The fairy tale of the “documentation and advice waiver” – a guide to the certain destruction of existence for almost every insurance broker *
*by Dr. Johannes Fiala, lawyer (Munich), mediator (Univ.), MBA Financial Services (Univ.Wales), MM (Univ.), certified financial and investment advisor (A.F.A.), lecturer in civil law and insurance law (Univ. of Cooperative Education), banker (www.fiala.de) and Dipl.-Math. Peter A. Schramm, actuary DAV, expert for actuarial mathematics, publicly appointed and sworn by the IHK Frankfurt am Main for actuarial mathematics in private health insurance (www.pkv-gutachter.de)
“The end justifies all meanness” (Stanley Bing) The impending implementation of the Intermediaries Directive has seen enterprising entrepreneurs step up to the plate – in Austria, many have disappeared from the market following implementation. Some insurers/licensees have also jumped on the bandwagon of a “hope for comfortable liability security” through software/forms: This “philosopher’s stone”, however, is a path into the personal liability abyss for many players. The “interposition” of a GmbH or AG helps in the rarest cases to really shield the liability. Today’s players are software manufacturers – they praise the alleged freedom from liability of their products with “built-in” sample forms/protocols, associations, societies, insurers, pools, distributors, unknown specialist authors/lawyers on insurance broker law – sometimes in employment with the insurer, working groups with self-created certifications – also as a miraculous source of licensing income management consultancies for insurance brokers. Thesis: Here one writes off ineffective clauses from the other in the last months. Unfortunately, many clauses were ruled invalid shortly after 1900. The real lawyer then casually says “A look at the law makes it easier to find the law”, because in most cases it is already clearly stated there. Everyone is a “lawyer” The professional title “lawyer” is not protected in Germany – just as in Switzerland anyone can call themselves an “auditor”. Some authors of numerous sample forms like to be celebrated as “lawyers” in public appearances. However, these students are likely to have been absent from their studies as early as the third semester of law school. This is because they would have learned there that “model forms” count as general terms and conditions (GTC). If one applies now the “AGB right” to such printed pieces, numerous forms turn out as safe guidance to the existence destruction for the insurance broker. Advice for the insurance broker: Before the assignment, the “last things” should be settled – in the event of liability, there is usually hardly anything left of the personal assets. The customer expressly waives the right to advice and documentation. This or similar is how the current marvels for the contemporary form management of the insurance broker read. Often, no responsible author of the samples is named – with good reason, because numerous clauses turn out to be “null and void” already upon first examination. Insofar as authors are named, it has presumably not been possible to prove adequate insurance cover or none at all for the practically “incalculable” amount of liability. The costs alone of the forthcoming “recall actions” on the part of pools and/or publishers are likely to be higher than the usual “statutory minimum insurance sum” of EUR 250 thousand. by the way: The “lawyer” as such usually does not have a VSH for this. The fairy tale of the exclusion of the duty to consult by forms. By means of forms, i.e. general terms and conditions, no insurance broker can eliminate his “duty of care”, in particular no duty to give advice. How reassuring that this also applies to entrepreneurs or registered traders as customers. The Reichsgericht (Imperial Court) and the Bundesgerichtshof (Federal Court of Justice, BGH) had already decided this for decades – but the so-called “jurists” and similar experts have unfortunately missed this until now. Also for the insurance broker the BGH decided the advice waiver years ago as ineffective/void! Are these players now assured of liability? No VSH insurer will be happy to take on this “cluster risk”. Those who have copied such “samples” can simply ask how the pool, lawyer, association, etc. has insured this. Surprising if the answer is not forthcoming? The “Waiver of Advice” form puts the best evidence of the insurance broker’s breach of duty and certain liability in the client’s hands? A short exercise for brokers in the matter of plausibility check: There a pool spreads the “new” broker contract as a sample, with support of a renowned “professor”. I guess the first question from experts.com would be, is he adequately insured for this? The VSH insurer could refuse because it is a “cluster risk”: Perhaps it now dawns on the person responsible at the pool, after the conversation with the VSH insurer, that there are side effects that he did not even think of – it could soon “evaporate” his private assets as well? Note: The risk would be “incalculable” for the professor, the sample contract could be used an infinite number of times with “minor (of course unintentional) errors” and damage could occur. With the many contracts, the question arises, which professor can afford a “pecuniary damage liability” at his own expense with “infinite coverage”? Oh yes, the insurance broker should recognize it immediately – after