- It is a basic principle of German insurance law that an insurance payment by the underwriter to the insured having suffered a damage shall not be to the benefit of the party having caused the damage. To prevent this result, sec 67 VVG (Insurance Contract Act) provides for an automatic transfer by force of law of the insured's claim against the third party having caused the damage to the underwriter upon the insurance money being actually paid to the insured.
- The above mentioned provisions were drafted on the basis of the "normal" case that it is the insured (policyholder), who owns the subject-matter insured (e.g. property in insured goods). It is undisputed in jurisprudence and textbooks since the judgment of the German Federal High Court reported in its judgment of 11.7.19601 that in case the subject-matter insured belongs to a third party (the "assured") for whom the policyholder has taken out the insurance, a damage claim of the assured against the party causing the loss or damage is being transferred by force of law to the underwriter upon his indemnifying the assured in accordance with sec 67 VVG /sec. 804 HGB / sec. 45 ADS.2
- In the same judgment of 11.7.1960 (BGHZ 33, 97, on page 100), the court dcided that such transfer of a claim upon the underwriter in principle also takes place if the party having caused the loss or damage and being liable to the assured is the insured (policyholder) himself. The Federal High Court confirmed this position expressly in a later judgment of 24.11.19713. There has been no change in this jurisprudence since. The textbooks / commentaries follow this jurisprudence.4
- Also in the mentioned judgment of 11.7.1960 (BGHZ 33, 97, p. 100/101), the Federal High Court expressed the view that such transfer to the underwriter of the claim against the insured would, however, not take place if the insurance cover was also meant for the benefit of the insured and not only to cover the interest of the assured. Whether this is so in the actual case depends on the construction and interpretation of the insurance cover in question. On page 100 of the report, the Court gives as an example where presumably the insurance cover is to be considered as benefiting also the insured the cases in which the insured owes care for the assured's goods when he has these in this custody. In this regard the Court said: "The insurance cover of the other party's interest has here at the same time the effect of a liability insurance for the policyholder." (This view has later been changed, see below.)
- In BGHZ 33, 97 the Federal High Court found on the facts that the insurance cover taken out for the interest of the assured did not at the same time cover an own interest of the insured. In fact, here the risk insured against was a possible fraud committed by the insured to the disadvantage of the assured (the insured was engaged as an agent by the assured and had i.a. the obligation to collect money [insurance premiums] from clients of the assured; the risk that the insured should fail to remit collected money to the assured was covered by the insurance contract). Here the insurance cover was not only taken out by the insured but also against possible fraudulent actions of the insured itself. Therefore, it could not be assumed that a cover also for the insured's interest had been intended, quite to the contrary.
- It must be remembered that the judgment in BGHZ 33, 97 dealt with a "personal-guarantee-insurance", not with a property damage insurance. With regard to the question whether under an insurance contract taken out by the insured for the interest of the assured also the liability interest of the insured could be covered at the same time, the Federal High Court has constantly decided that this is not possible in cases where the insurance cover for the assured is a property damage insurance. This has been decided by the Federal High Court for various property interests, always with the argument that by including the cover for the liability interest of the insured the insurance contract would change from a property damage insurance to a liability insurance. This has been decided in various judgments of the Federal High Court concerning motor vehicle insurance5, building fire insurance6 and building insurance against damage by tap water.7
- A recourse claim by the underwriter having paid the assured against the insured can therefore according to the Federal High Court only be prevented if there is agreed a waiver of recourse in favour of the insured. If such waiver of recourse has not been agreed explicitly, it can be implied into the contract between the insured and the assured under certain circumstances.
- The majority of writers of textbooks, articles and commentaries are to the contrary of the view that whereas the assured's claim for damages against the insured passes to the underwriter upon payment to the assured, the recourse action of the underwriter against the insured is excluded only under two possible aspects11:
- The insured can be co-insured for its own interest in the subject-matter insured. In this case there is no claim against the insured if, had he taken out the property damage insurance initially in his own interest, he were covered thereunder. There would for example be no cover for the insured if he caused the loss / damage by acts of wilful misconduct or gross negligence.
