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

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 person) 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, a considerable liability potential may arise for him – the policyholder, on the other hand, jeopardises his insurance cover. Then the insurance broker and his liability insurance effectively become the reinsurer of the customer, regardless of whether it ends up costing the broker his entire assets and, after the withdrawal of his licence, his entire existence.

No withdrawal by the VR in the case of the broker’s catalogue of questions or instruction in the GPC

Poorly organised insurers leave it to the insurance broker to design 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 determines whether the BoD can be challenged

According to § 123 para. 2 sentence 1 of the German Civil Code, a declaration of intent requiring receipt can only be challenged if the opponent of the challenge 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 always has a right of rescission if the broker himself has been deceptive. It is therefore understandable that insurers would prefer not to see the broker as a neutral third party, which, according to OLG Hamm, he usually is – it is 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 cooperatives” and lack a clear positioning in the camp of the policyholder, which can be demonstrated by the activity profile, become third parties who are no longer in the camp of the customer under avoidance law  despite the brokerage agreement. This is a disadvantage for the policyholder because it can make it more difficult for the VR to contest the contract 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. Some insurers, however, 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 possibly also named as “advisors” in the insurance policy. A broker will seldom object to this, nor to having to share at least the service commission with the agent. In contrast to the broker’s power of attorney, the broker’s contract, in which the broker may have committed himself to the contracting party to provide ongoing “support” of some kind, is of no concern. And a broker who is in the camp of the insured person cannot commit himself to the insurer to provide ongoing advice to his client to the extent required by law of the insurer.