Borrower Insurance Never Taken Out: The Bank Must Reimburse the Premiums and Compensate the Loss of Chance (CA Bordeaux, 23 April 2026, No. 23/05253)

Bordeaux Court of Appeal (cour d’appel), First Civil Chamber, 23 April 2026, No. RG 23/05253

What exactly is the bank blamed for in this case?

The story begins with a most classic banking transaction. In March 2008, a borrower took out two home loans with Crédit Lyonnais: a main loan of €176,800 at a fixed rate of 4.85% repayable in 300 instalments, and a supplementary interest-free loan of €13,200 over 96 instalments. A few weeks earlier, on 28 January 2008, she had signed an application to join “LCL group contract No. 500”, an insurance policy covering the risks of death, disability, total and irreversible loss of autonomy and incapacity for work, offered by the bank and taken out by her with, in particular, the company AXA France Vie.

Everything seems in order. Better still: from April 2008, the bank regularly collected, together with the loan instalments, a monthly insurance premium of €39.78. For the borrower, the message is clear: she is insured, she pays for it, and she will be able to count on this cover the day misfortune strikes.

Misfortune did strike. In February 2015, the borrower, placed on sick leave for a high-risk pregnancy, asked for her instalments to be covered by the insurance. Her request went unanswered. She repeated her request in December 2016 for a second period of sick leave, linked to the same cause. Still nothing. She then formally demanded, by registered letter of 26 January 2017, that the bank provide her with the general and special conditions of her insurance policy and suspend the direct debits. A further reminder by registered letter followed in July 2019.

The truth finally emerged in October 2019: the brokerage firm in charge of handling claims informed the borrower that no file existed in her name. In other words, despite eight years of direct debits, she had never been insured. AXA would confirm that it had never opened any file concerning her. The application to join signed in 2008 had quite simply never been forwarded to the insurer by the bank.

The Bordeaux Court of First Instance (tribunal judiciaire), by a judgment of 10 October 2023, had already recognised the bank’s fault. But the sums awarded appeared modest in view of the loss suffered. The borrower therefore appealed to obtain compensation commensurate with what she would have received had she actually been covered. The bank, for its part, contested even the reimbursement of the premiums. It is this appeal that the Bordeaux court decided on 23 April 2026.

Why is the bank liable for the insurance not having been taken out?

The answer lies in a central legal mechanism of home lending: group insurance. When a bank offers its borrower the chance to join an “in-house” insurance policy, it does not merely sell a financial product. It takes on the role of intermediary between the borrower and the insurance company, with the duties that follow.

The court recalls the applicable legal framework. Articles L. 511-1 et seq. of the Insurance Code (code des assurances) lay down the principle that the intermediary must take an active part in the relationship between the insured and the insurer, in particular for forwarding declarations, administering contracts and providing assistance in the event of a claim. It is for the intermediary to pass on information between the insured and the insurer and to keep evidence of these exchanges. Articles L. 112-2 and L. 112-3 of the same code specify that the insurance contract is formed by the meeting of minds and that the insurer must issue a policy or an insurance certificate.

The court stresses a decisive point: it is for the bank, acting as intermediary, to make sure the contract is regularised. It is under an obligation to ensure the regularity of the borrower’s membership agreed when the loan was obtained. Its role is therefore not limited to having a form signed: it extends to verifying that the application to join has actually resulted in effective cover.

In this case, the borrower had signed, on the day the loan offer was signed, an application for admission to LCL group contract No. 500, stating that she “requested to join the contract”. The bank did receive this application and collected the premium of €39.78 from April 2008 until November 2016. But it produces no proof that the application to join was forwarded to AXA, which confirmed that it had never opened a file. The bank, which owed the obligation to forward in the framework of a group insurance system, does not show that it discharged this obligation. Its liability is engaged by this wrongful conduct.

Who bears the burden of proving that the application to join was forwarded?

This is arguably the most operational lesson of the ruling. The court states unambiguously that the burden of proving that the documents necessary to take out the policy were forwarded lies with the bank, and not with the borrower. This rule changes everything in practice.

In concrete terms, the borrower does not have to prove a negative: it would be impossible for her to show that the bank sent nothing to the insurer. The reverse applies: it is for the bank, an intermediation professional and the sole holder of the file’s administrative records, to produce the trace of the transmission. Without this proof, the breach is established. In this case, AXA’s confirmation that no file had been opened seals the demonstration.

Must the bank reimburse the premiums collected without any counterpart?

