On the brutal pedagogy of brokerage contracts, maximum liability sums and VSH reinsurance

(expert-network) Mr. Fiala, brokerage contracts
will be from pools, working groups,
Associations and distributors as a service
offered. From your point of view.
any abnormalities?

(Johannes Fiala) I noticed,
that numerous sample contracts
contradict each other in substance. Spotlight
Research shows that
any text samples from form books
were written off. Always
clauses are to be found again and again, which
years or decades ago by the
Jurisdiction as ineffective
have been designated. An example would be
the clause that “the liability of the
Broker time-barred after 3 years”.
The rule is, unfortunately, that even not
explains which contract, when
can be used safely. Recently
one broker reported that his association
two different brokerage contracts,
from the pen of two law firms
offers: Each firm is to sign the contract
of the other office as faulty
denote. The association may
not judge the matter, and offers after
as before two contracts, of which he
knows that at least one other
Professional lawyer on the “risks and side effects”
pointed out. An
reliable adhesion?

How is that to be understood? We read
again and again in brokerage contracts that
the liability of the insurance broker
is limited to 1.0 million. Is that a

Yes, and I read that VSH brokers have such
Clauses with the words “There are
no BGH ruling on the unification of the
Recommend maximum liability amount”.
From a VSH broker, I would expect,
…that he has read the most popular textbooks…
to his profession: there he would have
that such clauses
are ineffective 99% of the time.
If the VSH broker has the usual
does not know the duties of a broker, and also
does not know whether an intermediary
its risk effective or ineffective
…how could such a
VSH broker then the existing risk
recognise, estimate with the mediator
and properly insured?
Who would have any confidence in that?

How then can a pool proceed that
knows that his contracts are invalid

Well, the first thing I’d do is go to the rework room.
and give me a
seek an independent opinion.
First, I would make such patterns out of
the Internet, because even from
such publications may
a liability. The pool members
I would also inform. The
Replacement of partially ineffective contracts
the pool members will also
Cost money and time: This I would
then carefully document – the
The costs will then probably be paid by the insurer
of the author.

What considerations are reasonable,
if I can limit the liability to
to limit the maximum amount?

Let’s stick with the pool for now.
Sample Contract. The consideration
will be how many times
contract is used, with which
Turnover and with what volume of losses
as a risk typical for the contract
is to be expected. Provided that in this amount then
insurance coverage exists,
liability can also be based on
restrict. However, the preliminary question
which the further conditions for effectiveness
are for the fact that
such an agreement later to a
judicial review actually
can withstand?
If the law firm has only one compulsory insurance policy
in the amount of 250,000 euros results in the following
Invoice: If the pool has 1000
members, and sets each member’s
contract “only” 100 times, this results in
“according to Adam-Riese” a mathematical
pro rata coverage of 2.50 Euro (i.w.:
two-euro-and-fifty-cent). And that
is supposed to be appropriate?
For the VSH insurance broker
things look similarly complicated.
He must investigate the risk and
check. At the same time, the intermediary’s
existing risk easily exceeds the statutory
Exceed minimum mandatory coverage.
Didn’t the VSH broker here
closely examined or his work of persuasion
not performed, he puts
hopefully (via his VSH coverage).
a kind of reinsurance for the
However, erroneous statements are also typical
from intermediaries, like “I do
no mistakes.”, “I’m not liable because
I don’t have a written brokerage agreement
“I’m still liable…
not.”, “My insurance today
also covers the past.”
If only the statutory duty coverage
desired, i.e. the actual
Risk in probably 95% of cases
with the advisor or intermediary does not
is discussable, then the
Question, whether and how the VSH broker
save from future recourse
can. Later on, every mediator
gladly because of a coverage gap to
keep his VSH broker, even if
this by telephone only with difficulty
can be reached.

In what can then further errors of a
VSH broker exist?

So there would be, for example,
that the VSH broker does not
Stationery, doorbell sign, internet presence,
phone book entries, etc.
Some person is referred to as an “employee”
but is in fact after
outside a “partner” (pillion according to the
AHB). This then inevitably leads to
often to underinsurance, and in the
In the event of a claim, the VSH insurer
its benefits under the AHB simply
to a fraction.
Or take the case of the
Multiple agents (according to the content
of sales connections with insurers),
but who calls himself a broker
is designated: Thus, in case of doubt.
exactly no VSH coverage, because a
Insurance for a broker exists –
but not for the sales connections
as an agent. My point is,
that not only the contracts with all
Employees viewed by VSH broker
but also the
with the product providers. If the VSH broker
can’t tell the difference,
because he or his staff cannot do so
the intermediary is, in case of doubt
misinsured. As a result
he can take part or all of the cover,
which, of course, often only happens
will come up.
It certainly makes sense to look at the
Burden of proof for the duties of a custodian
to be aware. Who as VSH broker
the risk situation of the client/intermediary
be unbiased
can or will, is in fact
as reassurance of his wrong or
underinsured customers/intermediaries
on. One way out, for example, would be,
to a separate corporation
to evade, which only
Agent activity. The insurance broker
Hermann Siebenhaar has
once described the situation this way:
“The necessary sum insured
then results “almost” by itself from
the comprehensive risk assessment, as
the risk was recorded individually
(Consultation Protocol). Can an insurance broker
…he shouldn’t have his
I’m going to quit my day job!”

