If victims of a flood catastrophe have no natural hazard insurance, they may under certain circumstances be able to hold their insurance intermediary liable.
Both brokers and agents are required to identify coverage risks, advise on them accordingly and document this without gaps. Missing documentation
can put intermediaries in serious difficulty, because it reverses the burden of proof. This is pointed out by attorney Johannes Fiala and actuary
Peter A. Schramm in a guest contribution.
Up to 99 per cent of all buildings, even in flood zones, would have been insurable.
Yet only around 45 per cent of buildings are actually insured against natural hazards such as heavy rain, flooding or even earthquakes.
In this regard the insurance intermediary is subject to comprehensive advisory obligations.
Where no natural hazard insurance was arranged, but perhaps other customary insurance cover for a building was
(e.g. liability, storm, fire, hail, legal expenses or water-pipe insurance), every judge will ask whether the insurance client
was correctly advised by the intermediary before deciding against natural hazard cover.
Questionnaires along the lines of „Which little piggy would you like, then?“, including those on the internet, cannot replace
qualified, complete advice (BGH (Federal Court of Justice), judgment of 10.03.2016, Az. I ZR 147/14). One variant of the questionnaire problem, with consequent intermediary liability, would be underinsurance.
Intermediary liability: despite the client’s wish not to spend much money on insurance cover
The client’s thriftiness is not in itself a reason to rule out natural hazard insurance. Rather, the
intermediary must look for alternatives – for example by offering a correspondingly higher excess on all building-insurance components to
reduce the premium – savings could even alternatively be made on motor insurance and the like instead.
Anyone who failed to take out available natural hazard insurance must even reckon with state aid being cut by half as a result – this too is a recoverable loss.
Insurance brokers must also offer coverage concepts and foreign insurers
The businesses of many insurance brokers are so small that they do not obtain a direct connection for cooperation with all insurers.
They then fall back on what are proverbially insurance wholesale markets, in particular so-called pools and purchasing cooperatives. However, these in turn
also offer only a limited range of insurers or tariffs. Some brokers also shy away, for instance, from offering cheaper insurers from abroad.
The broker must point out this then-limited advisory basis from the outset – pursuant to § 60 (2) of the Versicherungsvertragsgesetz (VVG, German Insurance Contract Act),
precisely stating his limited market basis. Perhaps more suitable and/or cheaper insurance cover would have been available elsewhere,
for the absence of which the broker is therefore now liable. Would the poorly insured client, after prior disclosure, often have sought advice elsewhere?
Even where insurability is lacking, the intermediary or broker may be liable
If no natural hazard insurance could have been arranged at all, the incorrect advice does not in itself give rise to a loss in respect of the
missing insurance benefit, because even with correct advice the client could not have insured the risk anywhere. However, the
broker’s client could still derive his loss from the fact that – had the broker pointed out this gap, uninsurable because of the excessive risk –
he would no longer have invested anything in his property or would have sold it in order to acquire a new one on safe land.
Disclosure and advice by the broker include the question of what should be insured and how
When advising, it is sufficient neither to point out gaps in the existing contract, nor to recommend insuring all risks.
Rather, the insurance broker must inspect the object to be insured himself – the internet and questionnaires cannot replace an on-site inspection.
In general, the broker may not accept inappropriate instructions from the client where the latter may not have understood him correctly or,
for lack of sufficient advice, does not yet possess an adequate basis for a decision. Even for a (further-reaching) waiver of
(possibly partial) advice, the average insurance client needs a qualified basis for the decision – otherwise the broker
accepts inappropriate conduct, and is thereby likewise liable in principle.
A one-off consultation is also not sufficient, because the insurance broker must keep an eye on the insured object and, when changes occur,
work towards risk-appropriate adjustments (BGH, judgment of 5 April 1967 – Ib ZR 56/65, VersR 1967, 686). Advice must also be given on insurability that newly
arises later. It goes without saying that converting, say, a former compulsory natural hazard insurance into a
building insurance without such protection will give rise to liability.
