procontra: Dr. Fiala, are insurance intermediaries with an assumption of liability by an insurer and financial intermediaries under a liability umbrella well out of all liability issues?
Dr. Johannes Fiala: No, such intermediaries can also be exposed to considerable personal liability risks. This may be because the assumption of liability or the liability umbrella does not cover all cases of damage or because the insurer or financial institution has a right of recourse. The only thing that can help here is an individual case analysis – ideally, of course, long before the first damage occurs.
procontra: What do you think of software manufacturers and associations that advertise solutions for liability-free brokerage and documentation?
Dr. Fiala: Forms are distributed via software and the Internet which, on closer inspection, turn out to be nothing more than checklists. One danger is that the checklists do not reflect all of an agent’s current rates in the differences. Ideal evidence of subsequent misadvice. On the other hand, checklists can never be sufficient to replace a real interview protocol.
procontra: In the case of intermediaries, there are also other models and templates that are recommended by experts. For example, a model contract for the insurance broker. As an intermediary, can you rely on such things?
Dr. Fiala: No, not at all. The contracts are often home-grown, and the case law of recent decades has simply been ignored in the drafting process. One of many examples is the clause “The intermediary is insured for one million euros. Liability is limited to this amount”. If the damage then exceeds one million euros, the court will often delete such a clause in the terms and conditions.
procontra: With what consequences for the intermediary?
Dr. Fiala: In concrete terms, this means that the intermediary has unlimited liability. If your own insurer pays the one million insured, the adviser is usually personally liable for the rest. If the insurer does not step in, the agent is left alone with the complete loss.
procontra: Now there is also the possibility that the intermediary works through a limited liability company. Does that make personal liability no longer an issue?
Dr. Fiala: Even in the case of a limited liability company, there may be a liability to pass through. The vast majority of limited liability companies are suboptimal in this respect. In addition, there are simple reasons to make the intermediary directly and personally liable, in addition to the limited liability company. In this respect, it is advisable to have a coordinated overall concept at all levels, from documentation to the sensibly designed use of a capital company to insurance protection.
(Procontra 2/2007, 70)
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About the author
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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