Are there any other important cases where
there is no cover with the intermediary?

The most important point is often the “knowing
Breach of Duty.” Think of
the intermediary, who together with the
customer decides to give the PKV insurer
to conceal a back problem
(pre-contractual duty of disclosure). With this
in the event of a claim, the intermediary owns
no VSH cover, but
is liable only privately and personally. Whether the
PKV insurer the contract later
or for the previous illness that was not disclosed.
simply does not perform, stands
on a completely different sheet – a
economic consideration by the insurer.
Another fine point concerns
the fee-based advisory service: the intermediaries
will certainly be watching closely to see if
the staff of the consumer centres
all an admission at the IHK
possess. The case law will
also deal with whether the fee consultant
overprice a net policy
may, without any reference to the fact that
there may be other cheaper products
on the market – which do not
net tariffs (duty of disclosure).

What important points would there be after
the case law on limitation of liability
…to know?

Since the 50th Jurists’ Congress in 1974
that even merchants are becoming more
or less from “inappropriate
Disadvantages” similarly protected
as consumers or non-merchants:
These include provisions,
which essential contractual rights
or obligations in a way that is compatible with the purpose of the contract
in a dangerous way.
In this area, you can’t
times the liability for simple negligence
in the case of vicarious agents.
This applies accordingly to contractual
principal obligations, as well as for such
Ancillary obligations which, according to the purpose of the contract
of particular importance
are. The 1985 guardianship ruling
sets the direction of travel here. The
In 2006, the BGH ruled that an intermediary clause for
invalidated, according to which a
Intermediaries “only mediate and do not
wanted to advise”. The restriction of
Liability only for slight negligence
fails when it comes to essential
obligations, the fulfilment of which is necessary for the proper
Contract execution
are necessary, and the contractual partner
was allowed to trust in it. This applies
by the way also in commercial traffic,
particularly in the use
of model contracts. Included herein
are also such secondary obligations,
which are foreseeably dangerous
particularly high damage
brings. With the insurance broker leads
its particular expertise and the
Customer’s expectation of trust in the
Ineffectiveness of any exemption from liability,
even in the subset of
Limitation of liability only the
These are examples from a wealth of
BGH rulings, without any claim to completeness.

Can’t I just give the customer
…and ask him to report himself,
if he has a more extensive
VSH protection by the intermediary

This already fails because of the fact that the
Intermediary an expert in risks and
the mastery of which is – at least
with the insurance broker is of it
to be assumed. Often only the intermediary can
cover the risk (of his misadvice),
so insure. For the customer
of an insurance broker
there is usually no separate
Possibility. The only exception would be,
that the “normally feared
Damage” (also the amount !)
through an existing VSH cover
is actually insured, and the customer
the conclusion of an additional
VSH cover particularly recommended
had been; but only if the
Customer the scope of the insurance interest
is the best judge of that:
This is the situation when the customer
“his most prized possession” at the clothes cleaners
and even at the
can best judge the value. At
Broker, however, is exactly the opposite
the case, because he is a specialist for risk assessment
with the customer, and can
to that extent his core duty as trustee
…hardly limit it.
Apart from the possibility of such
points, it must always be ensured that
that a risk typical for this type of contract
is included in the coverage. Also
will be questions on the freedom from benefits,
about the deductible, as well as any
Risk exclusions must be regulated.

Where is the flaw in the thinking of those
Brokers who have accepted their liability towards the
customers simply as a lump sum and thus
limit ineffective to 1.0 million

The minimum compulsory VSH cover follows
customer protection. To keep yourself neat and tidy
to insure is for the normal
intermediaries, on the other hand, only one option, for
the VSH broker involved a
central duty, which cannot be limited
is. The VSH broker must comprehensibly
pre-calculate and document,
how to find the right amount of cover
and the necessary
Maximization determined as recommendation
has. Any intermediary who is
VSH broker should be “looked after”.
this without exception in writing
…and have it given to me. Included herein
are also the questions about excess
and single object covers, as well as
negotiating real improvements
in the terms and conditions (design obligation
of the broker).