Many intermediaries are personally liable for insurance gaps
Time and again clients discover that their „adviser“ in insurance matters had never thoroughly studied the small print – that is, the
policy terms and conditions. Legal subtleties arise when, after a flood, the insurer claims, for instance, that only heavy rain
was insured – and announces that it will provide no benefit without a prior lawsuit. How is an insurance client, as a layperson, supposed to grasp legally the
difference between, say, heavy rain, flood and inundation or backflow, even conceptually, without advice?
The insurance intermediary’s obligation to provide legal advice
Anyone who believes themselves to have been harmed – for instance because the state failed to issue a timely storm warning, or because operators failed to release water in
retention basins or dams – will learn that state liability usually presupposes that no one else is liable.
Up to 85 per cent 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 per cent of insurance intermediaries (brokers and agents)
had not handed the client any advisory documentation before his decision.
The purpose of this obligation under the so-called EU Insurance Mediation Directive (in force since 21.05.2007) is to enable the client, before
concluding the insurance, to examine all the reasons and recommendations closely before his decision. It is therefore of no use if such documents are supplied
afterwards – rather, what matters is the content of the documentation and its timely handover.
Brokers hold corresponding professional liability insurance for such advisory errors. For agents, the insurer they represent is regularly co-liable,
which under the VVG is itself subject to an own advisory obligation pursuant to § 6 VVG even where a need for advice – for instance because of the absence of natural hazard insurance – is recognisable.
The Federal Court of Justice rules all the way to reversal of the burden of proof
The documentation is later the best evidence of the advisory gap, that is, of incorrect advice and intermediary liability, where it is – as is often the case – formulaic, boilerplate
and meaningless. If the documentation is missing entirely, or the intermediary cannot prove timely handover to the insurance client, this leads
all the way to reversal of the burden of proof (BGH, judgment of 13.11.2014, Az. III ZR 544/13).
The omitted documentation is then not yet proof – it merely means that the policyholder need only specifically allege the particular incorrect advice, and the broker/agent then bears the burden of proving that he advised correctly. For which it is sufficient neither that he offered the natural hazard insurance, nor that he urgently recommended it. Rather, he must have drastically illustrated the consequences of its absence and genuinely examined and explained every possibility of somehow making it available.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
with the kind permission of
www.handwerker-magazin.de (published on 10.08.2021 under the heading: Elementarschaden und keine Versicherung: Wann der Makler haftet)
Link: www.www.handwerk-magazin.de/elementarschaden-wann-der-makler-haftet/150/19816/415042
and
www.nfh-online.de (published on 12.08.2021 under the heading: Fehlende Elementarschadenversicherung)
Link: www.nfh-online.de/2929-fehlende-elementarschadenversicherung
and
www.versicherungsbote.de (published on 16.08.2021 under the heading: Elementarschäden: Wann Geschädigte sich bei Versicherungsmaklern und Agenturen schadlos halten können)
and
www.experten.de (published on 19.08.2021 under the heading: Starkregen und Flutschäden: Schadenersatz bei fehlender Elementarschadenversicherung)
Link: www.experten.de/2021/08/19/schadenersatz-bei-fehlender-elementarschadenversicherung/
and
www.submissions.de (published in Submissions Anzeiger No. 166 of 27.08.2021, pages 20-21 under the heading: Starkregen und Flutschäden: Schadenersatz bei fehlender Elementarschadenversicherung)
and
www.dzw.de (published in Die ZahnarztWoche 41/21, page 26 under the heading: Schadenersatz bei fehlender Elementarschadenversicherung)
and
www.channelpartner.de (Published on 05.11.2021)
Link: www.channelpartner.de/a/schadenersatz-bei-fehlender-elementarschadenversicherung,3339792
and
www.network-karriere.com (published in issue 7.2024, pages 28-29)