- There can an agreement of waiver of recourse. This can be agreed either
- between the insured and the assured: In this case no claim of the assured against the insured can pass from the assured to underwriter as such a claim has been excluded (to the extent of such exclusion);
- between the insured and the underwriter: This can be either an express waiver of recourse or an implied one. The extent of the waiver of recourse would be the same as under a cover provided for the insured had he taken out an insurance in his own interest primarily.
Sec 67 VVG is applicable to all branches of insurance save marine insurance. For marine insurance a similar provision is sec 804 HGB (Commercial Code) which provision generally is replaced in marine insurance contracts by sec 45 ADS (German General Rules of Marine Insurance) having the same effect.
Only for a comprehensive motorcar insurance taken out under a leasing contract for a motorcar did the Federal High Court accept that the interest of the leasing-holder can be included.8
According to the Federal High Court there is therefore no co-insurance of theliability interest of the insured under property damage insurance contracts having been taken out by the insured to cover the property interest of the assured.
The Federal High Court had accepted such implied waiver of recourse especially in cases where the insured as hirer of a car or tenant of an apartment had to pay as part of the rent also the insurance premium of the property damage insurance of the assured. In such a case, the Court said, the hirer or tenant is deemed to be liable for a damage caused by him only to the extent he would have to bear the loss / damage also if he had himself taken out the property damage insurance in this own interest. According to the relevant provisions of the insurance law, the hirer or tenant would therefore be liable only for wilful misconduct or gross negligent (sec 61 VVG).9
Recently the Federal High Court has decided that such implied waiver of recourse to the extent mentioned is always to be assumed if in cases of a fire damage to buildings the tenant has caused the fire by an act of "simple" negligence only (in contrast to gross negligence).10
There is further made the restriction that the protection for the insured in both above mentioned variations is subject to there being no separate liability insurance for the insured which covers the damage. The protection of the insured under the property damage insurance shall always be contingent upon the lack of such liability insurance (actually taken out or ordinarily being taken out).12
In summary one can say that in German insurance law there are some situations in which underwriters may look to their insured (policy holder) for reimbursement of what they had to pay to the third party insured under the contract.
1 BGHZ 33, 97
2 Prölss / Martin, VVG, 26th ed., § 67 note 11;
Bruck / Möller / Sieg, VVG, 8th ed., § 67 note 126;
Römer / Langheid, VVG, § 67 note 20;
Bischoff, Versicherungsnehmer und Versicherter bei der Versicherung für fremde Rechnung als Regreßschuldner des § 67 VVG, Versicherungsrecht 1961, 193 ff;
Brockmann, Regreß des Versicherers gegen den Versicherungsnehmer bei der Versicherung für fremde Rechnung in der Transportversicherung ?, Versicherungsrecht 1906, 1
3 Versicherungsrecht 1972, p. 194 / 195
4 Römer/Langheid, VVG, § 67 note 22; Prölss/Martin, VVG, § 67 note 15; Bruck/Möller/Sieg, VVG, § 67
note 127; Bischoff, Versicherungsrecht 1961, p. 194, 195; Brockmann, Versicherungsrecht 1960, 1.
5 BGHZ 22, 109,114; BGHZ 30, 40,43,44; BGH, Versicherungsrecht 1994,p. 85,86
6 BGH Versicherungsrecht 1992, 311
7 BGH, Versicherungsrecht 1991, 462
8 BGH, Versicherungsrecht 1993, 1223
9 BGHZ 22, 109,113 (car hire); BGH, Versicherungsrecht 1996, p. 320, 321 (rent of an apartment); BGH, NJW-
RR 2002, p. 1243; BGH, Versicherungsrecht 1976, 44,46 (warehouse-keeper)
10 BGHZ 145, 393 (judgment 8.11.2000); BGH, NJW-RR 2002, p. 1243 (judgment 12.12.2001)
11 Prölss/Martin, VVG, § 80 notes 14, 15; Armbrüster, Versicherungsrecht 1994, 893; Bruck/Möller/Sieg, VVG,
§ 67 notes 129, 130
12 Prölss/Martin VVG, § 80 note 16
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.