Enforcing Insurance Cover Claims in Germany: Who needs to prove what and when?

Damage has occurred – and now what? Not only private individuals, but also medium-sized companies with little claims experience are often overwhelmed in this situation with acute claims management and the simultaneous defence of their claims. This is particularly relevant regarding the question of which facts the policyholder must present and prove under German law to fully enforce their claims against the insurer.

1. Theory and Practice Diverge in Case of Damage

For insurance disputes in Germany, the general rules of German civil procedural law apply. This means that each party must generally prove the facts favorable to them. The claimant bears the burden of proof for the facts that establish the claim. If the opposing party relies on facts that prevent, extinguish, or hinder the claim, it must prove these.

Additionally, the German principles of presentation apply in civil proceedings (i.e. including coverage proceedings). This means that the court generally only considers the facts presented by the parties when making a decision. 

In practice, things often work differently. In the event of a property insurance claim, policyholders regularly face the question of which facts they must present and prove in what manner. Furthermore, insurers' blanket assertions can create uncertainties regarding alleged breaches of obligations or risk exclusions. Between a major damage event and a potentially necessary coverage lawsuit, several years often pass. Policyholders are regularly inclined to believe the assertions of their insurer to reach a fast settlement. If policyholders do not initially consult a lawyer, they may accept blanket deductions during the settlement process, even if the insurer cannot prove the existence of a breach of obligations or could not prove it in a lawsuit.

Case Study:

The policyholder maintains fire insurance for their residential and business buildings. A fire occurs. The buildings on the policyholder's property are severely damaged and partially destroyed by the fire. The cause of the fire remains unclear.

The insurer conducts an on-site inspection and claims that the policyholder's hobby workshop is the only possible cause of the fire. The policyholder allegedly failed to properly maintain the electrical systems, thereby grossly negligently violating contractual obligations. In fact, the policyholder had the electrical systems inspected just a few months before the damage event. The insurer informs the policyholder that he must prove that the electronics in the hobby workshop were not the cause of the fire if he do not want to accept reductions in the insurance payout.

The insurer then makes a prompt settlement offer, deducting 25% from the insurance payout due to an alleged grossly negligent breach of obligations. If the offer is not accepted, the insurer threatens the policyholder with a lengthy claim settlement dispute. The policyholder wants to get his money quickly and accepts the unjustly reduced insurance payout.

The following explanations provide an overview of which facts the policyholder must present and prove under German insurance law to assert a claim, which evidentiary relief may benefit them, and which facts the policyholder does not have to present and prove.

2. What Must the Policyholder Present and Prove?

If policyholders assert insurance claims against the insurer after a damage event, they must prove the factual prerequisites for the regulations from which they derive their claim according to German general civil law principles. These principles apply both to extrajudicial and potentially necessary judicial assertion of insurance claims.

2.1 Scope of the Agreed Insurance Coverage

This initially concerns the existence of the insurance or the agreed insurance coverage. The policyholder must prove that an insurance contract exists with the insurer against whom he is asserting claims. The content of the contract claimed by the policyholder must also be based on this insurance contract. For proof, the presentation of the insurance policy is generally sufficient. If the policyholder wants to refer to oral agreements or additions made during the contract conclusion, he must present their application, the corresponding contract offer, or possibly the consultation protocol with the relevant content.

Tip: The policyholder should definitely keep all documents related to the contract conclusion. These include, in addition to the insurance policy and the underlying general insurance conditions, the policyholder's application, the insurer's contract offer, possibly issued consultation protocols, or emails exchanged with the responsible insurance broker.

2.2 Occurrence of the Insured Event

In the next step, the policyholder must prove the occurrence of an insured event.

This includes the factual prerequisites of the so-called primary risk description. The policyholder must therefore present and, if necessary, prove that an insured risk has materialized at the insured location during the insured period.

The insured risk in property insurance under German law generally materializes when an insured item is damaged or destroyed by an insured peril. The insured location and the start of insurance coverage in terms of time usually follow from the insurance policy.

In our above-mentioned case study, the factual prerequisites of the primary risk description are met. The insured event has occurred. According to the insurance policy, insurance coverage existed for the policyholder's property and the buildings on it (insured location) since the conclusion of the insurance contract (insured period). According to the underlying general insurance conditions, the buildings specified in the insurance policy are considered insured (insured items). The fire caused fire damage to the buildings (insured peril and causality).

For proof of the occurrence of the insured event, the policyholder in our case study again needs the information from the insurance policy and the underlying general insurance conditions. Fire damage to buildings is visibly recognizable and should be documented photographically. The policyholder's own photo or video recordings are sufficient. The policyholder should also keep fire fighter and police reports, if possible.

Depending on the type of damage event and the underlying insurance, additional factual elements may belong to the primary risk description.

Tip: After an insured event, policyholders should take a look at the underlying general insurance conditions and the prerequisites for the occurrence of an insured event. If the insurer already disputes that an insured event occurred, policyholders are well advised to consult an independent claims adjuster or a specialized lawyer.

2.3 Amount of the Claim

Furthermore, the policyholder must also present and, if necessary, prove the amount of the insurance claim or the extent of their damage.

Especially in property insurance, the insurance value is of great importance. Because the insurance value can, depending on the design of the insurance, form the basis for the compensation amount in the event of complete destruction of the insured building.

Tip: When concluding the insurance contract, policyholders should keep an eye on a correct determination of the insurance value to avoid the risk of underinsurance. The policyholder should also check the square meter specifications regarding the insured buildings as far as possible. In the event of a claim, the policyholder should keep all incurred offers and invoices.

