Intermediary Law in Practice – “Under what circumstances is a VSH insurer obligated to perform?”

In the case of pecuniary loss liability (VSH), a policyholder (VN) is obliged to report an impending loss already. The insurer (VR) must then take action and examine the case. Within a few weeks (acceleration requirement), the BoD must decide at its own dutiful discretion whether to reject unfounded claims or to provide compensation for justified claims.

Ultimately, the VR is obliged to indemnify the policyholder from claims in one way or another.

For a claim to be made, it is sufficient that the injured party believes that he has claims which he is pursuing or will pursue. Sufficient is, for example, the extrajudicial demand for payment, the demand for acknowledgement, or a notice of dispute. Any claim ground within the scope of protection of the VSH is sufficient. The VR then checks in particular whether and in what form its cover is given in terms of time and place, or whether cover is excluded, for example, due to intent on the part of the policyholder. For this purpose, the policyholder is first of all obliged to provide him with all the necessary information about the facts truthfully, if he does not want to jeopardise his insurance cover for this reason alone.

The obligation to provide legal protection (defence cover) or the alternative principal obligation to indemnify the policyholder against liability claims (settlement cover) are principal obligations of equal rank for the VR. Whether the injured party’s claim had merit is irrelevant to whether any of these coverages are owed. The VR may also, if it believes the liability claim to be well-founded, tactically opt for defensive coverage first instead of settlement. In addition, there are the cases of defence coverage, where liability is beyond question, but the amount of damage is wholly or partially in question.

If the VR does not react, or does not react dutifully, the policyholder will have to call in a lawyer himself. On the one hand, this is a matter of defending against liability, but it is also a matter of suing one’s own VSH insurer for a declaratory judgment before the policyholder’s claims against the insurer become time-barred after up to three years. It has already happened that the BoD did not react at all to a notification of damage and the initial complaints. Some financial services providers had insured loan brokerage and life insurance brokerage under the VSH terms and conditions – yet the VSH denied coverage for loan-financed immediate annuity models. In many cases, this threatens the insolvency of the insured party.

Problematic are either non-existent or incomplete VSH covers, in areas without statutory VSH compulsory cover. This applies, for example, to so-called liability umbrellas, pools, supplementary cover via framework agreements and agents. In particular, those affected later discover that there was no VSH cover at all, or that it was not designed to suit the activity or the products. Checking this off in good times would have been safer then.

by Dr. Johannes Fiala

by courtesy of

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About the author

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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