The bank sought to keep the premiums it had collected, arguing that a reimbursement would deprive “the insurance cover of its counterpart”. The argument backfires. Precisely, there was no cover at all: no insurance contract was ever taken out with the group insurer, because of the bank’s failing in neither forwarding the application nor verifying that the contract was put in place.

The court draws the logical consequence: the bank could not collect these sums, which AXA in any event never received in order to cover a risk that had not been underwritten. The €4,432.45 collected between April 2008 and November 2016 therefore constitute a payment not due, the return of which is ordered. The judgment is upheld on this point.

This reimbursement is a separate entitlement from compensation for losses. It must be clearly understood: recovering premiums wrongly paid merely resets the counter to zero. It does not compensate for the loss of the cover itself, that is what the insurance would have paid out had it worked. That is the whole point of the second part of the ruling.

How is the loss of chance of having been insured compensated?

The borrower was not claiming only the reimbursement of her premiums. She claimed the equivalent of what she would have received had the insurance worked: repayment of her loan instalments during her sick leave for a high-risk pregnancy. But since the contract never existed, it cannot be said with certainty that she would have been compensated. The law deals with this uncertainty through the concept of loss of chance (perte de chance).

The court relies on solid case law, recalling that loss of chance is most often relied on in cases of breach of a pre-contractual duty to inform (Civ. 1re, 21 November 2006, No. 05-15.674), and taking up the recent formula of the Plenary Assembly (Assemblée plénière) according to which “recognition of a loss of chance makes it possible to compensate part of the entire damage, determined in proportion to the chance lost” (Cass., Ass. plén., 25 June 2025, Nos. 22-21.812 and 22-21.146). The loss compensated, although distinct from the entire damage, remains dependent on it.

Can the bank rely on the exclusions in the insurance policy?

This is where the bank played its last card, and this is where it loses the game. To reduce the compensation, the bank argued that the loss of chance should be calculated taking into account the exclusions and excesses provided for by group policy No. 500: exclusion of the statutory maternity leave period, a 90-day excess of continuous sick leave, and so on. By applying these limitations, the compensation melted away like snow in the sun.

The court categorically refuses this reasoning, for a reason of pure legal common sense: restrictive clauses of a contract that was never formed cannot be enforced. Several findings combine. First, Article 1103 of the Civil Code (code civil) recalls that only lawfully formed contracts have the force of law between the parties. Here, no contract was formed. Next, under Article 1119 of the Civil Code, general conditions can be enforced against a party only if they were brought to its attention and it accepted them.

The court notes that insurance notice No. 500 relied on by the bank is neither signed nor initialled by the borrower. What is more, the application to join that she had signed bore an unambiguous statement: “in the event of acceptance of the Normalis proposal that will be sent to me, only the notice attached to that proposal will constitute the general conditions of my insurance contract”. In other words, the definitive conditions were to appear in a future proposal, which never came. The bank therefore does not demonstrate that it was policy No. 500 that would have applied to the contract the borrower would have taken out.

The court adds a useful reminder on the evidential value of clauses acknowledging receipt of documents: the borrower’s signature of a form or offer containing a clause by which she acknowledges having received the notice constitutes only a mere indication, which the party relying on it must corroborate with additional evidence (Civ. 1re, 8 April 2021, No. 19-20.890). A ticked box is not enough to make exclusions of cover enforceable.

The consequence is heavy for the bank: the loss of chance must be assessed without applying the limitations and excesses of policy No. 500, which it has not been shown would have applied. The calculation is therefore made on the basis of “full” cover.

Why is the loss of chance assessed at 99%?

The loss of chance rate reflects the probability that the favourable possibility would have materialised. The first-instance judge had adopted 95%. The court raises the cursor to 99%, in view of the high probability that the borrower would have been compensated for her period of pregnancy and high-risk pregnancy. This near-maximal rate sends a clear signal: where the bank’s failing is patent and nothing seriously suggests that the cover would have been refused, compensation must approach full reparation.

In concrete terms, for the first pregnancy, the court adopts 7 monthly instalments, applying neither the 90-day excess nor the limitation to the high-risk pregnancy period alone. The calculation arrives at the sum of €7,474, corresponding to 99% of the chance of receiving compensation over the whole period, that is, according to the breakdown given in the ruling, [(7 × 941 + 7 × 137.5) × 0.99]. The sum of €7,474 therefore replaces the €2,049.15 initially awarded by the court: the judgment is overturned on this point, to the borrower’s advantage.

Why is the second pregnancy not compensated?

