Approval is at stake

Consultation and documentation are expressly waived! Such or similar model forms are intended to make it easier for intermediaries to exploit the legal possibilities. In practice, however, there are some “risks and side effects” associated with this.

In principle, an insurer has two ways of controlling the conduct of its policyholder: n It can specify an exclusion in the terms and conditions, according to which no insurance cover is to exist if certain objective conditions are met. It may define a specific obligation. This is generally understood to mean a requirement of conduct, non-compliance with which entails legal disadvantages. According to the relevance theory of the Federal Court of Justice (BGH), a breach of obligation only leads to exemption from benefits if it is generally suitable to seriously endanger the legitimate interests of the insurer. The insurer must therefore prove firstly that the policyholder has objectively breached an obligation, secondly that he is responsible for this due to intent or negligence, and thirdly that his interests have been causally harmed as a result. At first glance, this looks similar in the case of pecuniary loss liability insurance (VSH). In practice, however, the impact is not insignificant. Occasionally there are attempts by the insurance industry to circumvent the stricter requirements of breach of obligation by formulating a subjective conduct of the policyholder as an “objective” reason for exclusion. In such cases, one speaks of “veiled” obligations.

Documentation as evidence of error

The insurance intermediary’s duty of documentation is governed by section 42 c paragraph 1 and section 42 d VVG. The contents of the consultation, i.e. the fulfilment of the obligations, must then be recorded in documentation. The documentation is no substitute for a structured working method or your own expertise. In case of doubt, the documentation will provide the client with the best evidence of errors, for example, if liability-bearing points are missing or risks requiring clarification have not been documented.

Practice of pecuniary loss liability insurers

An examination of various sets of conditions by the VSH specialist insurance broker Ralf W. Barth (www. rwb-finanz.de) revealed a total of three typical forms of design: n The insurance cover should not relate to liability claims “due to damage caused by knowingly deviating from the law”. The insurance intermediary would therefore have to prove that the policyholder deliberately waived the documentation during his consultation. Examples can be found in the General Conditions of Contract and General Terms and Conditions of Insurers. n “Legal liability claims (…) are excluded in cases (…) – in which the documentation (…) cannot be proven to the insurer by presenting the relevant documents.” Examples: Insurers’ special conditions and additional conditions. n An insurer takes a special path in its “Special Conditions for Financial Service Providers”: “(…) The policyholder must document the advice, in particular about the risks associated with the investment (…) and present it in the event of an insured event. In case of breach of this obligation …”

Risks of not documenting

So, first of all, the intermediary’s risk is that his insurer will not provide him with VSH coverage in the event of a claim if he blindly uses a model form for waiving documentation of advice. Such forms, too, must always be adapted to one’s own coverage concept and personal way of working. This opportunity can also be used to discuss if the intermediary is linked as an agent to his product providers (also in the areas of company pension schemes/time value accounts), but acts as a broker vis-à-vis the customer: whether his own VSH insurer is then even sure to pay? Or is it possible that the approval is then at stake? A further disadvantage is that the intermediary cannot provide any proof of the content, course and scope of his activity in liability proceedings or in an alleged case of damage. This makes it more difficult for one’s own lawyer or the VSH insurer to defend against unfounded claims. This can result in unnecessary settlement payments, and the agent accumulates “negative points from settled prior claims.” As a result, a VSH contract restructuring may be pending – specifically, a termination of the insurer: The agent is then offered that he could get a contract renewal for ten or twenty times the premium amount.

Experience from other professional groups is available

This will then, in fact, often lead to a ban from the profession and a withdrawal of the licence. Experience of this kind has been available for decades from other professional groups with statutory VSH insurance obligations. It is an option for intermediaries to optimise their own liability situation through a bundle of measures. The coordination of one’s own forms (brokerage contract, waiver of consultation, documentation, etc.) with the personal VSH conditions thus becomes an existential task of the present.

Dr. Johannes Fiala is a lawyer and certified financial and investment advisor in Munich.
(published in Versicherungsmagazin 6/2007, 58)

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About the author

Dr. Johannes Fiala
PhD, MBA, MM

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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