Lawyer Trustee Faces Staged Lawsuit From Client

An Austrian lawyer acting as a trustee has been sued by a client in a staged claim proceeding, with the court determining that professional liability insurance does not cover fulfillment claims arising from alleged breaches of trust duties, according to a recent ruling by the Austrian Supreme Court (Oberster Gerichtshof, OGH).

The case, which originated from a dispute over the handling of trust funds, centered on whether the lawyer’s professional liability insurance policy was obligated to provide coverage for claims seeking performance of contractual duties rather than compensation for financial loss. The OGH ruled that such fulfillment claims—where the client demands that the lawyer carry out specific obligations under the trust agreement—are excluded from standard professional indemnity coverage under Austrian insurance law.

The court emphasized that liability insurance for lawyers is designed to cover damages resulting from unlawful acts, such as negligence or misconduct leading to financial harm, not to enforce the performance of contractual obligations. When a client seeks to compel a lawyer to fulfill specific duties—such as transferring trust assets or providing accountings—the claim is considered contractual in nature and falls outside the scope of typical Berufshaftpflichtversicherung (professional liability insurance) policies.

This distinction has significant implications for legal practitioners and their insurers. The OGH clarified that while claims for compensation due to mishandled trust funds—classified as Vermögensschaden (financial loss)—may be covered, demands for actual performance, such as the return of specific assets or the completion of administrative acts, are not. The ruling reinforces a growing trend in Austrian jurisprudence that limits insurance coverage to compensatory claims and excludes declaratory or performance-oriented actions.

The decision stems from a multi-stage lawsuit (Stufenklage), a procedural mechanism in Austrian civil law allowing claimants to first seek a declaration of rights, then performance, and finally damages if performance is not met. In this instance, the client initially sought a declaration that the lawyer had breached trust obligations, followed by a claim for fulfillment of those duties. The OGH’s ruling on the insurance coverage question arose during the proceedings, specifically addressing whether the insurer was obliged to defend or indemnify the lawyer against the fulfillment claim.

Legal experts note that the judgment aligns with prior OGH precedents affirming that Berufshaftpflichtversicherung policies are not intended to function as guarantees of contractual performance. Instead, they operate on a fault-based model, requiring proof of culpable behavior triggering liability. The court rejected arguments that the insurer should cover defense costs even for non-compensatory claims, stating that the absence of a covered damage claim negates the insurer’s duty to act.

The ruling has prompted concern among legal professionals who rely on such insurance to manage risk in fiduciary roles. Trust administration—particularly in estate planning, real estate transactions, and corporate structuring—often involves lawyers acting as trustees, making them vulnerable to claims that blend contractual and tortious elements. The OGH’s clarification may lead to increased scrutiny of policy wording and potentially higher premiums or more restrictive coverage terms for lawyers engaged in trust work.

Industry observers suggest that the decision could influence how insurers draft future policies, possibly leading to explicit exclusions for Stufenklage proceedings or performance-based claims. Some recommend that lawyers engaged in trustee activities consider supplemental legal expenses insurance or negotiate broader coverage riders, though such additions may come at increased cost and remain subject to underwriting approval.

As of the ruling’s publication in April 2026, the decision is considered binding precedent in Austrian civil and insurance law. It underscores the importance of distinguishing between types of legal claims when assessing insurance exposure and highlights the limits of standard professional liability coverage in fiduciary contexts. Lawyers and their insurers are advised to review existing policies in light of this jurisprudence to avoid unexpected gaps in protection.