*by Dr. Johannes Fiala, Lawyer (Munich), Mediator (Univ.), MBA Financial Services (Univ.Wales), MM (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Lecturer in Civil Law (Univ. of Cooperative Education), Banker (www.fiala.de)
“There is known knowledge. These are things we know we know. There is known ignorance. That is, there are things we know we don’t know. But there is also unknown unknowing. These are things we don’t know we don’t know.” (Donald Rumsfeld)
Consultancy risks in the case of insurance against loss of working capacity:
For insurance brokers, advising on and arranging insurance for loss of working capacity is one of the tasks with particularly high liability. Offering coverage by line of insurance, rather than by product, protects the intermediary from liability for a gap in the offer and failure to advise. For here the intermediary is threatened with liability, so that he would have to pay “the uninsured annuity” to the customer himself later as compensation for damages.
Every third incapacity case in court?
This also includes the case that, for example, the occupational disability (BU) insurance does not (yet) pay – but the daily sickness allowance insurance does not (no longer) pay. Especially when two insurers are involved, the risk of a de facto coverage gap is considerable. This is, as it were, a “total loss and plaintiff risk” of the policyholder. The possibility of selling legal expenses insurance (with another company!) does not completely eliminate these risks.
The daily sickness allowance insurance is not obliged to pay benefits in the event of occupational disability:
However, the reverse may also be true. The daily sickness allowance (DI) insurance already provides benefits, and the occupational disability benefits of another insurer are added later. In this case, the OLG Karlruhe (Case No. 12 U 89/06) awarded the KT insurer a contractual claim for repayment in accordance with § 15 I a of the standard terms and conditions (MB/KT 94) in its judgment of 6 July 2006. According to the case law of the Federal Court of Justice (BGH), a plea of deprivation pursuant to § 818 III of the German Civil Code (BGB) by the insured party is excluded. This is because the contractual claim for restitution pursuant to § 11 MB/KT completely displaces the right of unjust enrichment, §§ 812 et seq. BGB. This is intended to prevent “multiple coverage” (via KT and BU) through the additional receipt of “benefits from an insurance relationship of a private or social law nature”: The decisive factor is not the existence of a BU, but the simple receipt of a BU pension, even if only “for a limited period” or “as a gesture of goodwill” on the part of the BU insurer or “without recognition of a legal obligation”.
Risks in the settlement of claims:
The insurance broker may handle claims, i.e. like a lawyer he may only represent the insured person out of court vis-à-vis the insurer. However, there are numerous pitfalls, and mistakes in the advice given when taking out the insurance can also come to light.
The entitlement to KT payments ends when the pension is drawn:
– The existence of a BU or reduction in earning capacity with a certain percentage is not important. – The simple payment of an occupational disability benefit, even as a goodwill gesture or temporary occupational disability benefit, is sufficient to render the KT entitlement void. This also applies if it is only a “fictitious” BU case. – The amount of the occupational disability benefit is irrelevant. If this is below the KT payment, this may also reveal an advisory error on the part of the intermediary. Typically, the intermediary overlooked the fact that such insurance benefits are also taxable. – If, as is often the case in practice, the pension from a private contract or from the social insurer is only granted retroactively after months, the obligation to pay benefits (at the latest three months after the pension is granted) of the KT insurer also ends. Such delays alone, with the resulting income gaps of the insured person, represent a typical consulting error, which can also be found in many a financial plan.
Unlawful MB/KT: Therefore no automatic KT contract end:
If an occupational disability benefit is payable, the entry age and the risk in the person of the insured person have changed. It would be unreasonably disadvantageous to him if the KT insurance contract were to end automatically, as the Federal Court of Justice (BGH) stated in two judgments as early as 1992, § 307 I, II No.2 BGB. The only exceptions are the end of a KT contract due to the drawing of an old-age pension or the reaching of the contractual age limit (e.g. 65th birthday). Just as a previous BU case is only to be regarded as “temporary”, the case of moving abroad will not lead to the automatic end of the KT contract. By way of supplementary interpretation of the contract, the KT insurer (in the BU case) is thus released from the obligation to pay benefits (only temporarily), §§ 133, 157 BGB. A (final) termination of the contract would run counter to the social protection purpose of the KT insurance.
Training liability of distributors / insurers: gap in advice when moving abroad
If you want to spend your retirement in Brazil, for example, you will find that “your” statutory health insurance (GKV) simply deregisters you as soon as you no longer reside in the country. If there is a residence in Germany, the worldwide income of “the emigrant” is permanently subject to German tax law, §§ 8 AO, 1 EStG. Many insured persons in private health insurance (PKV) suffer a similar fate, as only a few tariffs permit a permanent cessation of residence in Germany. As a result, not only the entitlement to KT benefits is then regularly (“temporarily”) lost, but also to the other claims contractually agreed with the insurer. Here, too, a not insignificant liability case may lie dormant for the broker. Insofar as training courses on the MB/KT were incomplete – i.e. incorrect – in this case, the intermediary will attempt to take recourse against the insurer or sales department that provided the training in the event of liability.
Liability trap due to option of expectancy insurance:
The option of a qualifying insurance offers the insured person the option of receiving further KT benefits for himself in the event of renewed incapacity for work. The conversion into a temporarily dormant contract has the advantage that the original age of entry into the tariff is retained and no further health check takes place. The catch is that the KT contract can end “automatically” if the insured person does not exercise his right to choose a qualifying insurance within – as a rule – two months. This is because this option in the KT tariff represents an appropriate balance of interests (which adequately protects the policyholder) according to the BGH ruling from 1992. If the BU is only determined later (retroactively), this period may have elapsed! If a BU is later recognised as non-existent, the insured person has lost his KT benefits if he has already exercised his right to choose a prospective insurance!
Either litigation risk or use of legal terms:
The risk of litigation for the policyholder lies in the fact that he would then first have to assert in court that the limitation of the right to choose a qualifying insurance would also be an “unreasonable disadvantage”. The court would then, for example, have to allow the period to begin by supplementary interpretation of the contract only when the policyholder has certain knowledge as to whether a BU case exists. However, the policyholder can also link the application for a conversion of the KT insurance into a qualifying insurance with a legal condition, § 158 BGB: A suitable condition would be that the application is made in the event of occupational disability. The same problem arises in the event that the BU case later ceases to exist. This can lead to the revival of the contractual KT benefit claims. In any case, it would be safer to notify the insurer, combined with an application for KT benefits, because the insurer is exempt from paying benefits during the qualifying phase. Here, too, the use of legal conditions can help the UN. Whether the risk “of a notification omitted due to ignorance or through no fault of the policyholder” has to be borne by the policyholder has yet to be decided by the higher court.
Intermediary strategy for disengagement:
As a sales manager once said so well “Insurances are products for people who need it – but usually cannot afford it comprehensively enough”. From the intermediary’s point of view, it may make sense to present and offer the client not only KT and BU, but also business interruption or run-off insurance, as well as dread disease and accident insurance cover. The customer must then decide (after verifiable clarification!) what he can afford and wants. In order to find gaps in one’s own advice or documentation, a glance at the file is usually enough: this can be reason enough to “pick up the money that is lying in the street” – you just have to bend down a little, even if it is to reach for the file, and then to the telephone for an appointment with the customer. Finally, this would be a fine alternative, rather than hopefully believing that gaps in documentation and/or advice can be safely sat out. Status: 14.11.2006
(experten report 9 4/2007, 2)
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About the author
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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