The Federal Court of Justice (BGH, ruling of 10.03.2016, file no. I ZR 147/14) once again wrote into the insurance brokers’ logbook how comprehensive their advice must be. The usual questionnaires, including any data retrieval via the Internet, are insufficient. If, in the event of a claim, the insurer (BoD) does not pay or pays too little, for example because of gaps in coverage, there are now even better prospects that the intermediary (i.e. broker or agent) and his liability insurer will be held liable.
FinTech’s in insurance sales are thus experiencing a defeat – personal advice is strengthened, including various brokerage duties before and after contract mediation. This was also the case with the decision of the OLG Stuttgart (ruling of 30.03.2011, ref. 3 U 192/10) in the case of underinsurance. The broker thus becomes the reinsurer of his clients.
Are broker associations silent on the brokerage obligations?
In 2016, the Federal Court of Justice (BGH) again wrote into the register of insurance brokers by means of various rulings which professional obligations must be fulfilled. At the same time, handicraft instructions for “consulting processes” are still being advertised on the Internet using standard questionnaires, as the “yellow of the egg” to this day.
Not only since the decision of the Federal Court of Justice (BGH) of 10.03.2016 have such standard questionnaires based on the motto “what would you like to have insured?” proved to be worthless waste if the customer was not given detailed advice on what he should in fact insure. To do so, however, the broker would first have to fulfil the cardinal obligations of risk assessment and property inspection, as the BGH has been offering for decades (BGH Sachwalter judgement, already from 1985): “On his own initiative”, says the BGH.
Some fully qualified lawyers who act as advisors to “pool and advisory process portals”, for example, risk personal liability that is not regularly covered by the VSH. This is because misguided brokers could get the idea that they could get a recourse there. The broker as an expert on liability should know that advisory boards are usually not insured.
1st liability hammer for the broker
The BGH writes in the first guiding principle
“The obligations of the insurance broker to provide information and advice include above all the questions as to which risks the policyholder should insure, how the most effective cover can be achieved, with which risk carrier the cover can be taken out and at what premium level which risk cover is available.
An insurance broker does not fulfil these obligations merely by pointing out to the policyholder, without examination and discussion in the specific case, any gaps in an existing insurance policy and the economic risks caused by them and by recommending insurance cover against all risks”.
The ruling is compulsory reading for every insurance broker, even if his associations are silent on the matter.
This leads insurers to a conflict of objectives: their own questionnaires prove to be a liability trap for brokers – their use means full broker liability for them as users. However, if the broker develops his own questionnaires, these are not questions of the insurer, so that the customer may serve the insurer with untruth with impunity (OLG Hamm, judgement of 03.11.2010, Az. I-20 U 38/10).
Instead of inexpensive marketing via portals for consulting processes, sales directors would have to provide proper training for brokers. In any case, the broker must determine the “concrete need” himself – a questionnaire is often incomplete or obstructive. The result of the broker’s work means the preparation of a needs-based “risk analysis”, as can be read in the more recent ruling of the Federal Court of Justice.
2nd liability hammer for the broker
The Federal Supreme Court says:
“If the insurance broker has comprehensively fulfilled his duties of examination and advice and the policyholder decides against the appropriate and appropriate course of action proposed to him, the insurance broker cannot be held responsible for insufficient insurance cover of the policyholder. In this case, the insurance broker is not obliged to repeat his recommendation and to advise the policyholder again against his declared will.”
The BGH thus writes into the broker’s log book that he must not only advise but also check himself which risks are to be insured. The ideas of wise guys and some previously highly praised professors that this could be solved through Internet chats are proving to be proof of their own excessive demands. Neither can one as a broker, by clairvoyance, without training with certificate and glass ball, guess the risk of the customer, nor can one give advice on this, let alone explain this later to a court “as advice from a distance” credibly. Including the customer’s reaction to indications as to what he should insure “appropriately and in accordance with his interests”. Professors with such ideas can unfortunately only be overwhelmed.
On the basis of online chats and questionnaires, it is hardly possible to make a sufficient recommendation as to what to insure. This means that the broker cannot even fulfil his secondary burden of presentation, namely the answer to the question of whether he can have fully examined, advised and recommended something. And then there are two further hurdles: How does the broker want to prove that the customer must have understood him correctly – and is there any documentation so that the burden of proof is not reversed in the end, at the expense of the broker? In the event of a claim, the own VSH then assigns the broker the task of defending himself at his own expense on account of such knowledgable errors.
The Federal Court of Justice on this:
“If, on the other hand, the policyholder has not yet been advised or has not received sufficient advice, the insurance broker may not accept any instructions that are inappropriate and must first ensure that the policyholder is given a basis for a decision that is suitable for an appropriate decision and in accordance with his interests”.
Errors made by the client due to misunderstandings and insufficient or unnoticed information may not be accepted by the broker as his decision. The burden of proof lies with the real estate agent.
