Insurance brokerage: lack of uninterrupted liability insurance may result in loss of broker's licence

The Administrative Court [Verwaltungsgericht, VG] of Magdeburg has ruled that the subsequent conclusion of a professional liability insurance in order to obtain uninterrupted insurance coverage does not meet the requirements of Sec. 34d (5) sentence 1 No. 3 German Industrial Code [Gewerbeordnung, GewO] (judgement of 18 January 2022, 3 A 96/21 MD).

The VG Magdeburg has ruled on the requirements for revoking an insurance broker's licence in the absence of liability insurance. The professional liability insurance of an insurance broker had expired. There was no evidence to the effect that he had concluded a new insurance policy that seamlessly followed his previous liability insurance. The responsible Chamber of Industry and Commerce [Industrie- und Handelskammer, IHK] subsequently revoked his licence. 

The court confirmed the IHK’s decision on grounds of the lack of proof of insurance according to Sec. 34d (5) No. 3 GewO. Firstly, it based its reasoning on the fact that a licence must always be refused in the absence of insurance proof. Secondly, the court specified the requirements for the obligation to provide such proof: the insurance broker must have adequate professional liability insurance throughout the entire period of his broker’s licence. In the case up for judgement by the VG Magdeburg, however, the broker had only taken out a new professional liability insurance policy after revocation by the IHK. 

The court went on to state that, even if subsequently concluded insurance retroactively covers periods without insurance, this does not meet the requirements for proof of insurance. Here, the VG based this argument on the consumer-protecting function of Sec. 34d (5) No. 3 GewO: in the context of insurance brokerage services, the consumer needs to be provided with another solvent debtor, besides the insurance broker, against whom he can assert a claim in the potential event of incorrect advice; namely the liability insurer. Any periods whatsoever without insurance would mean an unacceptable liability risk for the consumer.

The decision of the VG Magdeburg makes it clear that periods without insurance or the lack of proof of uninterrupted liability insurance can cost the broker his licence. The consequences of this: first of all, the insurance broker's registration is deleted from the register of brokers in accordance with Sec. 11a GewO. Secondly, the broker must hand over his previously issued licence certificate to the IHK. The broker is permitted to reapply for a licence, but should he conduct any work as a broker in the meantime without a licence, this will usually lead to an operating ban. Likewise, the broker faces penalties under competition and regulatory law.

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