Borrower's insurance: duty to advise and prescription

Cass.com, January 6, 2021, appeal no. 18-24.954

BNP Paribas grants a loan to an individual, in exchange for two guarantees: membership in borrower's insurance and a guarantee by Crédit Logement.

The borrower, placed on sick leave, requests that the insurer cover the loan payments, but the insurer argues that he has reached the age beyond which the risk of illness is no longer contractually covered.

Due to the unpaid installments, BNP Paribas declares the loan in default and demands the balance of the loan from Crédit Logement, in its capacity as guarantor, which pays and then seeks recourse against the defaulting borrower, who in turn seeks recourse against BNP Paribas, accusing them of having given him bad advice and thus causing him to lose the opportunity to take out borrower's insurance adapted to his personal situation.

Seized with the question of whether the borrower's liability action against BNP Paribas was not time-barred, the Bastia Court of Appeal ruled that the five-year limitation period applicable to the action began to run from the date of obtaining the loan, which is the moment when the insured-borrower was given the information notice containing the insurance conditions of which he complains.

With regard to articles 2224 of the Civil Code and L. 110-4 of the Commercial Code, the Court of Cassation censures this decision on the grounds that the limitation period for the action in liability for failure to advise begins to run from the day on which the insured knew or should have known the facts enabling him to exercise said action, which here corresponds to the day on which the borrower was met with the refusal of guarantee by his insurer due to the age limit provided for in his contract.