Insurance companies must also be liable for errors made by their insurance agents and insurance brokers (intermediaries) * *by Dr. Johannes Fiala, lawyer (Munich), mediator (Univ.), MBA Financial Services (Univ.Wales), MM (Univ.), certified financial and investment advisor (A.F.A.), lecturer in civil and insurance law (BA Heidenheim, Univ. of Cooperative Education), bank clerk (www.fiala.de) and Dipl.-.Math. Peter A. Schramm, expert for actuarial mathematics (Diethardt), actuary DAV, publicly appointed and sworn by the IHK Frankfurt am Main for actuarial mathematics in private health insurance (www.pkvgutachter. de). With judgement of 11.05.2007 (Az. 6 U 191/06) was decided in second instance that an insurance enterprise must replace also then the full damage, if with the customer an underinsurance is present. The damage, i.e. the costs for a new acquisition after a fire damage, amounted to 84,800 Euros – however, only 45,000 Euros (sum insured) were insured. The insurer nevertheless owes full compensation. Frequent underinsurance in practice When it comes to taking out insurance, a qualified analysis should be made at the outset: The property to be insured should be inspected by the agent, and the risk investigated. However, agents are regularly overtaxed with this in practice. If the intermediary is an insurance broker, he is also regularly personally liable to the insurance customer – to an unlimited extent. Nevertheless, full compensation owed by the insurer According to the statutory rule of § 56 VVG, an insurer is only liable on a pro rata basis if there is underinsurance. In addition, however, there is the common law liability of reliance as vicarious liability: This is relevant if, when applying for insurance, incorrect advice is given on the amount of the sum insured or the required clarification is omitted. The court clarified that the fault of the insurer’s employees is not relevant for this common law liability of trust. The court clarified that insurance companies are not only liable for their “insurance agents or insurance brokers” (intermediaries), but also under common law for incorrect advice given by internal employees and other agents. Insurance companies have to take responsibility for their specialists and experts In the case at hand, employees from a specialist department had travelled to the policyholder’s home and recommended an insufficient sum insured. Insurers owe notice of underinsurance In addition, insurance companies owe their customers notice of underinsurance as soon as they become aware of it, based on the principle of good faith. The knowledge of your representatives and assistants must usually also be attributed to you, §§ 166, 278 BGB. Own risk management in employee training Insurers are obliged to carry out their own risk management. A functioning risk management also requires that misunderstandings and mistakes are identified and corrected in time and that all employees who are in contact with customers are trained in such a way that they can actually perform their tasks responsibly. The example of a major bank, which even until recently had a designated risk management specialist as a board member, shows the danger of misunderstandings and faulty training – the results were then such that even deliberate “sabotage” was suspected. Danger of faulty implementation in sales It is precisely in sales that proper customer education can collide with sales objectives. There is a danger that risks are deliberately underestimated – e.g. the required sum insured or other risk factors – so that the premium can be lower than that of competitors. Ultimately, the insurer then bears the full risk even though the premium is too low – losses are then inevitable. And the question could be asked who is responsible for this – after all, the responsibility for the risk management system lies (or lay, as in a recent banking case) with the board of directors. Lack of risk management in the case of promises of care The statement “You will be cared for …” can be found almost formulaically on insurance policies. The reality often shows that a real support does not take place. As a result of the judgement of the Court of Appeal, considerable liability risks can arise for the insurer – e.g. if an insured risk is subsequently increased. A first step for risk management at this point would simply be to omit such a possibly misleading “promise of care” – because the insurer is not obliged to provide care that might then be interpreted in a legally broad way.
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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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