In a guest article, Dr. Johannes Fiala and Peter Schramm explain why brokers should keep a close eye on the sum insured of their customers even after the contract has been concluded.
The OLG Stuttgart (ruling of 30.03.2011, file no. 3 U 192/10) sentenced a commercial broker after a claim for seven-digit underinsurance in building insurance.
Minimum content of the advice
“In any case, the main thing to be advised and clarified is what risks should be covered, how the most effective cover can be achieved and what risk cover is available at what premium level. The obligation to advise is accompanied by a duty of inquiry and information on the part of the broker”.
The broker cannot claim that the policyholder (UN) wanted a certain sum insured that was ultimately too low. Rather, he must check this himself, clearly point out the underinsurance to the policyholder and only insure the insufficient sum insured if the UN is informed precisely – and not, for example, erroneously – deliberately insists on the underinsurance. If the broker cannot – as a rule – prove this, he is liable for the underinsurance himself. Even a mere recommendation to the UN that the sum insured should be checked, which the UN does not follow, does not exculpate the broker because of his own breach of duty. So says the OLG Stuttgart.
Need for a cover concept
“If it is a matter of initiating a new insurance contract, the broker is obliged, within the scope of what is possible and reasonable to achieve a cover concept tailored to the concrete needs of the policyholder, to investigate a risk on his own initiative if necessary”.
The broker must therefore not rely on the UN’s assessment or its possibly ill-informed and erroneous opinion about his risk. It must examine the risk itself, provide advice, clarify misconceptions of the UN and make clear to the UN the consequences of a possible wrong decision. The UN’s opinion that a lower sum insured would suffice does not mean that it is therefore consciously accepting underinsurance – the broker is liable for underinsurance if he accepts it as a requirement of the UN, without trying in all clarity to teach the UN a better lesson.
“Even after the conclusion of an insurance contract, the broker still owes a constant active, unsolicited support. This includes the obligation to check the agreed sum insured for its appropriateness and, if necessary, to work towards an adjustment.”
In the case in question, the previous insurer had incorrectly calculated the sum insured. The broker had failed to investigate this discrepancy, to obtain documents from the insurer to clarify and correct the error. In a later change of cover, he had simply taken it over, without any further examination. Nor did it help the broker that the UN expressed its conviction that the sums insured were sufficient – the broker should have checked for himself and shown the UN his misconception and its consequences.
Obligation to draw up an optimal contract
The broker “bears the responsibility for ensuring that the risks to be covered are fully covered and must ensure that the contract is drafted in a clear and unambiguous manner that leaves no room for doubt when the insured event occurs”.
According to the Stuttgart Higher Regional Court, the broker cannot invoke the general wishes of the UN for low premiums to justify the underinsurance. Rather, the broker must make the consequences of the underinsurance clear to the UN in such a way that the UN must make a conscious decision for or against this specifically stated underinsurance.
The Federal Court of Justice (BGH, ruling of 10.03.2016, file no. I ZR 147/14) confirmed the aforementioned brokerage obligations and thus rejected the usual questionnaires. It is not acceptable to simply ask the UN what amount of insurance it thinks it needs. Risk assessment by the broker and determination of the need does not follow a wish list.
Rather, the UN can always hold the broker liable for gaps in cover if he has not wished for what he actually needs, when he has been badly advised. The dentist might as well ask “Which tooth do you want a crown on today?” Brokers who mediate according to the system “Which rascal would like it?” do not fulfil their duties and are liable for them.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.procontra-online.de (Published on 15.09.2016)
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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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