all, he is the “expert in risk”? No, as the saying goes: “Only the donkey advises himself”: The pool has certainly insured everything well, and so has the professor – it’s a pity that no one answers the vicious question of who bears the insolvency risk here if things go wrong – and whether adequate VSH protection ever existed? The fairy tale of the exclusion of documentation by forms. Again and again, “self-proclaimed lawyers” are allowed to declare at conferences that insurance brokers are comparable in professional status to lawyers and tax consultants: Unfortunately, this is gross nonsense. At the latest since the Sachwalter judgement, it is generally known that the burden of proof in the case of errors lies with the insurance broker – similar, for example, with doctors and architects. It’s in every reputable book on the insurance broker. By the documentation the customer receives starting from 22.05.2007 the best proof for the incorrect consultation of the mediator directly into the hands: “Ihh-gitt” – this is to be avoided. The mediator is grateful for the “documentation waiver” form. By the form “documentation waiver” the customer receives meanwhile for the adhesion process the certainty that the insurance broker before court will probably stand there with empty hands? Of course, this also helps the client’s litigation funder in assessing the risk of recourse against the insurance broker. Incidentally, this also means that, according to the vast majority of terms and conditions, the coverage of the pecuniary loss liability insurance (VSH) no longer applies. Would it be presumptuous to ask who else of the sponsors of such “surefire” tinkering instructions no one could ask who didn’t miss third semester law school? Or is it a “concerted action agenda 2007” to send the insurance broker profession over the edge forever? Risk is our business In the rare cases where a waiver of advice might be possible on an individual basis – not on a form-by-form basis – it is only of use if advice is not actually given. Even in the case of a waiver of advice and simultaneous (incorrect) advice, liability is of course assumed for the advice despite the waiver. The attempt to avoid liability in the event of insufficient qualification and thus incorrect advice by means of a declaration of waiver of advice is doomed to failure from the outset. A person who, because of a waiver of documentation, not only waives the handing over of documentation to the customer, but also waives the preparation of his own documentation, is acting like someone who, because of the customer’s waiver of invoicing, also thinks he can waive the tax-effective booking of income at the same time. The two simply have nothing to do with each other. The solution is actually obvious: If you do not want to be liable as a broker, the customer can waive advice, whereupon the broker then does not act at all and thus – even without a waiver of documentation – naturally does not have to document anything. Conclusion for insurance brokers? Firstly: If you want to find out which players are involved here, use the ever-popular search engines on the Internet. Have some “experts” here set themselves a monument for all eternity? Secondly: As prescribed by the BGH for capital investments (plausibility check – legal, economic, fiscal), the insurance broker should also examine (or have examined) the “liability-proof” (form and software) solutions on the market in detail. Preferably by some lawyer he trusts, who is the first to demonstrably insure such a “project” adequately. The broker has the “choice between plague and cholera” – either he is liable, or he gets an “initial consultation” beforehand, whether there could be something “wrong” with his (copied?) forms? Thirdly: Anyone who wonders, for example, which points would have to be clarified when arranging motor vehicle liability insurance, i.e. are liable, should think about how to obtain the necessary specialist knowledge for this in a flash. The customer “just wants a quick double card” – and the liability? The courts will always know (better). Fourth, the apparently “fatal documentation and advice waiver” is found in many “fashionable” new publications by various publishers as an “ingenious pattern”, for the insurance broker’s quick self-destruction. It is reassuring that the EC Directive on insurance intermediaries hardly changes anything for the insurance broker in terms of liability. Reading the old standard works (e.g. by Griess/Zinnert – Verlag VW) is probably most useful in practice. Fifthly: In addition, it is advisable to know many good – especially older – colleagues, i.e. to have a personal network. The life of an insurance broker is too short to recognize every trap immediately. Having your own “expert” archive can also help – especially when it comes to recourse for faulty “forms” or incorrect training. It is pleasant to then also have a proper war chest, because as is well known, sales and training managers are often liable for “half-truths” according to the rules of § 826 BGB. Remember: “Nothing makes a man so intolerable as the consciousness of having enough money for a good lawyer” (Richard Widmark). To all readers, have the longest, most liability-free time possible!
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About the author
PhD, MBA, MM
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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