Why are insurance agents and insurance brokers liable for underperformance?

The Social Court of Dresden (judgement of 09.03.2017, file no. S 39 VE 25/14) decided that if private provision by (accident) pension insurance coincides with pension entitlement under the Victims’ Compensation Act (due to a criminal offence suffered), partial crediting takes place. The victim’s pension of € 708 was reduced by about € 580 (part of the private pension).


Well-intentioned – and badly implemented

In the underlying case, the wife was the victim of a serious bodily injury – and it turned out that she had already been the victim of a faulty contract. Numerous types of income can be offset against victim compensation pensions – in this case the wife’s pension from a private accident insurance contract. The husband had meant well when he had concluded the insurance contract and thus became the policyholder – the implementation of a “subscription right (also) for the dear wife” was then in deficit.


Punishment by pension reduction of the court?

Proper provision would not have been “legally punished” – rather, there was simply a wrong contract design. The husband had designated his wife as the beneficiary vis-à-vis the accident insurance company. However, it would be better if he were to make himself the beneficiary of the accident pension payments. In that case no credit would have been made to the woman’s victim compensation pension.

Since the wife is probably less able to help in the household due to the accident, the husband must employ a domestic help if he does not want to help out himself. He therefore has a considerable economic interest in securing this financially himself with the insured accident pension. This means that the accident pension no longer serves to replace the wife’s professional income, which in this case alone had led to a crediting against the victim’s compensation pension.


Victim’s pension aims to compensate for occupational injury due to loss of income

It makes sense for the insurance mediation to give good advice on the problem of crediting and the more favourable structuring possibilities by appropriate designation of the beneficiary and, to be on the safe side, to document the purpose of the accident pension as compensation for damage to housekeeping instead of income replacement, so that crediting as replacement for professional income cannot take place.

The correction of the entitlement to benefits can also be made at any time until the occurrence of the insured event. Intermediaries should also take this into account for liability reasons. Negative consequences are relatively easy to avoid – the family would have had 580 euros more available every month.


Recourse to intermediary facilitated by lack of documentation

In up to 85% of cases, the advice given is not documented in the insurance sector. According to many higher courts, this can even lead to a reversal of the burden of proof. The reduction of the victim’s pension is based on a statutory provision and is initially excluded as a loss. However, the wife’s right of subscription did not reduce the damage to budget management to the extent planned by the husband when the contract was concluded. For such errors in advice or design, the agent would have to pay compensation for life in the amount of the credit, month by month.

Similar pitfalls await the intermediary if he insures partners and/or (spouse) partners unilaterally or reciprocally by means of (risk) life insurance policies; however, due to incorrect assignment of the characteristics as policyholder and/or beneficiary, tax payments (income tax, inheritance tax) are usually completely avoidable in the event of a benefit claim. The subscription right to a life annuity can also offer tax advantages over a one-off payment.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of


www.experten.de (published on 11 April 2018)

Link: https://www.experten.de/2018/04/11/weshalb-versicherungsagenten-und-versicherungsmakler-fuer-minderleistung-haften?utm_source=newsletter&utm_medium=email&utm_campaign=180411-70+experts+news%C2%B2


www.experten.de (published in ExpertenReport 03/2018, page 64)

Link: https://kiosk.experten.de/de/profiles/e3596a099c43/editions/cc30c3db698bab981724/pages/page/33

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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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