Borrower’s insurance is an essential component of any mortgage loan, offering protection to both the borrower and the bank in the event of hardships such as death or disability. However, reading the coverage conditions, particularly those relating to disability, can prove to be a genuine challenge for the average consumer. This is precisely what the Cour de cassation highlighted in a recent case involving an insured party and the company Generali Vie.
Cass. 2e civ., 7 mai 2025, n° 23-14.896, Publié au bulletin
The Heart of the Issue: The Definition of Total Permanent Disability (IPT)
In a borrower’s insurance contract, the “Total Permanent Disability” (IPT) coverage is crucial. It is intended to take over your loan repayments if an illness or accident renders you unable to engage in any gainful professional activity.
However, the way in which this disability is defined and assessed by insurers is often a source of litigation. In the case in question, the borrower’s insurance contract defined IPT as a “total permanent reduction rendering the insured unfit for any activity providing income or profit.” So far, this seems clear.
Where the complexity arises is in the rest of the clause: the disability rate had to be “greater than or equal to 66%” and determined by a medical assessment using the functional and occupational permanent disability rates set out in a table incorporated into the contract.
Why Was This Clause Found to Be Obscure and Incomprehensible?
The Grenoble Court of Appeal (CA Grenoble, 1re ch., 13 déc. 2022, n° 22/02173) had initially found that, despite a certain complexity, this clause presented “no difficulty of understanding” if one followed the definitional method. It had even ruled that the cross-reference table was “indispensable” and “ensured a clear and precise understanding for the insured,” and did not have “any unfair character.”
The Cour de cassation radically overturned this position. It held that the total permanent disability coverage clause was not sufficiently clear and comprehensible for an average consumer. Here are the main reasons:
- Absence of clear definitions: The clause contained “no definition” of the two types of disability mentioned (functional permanent and occupational).
- Lack of explanation of the calculation: It provided “no information enabling the calculation of the disability rate to be understood when these disabilities are not assessed in multiples of ten.”
Consequently, the Cour de cassation held that the clause “does not contain sufficient information to enable an average consumer, normally informed and reasonably attentive and perceptive, to understand the calculation of the disability rate determining the granting of the annuity.”
The Principle of Unfair Terms and Article L. 132-1 of the Consumer Code
This decision is based on Article L. 132-1 of the Consumer Code (in its version applicable at the time of the case, prior to the law of 4 August 2008). This provision states that terms which create a “significant imbalance” between the rights and obligations of the parties, to the detriment of the consumer, are unfair and deemed unwritten.
An important nuance: The assessment of unfairness does not apply to terms that define the main subject matter of the contract, provided that they are drafted in plain and comprehensible language. In this case, the disability clause did relate to the main subject matter of the contract. It was precisely because it was not clear and comprehensible that it could be subjected to an examination of its unfairness.
It is important to note that, in the same case, the Cour de cassation upheld the rejection of the request to void the exclusion clause concerning cardiac, vascular, and neurological conditions related to diabetes, ruling that this clause was formal and did not require interpretation. This demonstrates the distinction drawn by the courts between a clause that is complex in its definition (the IPT) and an exclusion clause deemed clear in its wording.
What Are the Consequences for You?
The Cour de cassation’s decision partially quashed the judgment of the Grenoble Court of Appeal and referred the case back to the Lyon Court of Appeal. This means that the insured party could succeed on the issue of the unfairness of the IPT clause, which would have significant implications for the coverage of their disability.
For consumers, this decision is an important reminder:
- Be extremely attentive to the clauses defining the coverage in your insurance contracts, particularly regarding disability.
- Do not hesitate to seek clarification if a clause seems complex or ambiguous, especially if it refers to tables or unexplained calculation methods.
- This case law strengthens consumer protection against complex adhesion contracts and reaffirms the requirement of clarity and comprehensibility of essential terms.
If in doubt or in the event of a dispute with your insurer, do not hesitate to consult a lawyer specializing in banking and insurance law. The complexity of these clauses can sometimes conceal significant imbalances, and this Cour de cassation decision is proof of that.
