Natural hazard damage: When injured parties can seek compensation from insurance brokers and agencies

If flood victims do not have natural hazards insurance, they may be able to hold their insurance agent liable.
Brokers as well as agents have to find coverage risks, advise accordingly and document this completely. A lack of documentation
can put intermediaries in dire straits, because it reverses the burden of proof. This is what attorney Johannes Fiala and actuary
Peter A. Schramm in a guest article.

Up to 99 percent of all buildings, even in flood areas, would have been insurable.
However, only about 45 percent of buildings are actually insured against natural hazards such as heavy rain, flooding or earthquakes.
The insurance intermediary has a comprehensive duty to provide advice.
If no insurance against natural hazards has been arranged, but perhaps other usual insurance cover for a building
(e.g. liability, windstorm, fire, hail, legal expenses, tap water insurance), every judge will ask himself whether the insurance customer
was correctly advised by the intermediary before deciding against a natural hazard insurance policy.
Questionnaires along the lines of “Which pig would you like to have?”, including those on the Internet, can provide qualified, complete advice.
(BGH, judgement of 10.03.2016, ref. I ZR 147/14). A case variant in the questionnaire with the following intermediary liability would be the underinsurance.

Intermediary liability: not spending a lot of money on insurance cover despite customers’ wishes

The customer’s thriftiness is not in itself a reason for ruling out natural hazard insurance. Rather, the
broker to look for alternatives – for example, by setting a correspondingly higher deductible for all building insurance modules.
Premium reduction is offered – even with car insurance, etc., could alternatively be saved instead.

Anyone who had not taken out a possible natural hazard insurance policy must even reckon with state aid being reduced by half as a result – this is also a claimable loss.


Insurance brokers must also offer coverage concepts and foreign insurers

The operations of many insurance brokers are so small that they do not receive a direct link to work with all insurers.
Then they turn to proverbial insurance wholesale markets, especially so-called pools and purchasing cooperatives. However, these then have
also only offer a limited range of insurers or tariffs. Some brokers also shy away from offering cheaper insurers from abroad, for example.

The broker must point out this then limited basis for advice from the outset – in accordance with the provisions of the law. § 60 para. 2 Insurance Contract Act (VVG) under
precise mention of its limited market base. Perhaps there would have been more suitable and/or cheaper insurance cover elsewhere,
for the lack of which, therefore, the broker is now liable. The poorly insured client would often have gone elsewhere for advice after prior education?


Even in the absence of insurability, the intermediary or insurance broker may be liable

If no insurance against natural hazards could have been procured at all, the incorrect advice itself does not give rise to a loss on account of the
lack of insurance cover because the customer could not have insured the risk anywhere, even with correct advice. However, the
broker’s customer also derives his damage from the fact that – if the broker draws his attention to this uninsurable because of the excessive risk
gap – would not have invested anything more in his property or would have sold it in order to acquire a new one on a secure plot of land.


Clarification and advice from brokers covers what should be insured and how

Neither is it sufficient to point out loopholes in the existing contract when advice is given. The advice to insure all risks is still sufficient.
Rather, the insurance broker must inspect the property to be insured himself – the Internet and questionnaires cannot replace an inspection.

In general, the broker must not accept any improper instructions from the client, if the client has perhaps not understood him correctly or if he has not understood the instructions correctly.
does not yet have an adequate basis for decision-making due to a lack of sufficient consultation. Also for the (more extensive) waiver of a
(possibly partial) advice, the average insurance customer needs a qualified basis on which to make a decision – otherwise the broker
accepts unlawful conduct; and thus is liable on the merits as well.

Even a one-time consultation is not enough, because the insurance broker has to keep an eye on the insurance object, and in case of changes
to work towards risk-appropriate adjustments (BGH, judgement of 5 April 1967 – Ib ZR 56/65, VersR 1967, 686). Also about a later newly added
Insurability is to be advised. It goes without saying that a change of cover, for example from a previous compulsory natural hazard insurance policy to a
Building insurance without such coverage will result in liability.


Many agents are personally liable for insurance gaps

Customers repeatedly find that their “advisor” in insurance matters does not understand the small print, i.e. the insurance terms and conditions.
had never studied in depth. Legal intricacies arise when, after a flood for example, the insurer believes that only heavy rainfall
is insured – and announces that he will not provide any service without first filing a lawsuit. How is a layman insurance customer legally supposed to know the
Difference between perhaps heavy rain, flood and inundation or backwater already grasp conceptually without consultation?


Obligation of the insurance intermediary to provide legal advice

Also who thinks, because of missing early storm warning by the state, or for example omitted draining of water in
If a person feels that he or she has been harmed by the operator of a reservoir or dam, he or she will learn that state liability usually presupposes that no one else is liable.


Up to 85 percent of insurance intermediaries are personally liable for insurance gaps

A former Minister of Justice had a specialist institute determine that, at the time, around 85 percent of insurance intermediaries (brokers and agents)
had not provided the client with advisory documentation prior to the client’s decision.

The purpose of this obligation in accordance with the so-called EU Insurance Mediation Directive (valid since 21.05.2007) is to enable the customer to be informed before the
Conclusion of the insurance to carefully examine all the reasons and recommendations before making his decision. Therefore, it is of no use if such documents are subsequently
The content of the documentation and the timely delivery are decisive.

Brokers have appropriate liability insurance for such errors in advice. For agents, the insurer they represent is regularly jointly liable,
The VVG also stipulates that even if a need for advice is recognisable – for example, due to the absence of insurance against natural hazards – the insurer has its own duty to provide advice in accordance with the VVG. § 6 VVG.


Federal Supreme Court decides up to the reversal of the burden of proof

The documentation is later the best proof of the consulting gap, i.e. incorrect advice and intermediary liability, if, for example, as is often the case with formulary clichés
and meaningless. If the documentation is completely missing, or if the intermediary cannot prove the timely delivery to the insurance customer, this leads to
this up to the reversal of the burden of proof (BGH, judgment of 13.11.2014, ref. no. III ZR 544/13).

So then, the failure to document is not yet proof – it only leads to the policyholder having to specifically allege the particular misadvice in the first instance, and then the broker/agent bears the burden of proving that they gave correct advice. For which it is not enough that he offered the natural hazard insurance, nor that he strongly advised it. Rather, he must have drastically demonstrated the consequences of their absence, and really examined and explained in detail all the possibilities of somehow making them possible.


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


by courtesy of (published on 10.08.2021 under the headline: Natural hazard damage and no insurance: When the broker is liable)


and (published Aug. 12, 2021, under the heading: Lack of Elemental Damage Insurance)


and (published Aug. 16, 2021, under the headline: Natural hazard damage: when injured parties can seek compensation from insurance brokers and agencies)


and (published on 19.08.2021 under the heading: Heavy rain and flood damage: compensation in the absence of natural hazard insurance)


and (published in Submissions Anzeiger No. 166 of 27.08.2021, pages 20-21 under the heading: Heavy rain and flood damage: compensation in the absence of natural hazard insurance)

and (published in Die ZahnarztWoche 41/21, page 26 under the heading: Damages in the absence of insurance against natural hazards)

and (Published 05/11/2021)








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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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