New ruling: Insurance broker is generally not in the camp of the policyholder

Liability risks of the broker vis-à-vis the policyholder and the insurer due to unclear positioning
A new judgement of the OLG Hamm (Ref.: I-20 U 38/10, dated 03.11.2010) proves: Insurance brokers often assume unseen that they are (exclusively) in the camp of the policyholder (insured party) and are not neutral “third parties”. The OLG, on the other hand, regards him as a third party, unless he clearly indicates otherwise. Insurers (VR) also often prefer to see the insurance broker as a neutral third party who is also supposed to protect their interests. This leads to some misunderstandings.

Legal positioning determines the rights of the insurer

Ultimately, the broker must explicitly decide where he wants to stand and make this clear. If he somehow appears without thinking about it (perhaps because he thinks that it is clear to the broker anyway how he is to be seen legally), he risks to be seen later (judicially) differently than it corresponded to his conception by coincidences of his appearance. Because of the legal consequences that may be attached to this, which he will of course not have considered,  he may be exposed to considerable liability – the policyholder, on the other hand, jeopardises his insurance cover. Then the insurance broker and his liability insurance effectively become the customer’s reinsurer, regardless of whether it ends up costing the broker his entire assets and, after withdrawal of the licence, his entire existence.

No withdrawal by the VR in the case of a questionnaire from the broker or instruction in the GPCs

Poorly organised insurers leave it to the insurance broker to draft questionnaires on the risk object, without any initiative on the part of the VR and without contributing to their content. However, questionnaires or inspection reports of the broker as part of an invitation to tender do not automatically become questions of the insurer within the meaning of § 19 VVG. Thus however their wrong answer remains consequenceless, as the OLG Hamm judged now. 
The same applies to industrial insurers who hide the information on the consequences of a breach of the duty of disclosure in the small print instead of clearly highlighting this information in connection with the actual application questions. Then the reference is neither comprehensive, nor unambiguous and unambiguous, and thus ineffective, so that also therefore a wrong answer of application questions remains without consequences, as the OLG Hamm   states.

Position of the broker decides on the possibility of contesting the BoD

According to § 123 para. 2 sentence 1 of the German Civil Code (BGB), a declaration of intent requiring receipt can only be contested if the party opposing the contestation knew or should have known of the deception, provided that the deceiver is a third party. However, third parties are only those who are not “in the same camp”, i.e. those who are not involved in the transaction, e.g. an insurance broker if he acts unrestrictedly and neutrally for both sides of the transaction (e.g. the dual broker). Such a constellation may exist, for example, if the broker is linked to the insurer via a framework agreement and at the same time cooperates with the policyholder via a brokerage agreement, but without being strongly involved in this. If, however, the insurance contract is concluded by way of a tender, the broker is no longer an uninvolved party, i.e. no longer acts as a neutral intermediary for both parties. This means that the broker is no longer a third party within the meaning of § 123 BGB, so that the insurer has no right of rescission, even if the broker himself has been deceptive. It is therefore understandable that insurers would prefer to see the broker as a neutral third party, which, according to the OLG Hamm, he usually is – making it all the more important that he positions himself clearly and unambiguously.

Good brokers – bad brokers?

All those brokers who allow themselves to be linked to certain insurers, either directly or indirectly, via framework agreements, pools or “purchasing syndicates” and who   lack a clear positioning in the camp of the policyholder, as evidenced by the activity profile, become third parties who are no longer in the camp of the customer under avoidance law, despite the brokerage contract. This is a disadvantage for the policyholder, because it can facilitate the challenge of the VR in the event of deception in relevant cases.
Probably only a broker who has already had the opportunity to learn the rules of the game expensively in the course of a trial knows these subtleties.

Duty of the insurer or broker to give advice?

A similar legal error is the ill-considered assumption that insurance brokers are also obliged to look after contracts after they have been concluded. Only the proverbial look into the law book could show the broker that such an alleged obligation originates from the wishful thinking of the insurers – and cannot be found anywhere in the legal text. 
However, some insurers have recognised that they are also obliged to provide advice on an ongoing basis for contracts brokered by brokers, and provide this advice through their agents, who are then also named as “advisors” in the insurance policy if possible. A broker will hardly be able to defend himself against this, nor will he be able to defend himself against having to share with the agent at least the vision of care.  In contrast to the broker’s power of attorney, the broker’s contract, in which the agent may have committed himself to the insured person to provide ongoing “support” of some kind, is of no concern. And a broker standing in the camp of the insured person cannot commit himself to the insurer to give his client the proper advice to the extent the insurer is obliged to by law.
Dr. Johannes Fiala, Dipl.-Math. Peter A. Schramm

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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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