Dispute about the scope of professional liability insurance
March 4th, 2022 – Professional liability insurance for insurance intermediaries may not exclude insurance cover from activities as a reinsurance broker; a limitation of the cover protection for mortgage credit intermediaries to the amount specified in the relevant EU Delegated Regulation is also not in accordance with the law. The Higher Regional Court of Innsbruck, as a court of appeal, has prohibited offers, advice and mediation of such insurance.
- Image: Tingey Injury Law Firm
In proceedings brought by Höher Insurance Services GmbH against a competitor for unfair competition, the Higher Regional Court of Innsbruck, as the court of appeal, passed a final judgment, as can be seen in a press release from Höher.
In its advertising, the sued company advertised insurance coverage in professional liability insurance for commercial financial advisors and insurance brokers that did not meet the legal requirements and also brokered this insurance.
Specifically, it was about two requirements of the trade regulations (GewO): then about the insurance cover for the activity of reinsurance brokerage (§137c), then about the amount of coverage for mortgage loan brokerage (§136a).
Not “complete” without reinsurance coverage
the end § 137 para. 1 1 Z 4 GewO the Higher Regional Court of Innsbruck emphasized that it is expressly stated that the area of reinsurance is part of insurance brokerage. Not even a hint of seeing § 137c GewO an exception for reinsurance.
Therefore, reinsurance intermediaries would also have to prove adequate professional liability protection, according to the judges. From the point of view of the unambiguous wording of the law, there is no room for interpretation.
The defendant company offered professional and pecuniary loss liability insurance in which insurance cover from activities as a reinsurance broker is expressly excluded.
Thus it did not offer full liability insurance within the meaning of Section 137c GewO; the contrary promotion is misleading, the defendant company has deceived about the essential features of the product.
Mortgage credit brokerage: Restriction not allowed
For the brokerage of mortgage loans by commercial financial advisers, no lower compulsory insurance sums are allowed than those in Section 136a para. 12 wt (EUR 1,111,675 for a single claim, EUR 1,667,513 for all claims in one year), according to the OLG Innsbruck.
The stipulation that when brokering mortgage credit, “professional indemnity insurance or equivalent guarantee pursuant to Art. 1 of Delegated Regulation (EU) No. 1125/2014“ (EUR 460,000 per claim, EUR 750,000 for all claims in one year, note) has a different background.
SIE is intended to ensure that the security anchored in the above-mentioned regulation must be in place, without emphasizing any liability cases from the remaining area of activity of the commercial asset advisor.
The defendant company offered mortgage brokers insurance with a total coverage of just the minimum coverage under the Delegated Regulation referred to.
As a result, the insurance sums offered were too low and did not correspond to the trade regulations, as the findings of the court of first instance clearly showed. According to the Court of Appeal, this is misleading.
Interim disposal
In the current case, it was a provisional procedure (hearing and decision on an application for an injunction, note); the demand was for the omission of the offer, the advice and the mediation of the mentioned insurances.
Admittedly, evidence to the contrary is possible in main proceedings, according to attorney Johannes Neumayer on VersicherungsJournal; however, the affidavits of the two managing directors were taken into account in the provisional proceedings.
In addition, the defendants withdrew the external appeal after the judgment of the Innsbruck Higher Regional Court as the court of appeal. An expectation that the judge’s legal view could change is “incomprehensible”.
In addition, the Federal Ministry for Digital and Economic Affairs stated in a response to a query that the full amount of the coverage pursuant to Section 136a (12) GewO must also be available for mortgage loan brokerage, as can be seen from the judgment.
Consequences warning
According to Neumayer, the present case was “purely abstract” about the legal assessment of the required scope of cover; The focus is not on the dispute between intermediaries, but on the blatant gaps in coverage of some offers.
This could seriously damage some policyholders, since a statutory minimum coverage is a prerequisite for the trade license.
In addition, in its press release, Höher Insurance Services added that insufficient compulsory liability insurance can also result in personal liability for the commercial director.
Information from the professional association
VersicherungsJournal asked the professional association of insurance brokers and consultants in insurance matters whether activities that are not actually performed must also be included in the scope of coverage of property damage liability insurance.
It can be assumed that the professional liability insurance must in principle cover all claims that can arise in the event of a breach of professional due diligence in the activity of insurance brokerage, according to the reply from the professional association.
According to the assessment of the professional association, professional liability also has to cover certain areas of insurance brokerage, to which the business owner is fundamentally authorized according to his trade license.
The statement expressly points out that § 137 para. 1 no. 4 GewO has expanded the concept of insurance mediation to include activities relating to reinsurance mediation.