Acquisition commission – Portfolio commission in the event of termination by the insurer
The case: Insurance broker M looked after his client until the broker’s contract was terminated. Since then, he has not received any brokerage fees from the insurer – and lost his lawsuit before the Federal Court of Justice (BGH) in a ruling dated 13.01.2005.
Commission and brokerage:
The intermediary community is divided into two groups. On the one hand, the (multiple) agent, § 84 HGB. The latter receives a commission for mediation and support as a vicarious agent of the insurer. On the other hand, there is the insurance broker, § 93 HGB. He receives an initial fee for the conclusion of the contract, i.e. the brokerage. In subsequent years, a subsequent fee may arise. This is usually a fee consisting of an agency fee (for the initial contract and/or the non-termination of the existing contract) and a management fee (for administration and portfolio maintenance). According to the prevailing view among (genuine) insurance brokers and according to well-known commentators, initial and subsequent fees are a single claim. Both result from the successful mediation of the insurance contract (the conclusion). The BGH now restricts this. However, doubts might be appropriate, because the BGH apparently uses the words “commission” and “brokerage” in its decision without differentiating exactly. Conceptually, a commission only exists with the agent. The insurance broker receives a brokerage fee, even if this is paid out in one go (as is sometimes the case with life and health insurance). Presumably, another insurance broker will soon file a lawsuit against his insurer – it will then be crucial to work out the terminology and special features of the brokerage profession in a way that is comprehensible to the court. In the case decided by the BGH, an expert had not been able to establish a commercial practice at first instance, a shortcoming that continued into the final instance. Thus, a repair of this individual case decision would be possible. Well done to the broker who has the experience to successfully “dissect” an expert report, because the plaintiff broker (or his lawyers?) could not show “reasons to doubt the correctness of the expert’s findings”. Sale and inheritability of the agency: The agent knows that his insurer(s) have the last word – an agency contract can be terminated at any time. This can be particularly bitter for heirs, as often the deceased agent’s holdings are passed on to someone else, ending the windfall from the holdings. For the insurance broker this was different until now: Most brokers relied on the fact that nobody could take away the follow-up commission from the insurance broker – and also from his heirs (through the back door, for example). Principle: In its judgements of 27.11.1985 and 13.06.1990 the BGH had clarified that for the subsequent fee it is sufficient if the insurance broker was involved in the cause. It is sufficient that the agent has a (tacit or indirect) mandate to also bring about the subsequent contracts (in the case of the agent, this is referred to as a “non-termination commission”). Contract interpretation and broker coverage: It is the interpretation of the contract that matters, the BGH now says: Especially if the customer gives notice to the broker – and then another broker takes over, or – as here – an agent of the insurer. If you are a broker and want to secure your subsequent fee, you have two options: 1. there is a need for clear agreements that can hardly be interpreted in any other way (contract dissolution by individual agreements). 2) Alternatively, the broker can file a lawsuit and hope that an expert will determine a commercial practice that is favorable to him – because there are weighty voices in the broker community on this. Doubtful findings on commercial practice: The expert was able to establish that in the case of multi-year insurance contracts in the property insurance sector, the brokerage fee is to be apportioned for the remaining term – the previous/old insurance broker therefore does not go away empty-handed. However, if there is a one-year term with a renewal clause – and this is likely to affect the vast majority of contracts – the broker loses his full entitlement on the next renewal date of the insurance contract; until then he retains his remuneration in full. Consequential error of the BGH? The BGH correctly recognizes that two components are economically included in the follow-up fee – a (further) remuneration for the (original) mediation and a remuneration for the support of the policyholder. The BGH then concludes that in the case of one-year contracts with a renewal option, in the property insurance sector the broker loses his brokerage follow-up fee completely from the time of termination; in doing so, the BGH relies on an allegedly unascertainable commercial custom of a follow-up fee: the BGH means in a sweeping manner “as soon as the broker no longer provides his service, however, his claim” to his follow-up fee is generally forfeited. If, however, one assumes in law that the insurance broker is entitled to a uniform brokerage fee, there is no need for a commercial practice. After all, the support effort may be omitted if the contracting party gives notice to the broker: then the principle “no work, no pay” always applies. However, this decision is unlikely to stand up before the Constitutional Court – because the follow-up brokerage fee would be “expropriated”, as it were, by the BGH: The BGH justifies this with the fact that “the mediation of the conclusion of the contract by the broker with advancing time steps as soon into the background”. In the case of a uniform claim to brokerage fees, this would be a violation of the laws of reasoning and therefore also constitutionally challengeable. The BGH further argues that the follow-up fee is a remuneration for the maintenance of the insurance contract by the broker, a “non-termination commission”: The flaw in this argumentation already lies in the fact that brokers do not receive “commissions”. The decision also makes clear how great the need for efficient lobbying is for many an association that has taken up the cause of brokerage law. But whether they want to do so is questionable. For sure, the insurer does not have to pay a double follow-up fee when changing brokers. If associations take the view that the broker taking over the business is not or only partially entitled to the subsequent fee, the latter will be at a disadvantage. If a brokers’ association is not in a position to take a clear position here and to represent it, then brokers should not be surprised if their own professional interests are not adequately represented in other respects either. The fact that this weakness of the brokers is then also exploited by insurers to their advantage is only one consequence to be expected.
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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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