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Transport insurance risk exclusion and concealed obligations need examining on case-by-case basis


Distinguishing between insurance policy risk exclusion clauses and so-called "concealed obligations” must always be examined on a case-by-case basis.

According to case law by the Federal Court of Justice, Germany’s highest court of civil and criminal jurisdiction, it is neither the wording nor the position of the clause in the insurance conditions that matters, but its material content. This plays a key role developing insurance policies and establishing any hidden obligations.

For example, if a risk exclusion clause in a transport insurance policy contains a concealed obligation of the policyholder, the clause is invalid if it does not account for the principle of fault underlying section 28 of the Insurance Contract Act (VVG) - the main source of insurance law in Germany - which sets out the general rules for insurance contracts as well as the statutory provisions for specific insurance branches.

A concealed obligation is a clause that is phrased as an exclusion of risk but contains an obligation on the part of the policyholder. Concealment technically consists of neglecting to provide information that, if presented, would change the terms of the policy while misrepresentation involves actively providing incorrect information to an insurance agent when purchasing a policy.

Risk exclusions, as well as being a breach of obligation, can lead to a reduction of benefits payable under the insurance policy. It can also release the insurer from their obligation to pay insurance benefits entirely.

Under German law, however, there are differences regarding burden of proof and other legal consequences requiring a distinction to be made between risk exclusion clauses and obligations.

The decisive factor is whether the clause contains an individualised description of a specific risk and, accordingly, only partial insurance cover is granted, or whether the policyholder is required to behave in a certain preventive manner and existing insurance cover is withdrawn in the event of misconduct.

If an exclusion is a disguised obligation, the clause will generally be invalid because section 28 of the VVG provides for a differentiated system of legal consequences according to which the breach of an obligation leads to a reduction in the insurer's benefit or exemption from benefits depending on the degree of fault.

According to the relevant section of the Insurance Supervision Act (VAG), the restrictions of the VVG do not directly apply to major risks such as transport insurance. However, the basic principles of the VVG are also applicable to major risks. With regard to obligations, this means that section 28 of the VVG does not apply directly to transport insurance. However, the principle of fault contained in section 28 of the VVG must be observed in transport insurances as well.

If the principle of fault is not taken into account, the clause is invalid in accordance with section 307 of the German Civil Code. Falling back onto section 28 of the VVG to fill the gap in the contract is not allowed.

W Denis can arrange specialist cover for companies that operate transport services by sea, road, air, rail or river. For more information, please contact:

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Western Europe &/or elsewhere worldwide

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