Reporting a loss
The policyholder must meet certain obligations when a loss occurs. Some of these arise from operation of law, whilst others are provided for under the contractual agreement entered into with the insurer. First of all, the policyholder is required to inform the insurer of the loss that has occurred without undue delay; if so requested the policyholder must also provide the insurer with any information it needs to establish the insured event or the scope of its liability.
A further important obligation is the duty to minimise losses. This means that in the event of loss the policyholder must take all steps necessary to limit and/or prevent such loss as far as possible. The insurance company bears the costs of the measures taken to minimise or prevent the loss provided that such measures do not exceed the total costs of the loss.
In the event of loss, the insurer’s instructions must be followed. If a policyholder fails to meet their obligations to minimise losses, the insurer may refuse to settle the claim. For policyholders that means that they have to carry the costs of a loss themselves.
I have reported a loss to my insurer. When will I receive my compensation?
There are no established time limits within which the insurer is required to perform. It has to be born in mind that pursuant to the Insurance Contract Act (Versicherungsvertragsgesetz – VVG) and the terms and conditions of insurance the insurer is entitled (and in the interest of all insured persons also required) to review the claims asserted on the merits or in terms of amount. For this purpose, it is frequently necessary to obtain expert opinions and information or to procure other documents as evidence. As past experience shows, this takes a certain amount of time. It is also generally the case that the insurer has to deal with numerous claims reported to it and has to be allowed a reasonable period within which to process such claims.
When do claims against the insurer become statute-barred?
For insurance contracts concluded after 1 January 2008, the claims – like any other contractual claims – are now subject to a uniform limitation period and become statute-barred in three years (cf. sections 194 et seq. of the German Civil Code (Bürgerliches Gesetzbuch – BGB)). The calculation of the time limit is governed by the general provisions of the German Civil Code according to which the three-year limitation period normally commences at the end of the year in which the insurer has decided on the insurance claim and has notified the policyholder of its decision on the insurance benefit to be paid.
In a legal suit, the insurer may assert the defence of the statute of limitations against a statute-barred claim. If it rightly raises such defence, it cannot be ordered by the court to perform under the insurance contract.
For contracts concluded before 1 January 2008, statute-barring is governed by the complex transitional provision of Article 3 of the Introductory Act to the Insurance Contract Act (Einführungsgesetz zum Versicherungsvertragsgesetz – EGVVG).
Under what conditions is it possible to request partial payment in advance?
The policyholder has a claim to partial payment in advance subject to the conditions of section 14 (2) of the Insurance Contract Act (Versicherungsvertragsgesetz – VVG). If the insurer does not complete the assessment on the scope of the insurance benefit owed by it before a period of one month has elapsed, the policyholder may request a partial advance payment equal to the amount that the insurer is at least likely to be required to pay.. In other words, the pre-condition for such partial payment in advance is for the insurer’s performance obligation to be established on the merits. Only the amount of the compensation remains to be settled.
Partial advance payment has to be distinguished from an insurance benefit paid by the insurer subject to reservation. In contrast to a partial advance payment, a benefit paid subject to reservation remains uncertain not only in terms of its amount but also in terms of the question of whether any performance at all is owed by the insurer. In other words, it may turn out that the policyholder had no claim at all to the insurance benefit, in which case the entire benefit paid would have to be returned by the policyholder to the insurer.