Compensation from the intermediary after change of cover or change of insurer

The Federal Court of Justice (BGH, ruling of 26 August 2018, file no. I ZR 274/16) expects the plaintiff, who feels that he has suffered damage after the re-coverage of life insurance policies, to present facts from which the probability of damage can be deduced for a declaratory action.


An action for a declaratory judgment is usually admissible and necessary because the statute of limitations regularly expires after three years, but the foreseeable damage, if any, cannot yet be quantified more precisely.


Duty of brokers to calculate and advise on settlements

The BGH considers advice to be in breach of duty if a financial service provider does not provide the customer with a comparative analysis or comparative calculation – with regard to profitability or profitability – or at least refers to the possibility of obtaining such advice from an expert.


No conclusive partial claim for payment in the absence of an expert opinion

The plaintiff and his lawyer had failed to present a conclusive presentation to the court for the (allegedly already occurred) damage. Such a presentation is hardly possible without the involvement of a private expert, for example, when it comes to a change in the tax burden to achieve further tax savings. The latter is actually already a pre-litigation duty of the plaintiff in his own interest. No conclusive action for payment can be brought without an explanation as to why a certain partial loss has already been incurred with certainty; this includes a complete financial comparison between the situation before and after the rescheduling, so that the minimum loss – in addition to a request for a declaratory judgment – is sufficiently explained.


No temporal classification of the difference in assets is required for declaratory action

Sufficient are tangible concrete indications of a loss, such as, for example, in the case of a Rürup pension, the personal nature of the insurance benefit, which is scarcely inheritable – or, for example, the reference to various tax disadvantages when paid out in old age. The decisive factor here is the demonstration of a predominant probability of such future damage.


Risk of re-coverage also in property insurance or other personal insurance

Of course, it would be an option for the policyholder (UN) to have the broker’s advice immediately checked by an expert, in order to immediately issue a revocation or a challenge and, alternatively, a termination.


The re-covering of health insurances proves to be just as error-prone in practice. The apparently favourable premium can become higher than that of the original contract within a few years – and this with lower insurance benefits. Some comparisons fail to recognise, by adding the deductible to the difference in contributions, that only the contribution but not the deductible is largely tax deductible.


A dutiful comparative analysis, before and after taxes, for the payment and payout phases is also necessary in the case of company pension schemes, pension scheme entitlements or those of the German Pension Insurance Federation (DRV).


Lack of advice on alternative courses of action – instead of termination and new contract

When it comes to the topic of re-covering life insurance policies, the documentation provided by the intermediaries rarely mentions the alternatives of reducing premiums, extending the term of the policy, applying for an exemption from contributions, or perhaps arranging the payment of a pension early. For example, in the case of existing illnesses, it will hardly be possible to decide without a medical expert whether it would be better to keep individual tariff components of your private health insurance in addition to switching to statutory health insurance.


Covering in the PKV – also possible as a simple tariff change?

In its judgement of 18 May 2018, the Munich I Regional Court (LG München I) prohibited an insurance consultant (VB) from agreeing to a fee for his legal services (RDG) of tariff change consulting as a contingency fee in accordance with § 204 VVG. The LG Heidelberg (file no. 11 O 18/17) in turn allowed an insurance broker structure sales department to provide advice on bills of exchange in return for a flat-rate fee due upon successful exchange.

Nevertheless, VB has always been allowed to advise on tariff changes – since 2018 this has included a change in tariffs, i.e. mediation; however, not with commission or performance-related remuneration.

If a broker violates the RDG, if he carries out tariff change consulting, his customers do not owe him any remuneration – because the remuneration agreement would be void, § 134 BGB.

But perhaps the insurer owes a brokerage fee if the premium increases due to a change of tariff. In particular, § 34 d GewO does not yet allow the broker to provide advice to non-business people in return for separate, non-performance-related remuneration.


Despite incorrect advice from the broker, the action for a declaratory judgment may become inadmissible

If an error of advice is established, but the plaintiff is unable to conclusively present a damage as probably resulting from it and at least to prove this, he will still lose the action for a declaratory judgment.

In numerous court cases, although brokers had undoubtedly made a mistake in their advice, some of them, with expert assistance, succeeded in successfully attacking the plaintiff’s statements on future damage as false or inconclusive, or even in conclusively demonstrating themselves that damage is also unlikely in the future. Some plaintiffs even withdrew their claim on the advice of the judge, others had their action for a declaratory judgment dismissed, in life/pension and health insurance.

Therefore, even for the action for a declaratory judgment, it is not sufficient to prove fault for consulting, but it must also be presented in a costly manner for future damages.


The later the action against the intermediary is brought, the more costly it becomes

Up to more than 90% of customers who have been wrongly advised already fail to pay the costs for an assessment and legal support by a private expert – after all, a standard legal expenses insurance does not cover such financial expenses.

Of the rest of the customers, another 30% fail because they simply do not provide sufficient evidence to establish a claim.

There are also numerous “buyers of legal claims” who have “gone swimming” in their lawsuits after revocation or because of damages – for example because the necessary official permits for their business model were lacking. Or perhaps because the plaintiff had run out of money for the expert support of the proceedings on the way; and then no meaningful presentation to the court took place – with the consequence that the action was dismissed. Some “buyers” were already collecting original files, and were sitting on their hands until the statute of limitations came into force. So the suspicion may be far away that a “deal” with the other side has been made in the background?


Rearrangement and mediation by tax advisors

Clients may be in a particular hurry if the tax advisor had arranged ship investments or container leasing models, for example. Even though the commission may have been paid into an account of the wife, such commercial activity is forbidden to this profession – and therefore not insured under any circumstances. Whoever then takes his time as a client, in the end only watches how the law firm is run – after withdrawal of the license. Perhaps a criminal conviction as well as a divorce is still imminent – with complete loss of assets from the former advisor. Then the first-come, first-served principle applies: Whoever comes first grinds first – the later plaintiffs usually go away empty-handed. For some customers the capital investment results in over-indebtedness due to tonnage tax or income tax for profits on paper despite a snowball system; in the case of credit financing or leverage transactions even combined with a proverbial turbocharger in the direction of one subsequent insolvency.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of (published on 17.09.2018)



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Dr. Johannes Fiala Dr. Johannes Fiala

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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