Can you illustrate this with the example of a
typically invalid clause?

As a little brain teaser, you can
You estimate why the following
popular and unfortunately only “allegedly” liability-proof
Intermediary contract clause
in case of doubt is ineffective:
“The liability of the broker in the case of
slightly negligent breach of his
contractual obligations on a
Amount of EUR 1 million per claim
limited. … As far as in individual cases the
Risk of greater damage
exists, the customer has the option,
the liability insurance cover
of the broker at his own expense
to a sum insured
increase the risk assumed
Here is the approach to the
Brain teaser: Is the foreseeable
typical risk of the customer is higher, is
the clause is invalid. Not the customer
must recognize the “higher” risk,
but the broker, as an expert and
Property manager. Not the customer “has a
Possibility for adequate VSH insurance”,
but the broker must
the work of persuasion for appropriate
Insurance in the interest of the customer
perform. And the liability for light
Negligence in central duties
of a custodian is to be limited
regularly “null and void” – i.e.
ineffective. All this is not a
“Spawn of legal doom and gloom”,
but for decades common
Jurisprudence: What is astonishing about this
except that apparently “supposed experts”
who are experts in the field of
“Risk and hazard control
on insurance solutions” thereof
don’t (want to) know anything?
For those who may not believe this:
Completely unknown to some experts.
Publishing house VVW (Verlag Versicherungswirtschaft)
has just published its publishing program
Reissued in 2007: Who
is able to read, is located
clearly at an advantage – for decades.

How do you get to be a lawyer,
to deal with such questions?

The many years of professional exchange with
experienced insurance brokers and
“Original” in the market continues to help – no one
comes into the world all-knowing.
A quality management and an active
Risk management complements our
Model contracts always have a
Commonality – they are model contracts!
In individual cases, these must be adapted
be sent, for example, to the
VSH conditions of the intermediary and
his appearance to the outside world on the
Market. The decisive factor is, for example
is that the insurance cover
of the mediator to deal with
the insurance cover of the broker
covers: In individual cases, it can happen,
that the insurance cover of the
intermediary, who in structural sales
of a broker does not apply
as far and as long as also the broker
adheres. And vice versa.
Broker liability does not apply, because the intermediary
have their own insurance cover
(in whatever amount
always). This can result in
of a structure reciprocal fine
recourse issues arise: If an intermediary
insured as an employee of the broker
is, then this still means
not for a long time that the mediator does not
from the broker (e.g. deductible) or
whose VSH insurance (e.g. full
Amount of loss) in the event of a loss in
recourse can be taken.
A blind adoption of model contracts
always leads to liability problems.
The brokerage contract must therefore, as
the consultation protocol and the company form
also, individually created
will be. It’s a good rule
Terms and conditions, the brokerage power of attorney
and the actual brokerage contract
in a separate easy to understand
Form to be separated in each case.

How should an intermediary proceed now?

Well, the first step is to get your
create your own “suitable” contracts
…to let… One of the first questions
to the lawyer is then how he’s going to deal with
liability for its draft contracts
…to insure it. When it’s optimal
is running, instructions are given for
Use of the sample contracts, and a
Training for individual agreements with
the company’s own customers. The rules of
Knowing courts optimizes coverage.
This is then followed by
mostly the realization that clean
contracts to own only one of
several building blocks is, the liability
to minimize – the VSH protection is in
as a rule, only for the residual risk
there. Among the many possible measures
for a minimization of liability
includes, for example, that the intermediary
a complete expert
Archive owns – with all training material
and for the production of own
Transparency. This can result in a personal
System for a conscious
Develop risk management.

And your conclusion?

The user of “free” sample contracts
should be the first thing to question,
who is responsible for the content
and how high this “work of art”
was insured. If there is a defect,
is from the responsible author
immediately and demonstrably
Claim with own VSH insurer
because if you don’t, you’ll lose
the author his VSH coverage
(Obligation). Sample contract without
“Operating instructions” are always
useless, because the associated
Dangers for the user do not
are foreseeable. In the case of allegedly “liability-free
Contract models” is often only
one thing is certain: your own liability.

Mr. Fiala, thank you for the

Status: 20.03.2007

(expert report 9 4.2007, 101)

Courtesy ofwww.experten.de.

Our office in Munich

You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.

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.
»More about Dr. Johannes Fiala

On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.

Arrange your personal appointment with us.

Make an appointment / call back service

You are already receiving legal advice and would like a second opinion? In this case please contact Dr. Fiala directly via the following link.

Obtain a second legal opinion

(The first phone call is a free get-to-know-you conversation; without consulting. You will learn what we can do for you & what we need from you in terms of information, documents for a qualified consultation.)