Why do insurance brokers have only limited duties of advice and documentation?

The Higher Regional Court (OLG Hamm, decision of 5 December 2018, file no. 20 U 146/18) confirmed the dismissal of the complaint regarding the (alleged) miscounseling by an insurance broker when changing the cover of a private health insurance. The new private health insurer had later challenged the contract because of incorrect answers to the application questions. There was no broker documentation.


If the process is conducted correctly, the broker often loses if only the documentation is missing

As a matter of principle, every insurance intermediary must submit separate documentation to the (future) policyholder before signing the insurance application, §§ 61 I 2, 62 I VVG. If the documentation is missing, in particular a note of essential importance, this regularly leads to a reversal of the burden of proof at the expense of the broker, who must then prove that his note or instruction was given (BGH, ruling of 13.11.2014, ref. III ZR 544/13).


Application questions are not necessarily to be documented

However, the legal documentation obligation only concerns “the wishes and needs of the policyholder and the reasons for advice given” by the insurance broker. Other references, for example the explanation of application questions, do not belong in the documentation.


The plaintiff lost the case after the court had “serious doubts about credibility” because of the “selective memory” of his witness. The plaintiff had claimed to have been informed by the broker that only transactions from the previous year had to be declared. Moreover, the plaintiff had signed the application without reading how the broker had filled out the form.


There is no legal obligation to document the application questions that can be read by each (future) policyholder, including any reference to them: “intermediary would otherwise have to document the entire course of the conversation almost verbatim, since policyholders can always claim that a relevant question has been incorrectly explained by the insurance intermediary.“.


Without a duty of documentation in this regard, there was then – despite the lack of documentation – no easing of the burden of proof or reversal of the burden of proof for the plaintiff. Because the wishes and needs of the policyholder and the reasons for the advice given by the broker in this regard were not – but only a (possibly incorrect) reference to the application questions.


Incorrect litigation of the plaintiff was advantageous for the insurance broker

The UN would have been better off not claiming that a certain misleading explanation – on the application questions – was given, but rather that a certain necessary explanation – in the context of the discussion before the actual application – was not given.


For in the first case, the UN itself must provide full proof if the broker simply denies the false explanation – unless he has documented it unnecessarily. In the second case, however, the broker himself must prove that he gave correct advice if this is not evident from the documentation – the UN only has to claim that the broker did not give the correct explanation or advice.


A typical hanger for an almost certain broker liability could have been the lack of information on the loss of the ageing reserves at the previous private health insurer – in which case the broker must prove that he has given correct advice – at best he has documented it. Of course, a cross at “Correctly advise on ageing provision” is not enough. When asked by the judge what exactly he would have advised on this, a broker once said: “The ageing provision is collective, therefore it does not belong to the customer and therefore he cannot lose it.


An expert could probably have discovered other possible disadvantages of the new tariff compared to the old private health insurance contract. However, the differences in benefits are usually compared in great detail in the consultation and it often turns out that the UN deliberately wanted to switch to the correspondingly weaker tariff in order to save contributions.


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


by courtesy of

www.experten.de (published in the ExpertenReport 11/2019, pages 24-25)

Link: https://kiosk.experten.de/de/profiles/e3596a099c43-experten-report/editions/experten-report-11-19/pages/page/14


www.experten.de (published on 25.11.2019)

Link: https://www.experten.de/2019/11/25/warum-den-versicherungsmakler-nur-eingeschraenkte-beratungs-und-dokumentationspflichten-treffen/?utm_source=newsletter&utm_medium=email&utm_campaign=20191125+experts+report



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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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