a general power of attorney is insufficient for cost-generating activities. You must obtain specific consent if insurance coverage is uncertain.
- The Risk of Dolo Agit: Breach of disclosure duties creates a damages claim for the client, which can be used to legally block your right to collect fees under § 242 BGB.
- Fee Caps: Note that in Diesel mass proceedings, a business fee (Geschäftsgebühr) is typically limited to 1.3.
Frequently Asked Questions
Does the insurer’s final decision on coverage matter for the lawyer’s fee claim?
No. The BGH ruled that the internal relationship between the lawyer and the client is the deciding factor. If the lawyer failed to warn the client and obtain consent, they cannot claim the fees regardless of whether the insurer eventually pays or denies the claim.
What happens if a lawyer proceeds without a coverage confirmation?
If the lawyer proceeds without confirming coverage and without the client’s explicit consent to pay out-of-pocket, they risk the client invoking the dolo agit defense, rendering the fee claim unenforceable.
Why is mass litigation treated differently?
Due to the scale and nature of mass proceedings, the court requires a higher standard of transparency to ensure clients are not blindsided by significant legal costs in cases where they believed insurance would be the sole payer.
Final Analysis
This ruling reinforces the shift toward greater consumer protection in legal services. For the modern practitioner, the lesson is clear: transparency is not just a professional courtesy—it is a financial necessity. Relying on a general mandate is no longer a viable strategy when insurance is involved; explicit, written consent for cost-generating actions is the only way to secure a claim to fees.