3rd liability hammer for the broker
The BGH writes:
“If the policyholder has not yet been advised or has not received sufficient advice, the insurance broker may not accept any instructions that are inappropriate and must ensure that the policyholder is provided with a suitable basis for a decision that is appropriate and in line with his interests. The insurance broker may only refrain from advising an insufficiently informed policyholder if the policyholder clearly states that he/she does not wish to receive further advice.
A waiver by the customer of service components may only be accepted if the customer is informed about its risks and objective needs in this regard. The further waiver of advice means that the broker must retain the advice until the waiver of further advice.
If the reason is the premium level, the broker must examine and advise on alternatives, also with a view to the economic impact. For example, include benefits where the deductible is moderately increased or consider which benefits are more likely to be waived. The mere waiver of advice does not in any case lead to the liability of the broker.
Documentation of the kind “customer wants this” is worthless. After years, the courts still want to understand why the customer wanted “the wrong, incomplete coverage” at all costs. The fact that he wanted them is not enough for the court, because this may have been caused by the broker through insufficient advice. How will the broker ever manage this without training on the difference between protocol and documentation?
4th liability hammer for the broker
The BGH states:
“The insurance broker who has not fulfilled his secondary burden of proof for the fulfilment of his duties of information and advice shall be liable to present and prove his allegation of an instruction of the policyholder which is contrary to the facts and interests of the policyholder and his renunciation of further advice.
If the UN makes a wrong decision on insurance cover, it depends on whether the broker can fulfil his “secondary burden of proof” in the liability process. Not even the timely handover of documentation as required by the VVG is sufficient for this. The broker also needs a record of all conversations – including the secure evidence “to convince the court” that the advice given was comprehensible and understood. Brokers’ associations and specialist professors as well as consulting process portals sponsored by VR are silent on this. Brokers are thus delivered to the knife free of charge and en masse – why actually?
5th liability hammer for the broker
The BGH states:
“If the policyholder has waived more comprehensive insurance cover and further advice from the insurance broker, the latter is not obliged to draw attention to the risks involved again if the situation remains unchanged.
Advice from the estate agent does not need to be particularly intensive or particularly emphatic – this also applies to lawyers and tax consultants.
But: since documentation is a duty to enable the client to carefully examine all the reasons and recommendations before taking out the insurance, it depends on the content of the documentation, and the timely delivery.
Any waiver of consulting services must be based on an undoubted will of the customer, which must also be documented and recorded – both are necessary (in terms of time until then)!
But even then the broker is not free to do anything, such as not checking the risk. It may not be clear to the customer that the broker understands the waiver of advice in such a way that he now simply takes any decision of the customer that is not relevant as a guideline. For example, if you catch someone still on their wrist on the precipice, who says “Don’t press my wrist so hard, it hurts”. And when asked “Would you like some advice on this?” and then after the answer “No”, you simply let go.
For example, someone who had said “I do not want any life-prolonging measures” should not do without the vital blood transfusion, but simply consider the declaration of intent to be ineffective. Just as the board of a broker association asked at the beginning of a general meeting “Do you know what Kukident for the third teeth and an insurance broker have in common? – after a pause, then the answer: “Both are equally liable!”
6th liability hammer for the broker
The BGH still states in the reasons for the ruling
“The main business of the insurance broker is the brokerage and conclusion of insurance contracts. It is true that it has not yet ended with the conclusion of the contract, as it also includes the actuarial management of the contracts and therefore continues to exist as a continuing obligation (BGH, ruling of 5 April 1967 – Ib ZR 56/65, VersR 1967, 686). For example, the broker is obliged to give advice on the risk-appropriate adjustment of the insurance contract brokered (Reimer in Ebenroth/Boujong/Joost/Strohn, HGB, 3rd ed., § 98 marginal no. 34).
Within the scope of the ongoing management of the insurance relationship, the insurance broker must therefore monitor the insured risk, inform the policyholder of any changes in the risk without being asked to do so and work towards an adjustment. Overall, the insurance broker is obliged to provide the policyholder with ongoing and permanent support. He must immediately and without being asked check whether the existing contract still meets the needs of the customer. He must take account of any changes in the insured risk by providing appropriate advice (OLG Düsseldorf, VersR 2000, 54).
Do brokers who want to fulfil such obligations need an additional qualification as a clairvoyant?
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.experten.de (published on 13.12.2016)
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Über den Autor
Dr. Johannes Fiala ist seit mehr als 25 Jahren als Jurist und Rechtsanwalt mit eigener Kanzlei in München tätig. Er beschäftigt sich unter anderem intensiv mit den Themen Immobilienwirtschaft, Finanzrecht sowie Steuer- und Versicherungsrecht. Die zahlreichen Stationen seines beruflichen Werdegangs ermöglichen es ihm, für seine Mandanten ganzheitlich beratend und im Streitfall juristisch tätig zu werden.
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