The ruling is not a blank cheque, and that is what makes it a balanced and solid decision. The court rejects the claim for compensation in respect of the second pregnancy, declared on 11 December 2016. The reason is chronological: the borrower had terminated her loan agreement, and consequently the insurance, on 24 December 2016, followed by early repayment of the loan in January 2017. At those dates, no loan instalment was running any more. There was therefore nothing left to cover: compensation for the second period of sick leave would not have been possible. The judgment is upheld on this point.

The court incidentally dismisses the argument that the bank’s fault was the origin of the decision to terminate the loan. While the termination request did come after the bank informed the borrower of the absence of cover, she produces no letter in which she gave this fact as the reason for her termination. The court also observes that she could have asked the bank to put right its error, either by repeating the application to the insurer or by taking out cover elsewhere while keeping the initial terms of the loan, rather than terminating and refinancing on financially less advantageous terms. The period covered by the loss of chance therefore stops at the date the loan agreement was terminated.

Can non-material loss be compensated as well?

Yes, and the ruling significantly increases it. Beyond the financial loss, the borrower lived through years of agonising uncertainty. The court notes the “stalling replies” given by the bank between February 2015 and October 2019, when it finally acknowledged the absence of a file in the borrower’s name. For more than four years, she remained in the dark about her legal position, not knowing whether or not she was covered, even as she was going through sick leave linked to her pregnancy.

In view of the anxiety caused by this prolonged uncertainty, the court raises the non-material loss from €1,000, the amount adopted by the court below, to €3,500. The judgment is overturned in this respect. This sum is added to the reimbursement of the premiums (€4,432.45) and the compensation for the loss of chance (€7,474), to which a further €1,500 is added in respect of irrecoverable costs, the bank being ordered to pay the costs as the losing party.

What to remember if you are faced with a defective borrower insurance policy

This decision goes well beyond the particular case. It sketches a valuable framework for all borrowers who discover, sometimes years later, that their group insurance never actually covered them. The scenario is more frequent than one might think: membership signed at the branch, premiums collected without interruption, and when the claim arises, the insurer answers that no contract exists.

The first useful reflex is to keep and demand the evidence. The statement “I have received the notice” ticked on a form is not enough to make the exclusions enforceable: the bank must corroborate this acknowledgement with concrete evidence. Conversely, the borrower can demand production of proof that her application to join was forwarded to the insurer, proof that was missing here. Bank statements showing the regular collection of premiums are a solid foothold: they establish that you paid for cover.

The second lesson concerns the allocation of the burden of proof. The borrower does not have to demonstrate the bank’s failure; it is for the institution, a professional intermediary, to prove that it correctly forwarded and formalised the membership. This asymmetry works in the customer’s favour, provided it is put forward before the judge.

The third point is strategic. The ruling clearly distinguishes two heads of reparation that must not be confused: the reimbursement of premiums (a payment not due, automatic where no cover existed) and compensation for the loss of chance (a fraction of the benefit that the insurance would have paid). Claiming one without the other amounts to leaving money on the table. Likewise, non-material loss linked to anguish and years of waiting constitutes a separate head of claim, which can be substantial where the uncertainty has been prolonged.

A word of caution, finally, on timing. The decision recalls, through its unfavourable part on the second pregnancy, that early termination of the loan closes the compensation window: one cannot claim cover for instalments that are no longer running. Before terminating or refinancing a loan in a hurry, it is therefore better to explore ways of regularising the situation and to document in writing the reasons for any decision. In terms of bank liability, it is also a reminder that the institution’s obligations do not end at signature: they continue in the diligent follow-up of the file, and failure to meet them gives rise to a right to compensation.

A Decision That Holds the Bank Accountable to the End

The Bordeaux Court of Appeal ruling of 23 April 2026 recalls sharply that a bank distributing group insurance is not a mere counter: it is an intermediary bound to forward the application to join, to ensure that the contract is actually formed, and to prove that it has done so. When it fails in this mission, it can neither keep the premiums collected nor take refuge behind the exclusions of a policy that never existed. The borrower recovers her premiums, obtains near-full compensation for the cover lost and redress for her non-material loss.

For all those who discover they are uninsured after years of direct debits, this decision marks out a clear litigation path. If you are in this situation (insurance never taken out, claim not paid, file not found at the insurer), a banking law lawyer can analyse your statements and your correspondence, identify the institution’s failings and quantify all your losses. The firm LE BOT Avocat assists borrowers in these steps, from formal notice through to legal action.

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