Facts
R. [F.] suffers from internal hydrocephalus and requires a drainage. An operation at Children's Hospital X., during which the drainage system was removed, led to complications and a brain injury resulting in 100% disability. R. [F.] is insured with O. Health and Accident Insurance, which in turn is reinsured with S. R. F.'s father is insured with [D.] legal expenses insurance, whereby the insurance coverage also applies to his minor children.
After O. Health and Accident Insurance had rejected a disability compensation, R. [F.] reported the claim to D. [D.] provided cost coverage for the out-of-court settlement of the civil claims against the Canton of X. and O. The proceedings against Children's Hospital X. were settled out of court, while [S.] as the reinsurer of O. rejected any claim for disability compensation. Thereupon, [D.] rejected the request for cost coverage for a lawsuit against O. (or [S.]).
R. [F.] then sued [D.] at the Cantonal Court of Appenzell Ausserrhoden, requesting a declaratory judgment that [D.] is obliged to cover the costs up to a maximum amount of CHF 220,000 for the enforcement of the claim for disability compensation against O. (or [S.]). The Cantonal Court upheld the claim, which [D.] appealed to the Federal Supreme Court.
Considerations
The Federal Supreme Court first notes that the declaratory action is admissible, as it concerns the clarification of whether the defendant will have to bear future costs. Two questions need to be distinguished: Firstly, whether the insurance contract actually provides for a claim for cost coverage prior to a lawsuit, or whether the insurer is only obliged to bear the costs retrospectively. Secondly, whether the requirements for cost coverage are met in the specific case.
The Federal Supreme Court makes it clear that the term "lack of prospects of success" within the…