3. Which Evidentiary Relief Benefits the Policyholder?

According to general principles under German law (§ 286 German Code of Civil Procedure – ZPO), the policyholder must provide full proof. This means that a court entrusted with the matter must gain full conviction in a free evaluation of evidence that a disputed factual assertion is true. The judicial conviction must therefore be based on a very high probability.

However, the policyholder may benefit from the so-called prima facie evidence. Prima facie evidence is a method of evidentiary relief in civil proceedings.

Prima facie evidence facilitates the proof of causality of a certain factual situation for the damage incurred, which is generally incumbent on the injured party. It applies to typical sequences of events in which a certain factual situation, according to life experience, indicates a certain cause for the occurrence of a certain result. Prima facie evidence can also be used to infer the cause from a certain result. Thus, prima facie evidence can also be relevant in determining the cause of a fire.

Suppose there is also a barn on the policyholder's property in our case study. The policyholder observed children playing with a found lighter in the barn. He loses sight of the children. A few minutes later, the barn catches fire. The fire spreads to the other buildings. Prima facie evidence can infer the handling of the lighter as the cause of the fire, as a typical sequence of events is present.

4. What Must the Insurer Present and Prove?

According to the civil procedural principles outlined above, the insurer bears the burden of presentation and proof for facts that prevent, extinguish, or hinder the claim.

4.1 Risk Exclusions

The insurer initially bears the burden of presentation and proof for the factual prerequisites of an exclusion clause. It is not sufficient for the insurer to merely assert that the prerequisites of an exclusion are given.

4.2 Forfeiture Rules – Especially Contractual Breaches of Obligations

If the insurer relies on forfeiture rules such as a violation of the pre-contractual duty of disclosure, premium default, risk increase, or a breach of obligations and a related reduction of the insurance payment, he must at least prove the objective facts. For violations of the duty of disclosure and breaches of obligations, this principle is codified in the German Insurance Contract Act – VVG (§ 69 para. 3 sentence 2 VVG).

Especially when faced with the allegation of having violated contractual obligations, policyholders can quickly encounter problems if they are not familiar with the principles of presentation and proof.

It needs to be emphasized: regarding contractual obligations, it is up to the insurer to prove the objective facts of a breach of obligations – including the causality between the breach of obligations and the occurrence or determination of the insured event.

Only when facts that establish an objective breach of obligations are undisputed or proven does the rebuttable legal presumption of gross negligence apply to the detriment of the policyholder (§ 28 para. 2 sentence 2 VVG).

In the above-mentioned case study, the insurer merely asserted the existence of a contractual breach of obligations: the policyholder allegedly failed to properly maintain the electronics, thereby violating contractually agreed safety regulations. Correctly, the insurer must present and prove which safety regulations or obligations the policyholder allegedly violated and how. The insurer would need to (possibly with the help of the policyholder) examine when and by whom the last inspection of the electronics took place and to what extent the policyholder fell short of their contractual obligations. Should the last maintenance have taken place earlier? If so, when? What is the basis for this timeframe? Would a timely maintenance have prevented the fire?

5. Defenses Available to the Policyholder

Next, the policyholder can rebut the legal presumption of gross negligence by proving that, despite the objective existence of a breach of obligations, he did not act with gross negligence subjectively.

Assuming the insurer had presented and proven in the above example that the policyholder objectively violated a contractual obligation because the last inspection of the electronics demonstrably took place longer ago than stipulated in the relevant safety regulations (9 months instead of the prescribed 6 months). In this case, the subjective element of gross negligence is legally presumed to the detriment of the policyholder. The policyholder can rebut this presumption by proving that he did not act with gross negligence – that is, he did not violate the required standard of care in a particularly severe manner. Perhaps the policyholder was aware that the electrical systems needed to be inspected. He scheduled an appointment with a specialist in a timely manner. The electrician canceled the appointment at short notice. A new appointment could only take place 3 months later. The policyholder can present corresponding emails between him and the electrician. In this case, the insurer would remain fully liable – without any reduction.

Furthermore, the policyholder has the option of providing the so-called causality counter-evidence ("Kausalitätsgegenbeweis", § 28 para. 3 sentence 1 VVG). According to this provision, the insurer remains fully liable if the policyholder can present and prove that the breach of obligation was neither causally related to the occurrence of the insured event nor to the determination and extent of the insurer's liability.

Let us assume in our scenario, that the insurer can prove that the policyholder violated a contractual obligation and the policyholder cannot exonerate himself. The policyholder simply forgot to have the electronics in their hobby workshop inspected. However, the policyholder can now prove that the uninspected electronics were not the cause of the fire because, according to the investigation results of the fire department and police, the workshop caught fire later than other parts of the building. The cause of the fire could not have been in the workshop. This would be an example of successfully providing causality counter-evidence and the insurer would remain fully liable according to § 28 para. 3 sentence 1 VVG.

6. Burden of Presentation and Proof Can Diverge

In insurance cover proceedings, the German procedural principle of secondary burden of presentation and proof can also gain significant importance:

If a party must prove facts that occur outside their own perception and within the opponent's sphere, the burdened party can hardly provide the proof.

In this case, the opposing party must – as far as possible and reasonable – present the facts originating from their sphere in a substantiated manner (i.e., as detailed as possible) and make them accessible for verification.

In the example case, the insurer must prove the objective facts of the contractual breach of obligations. However, the insurer can hardly know when, how, and by whom the policyholder had their electrical systems inspected. According to the secondary burden of presentation, the policyholder must then present the sequence of events – possibly by naming the engaged electrician, presenting maintenance protocols, or exchanged emails. Nevertheless, the insurer must prove, based on the newly obtained information from the policyholder's sphere, that the inspection of the electronics took place too late or improperly.

7. Conclusion

In the fictional initial example, the property insurer merely asserted the grossly negligent breach of an obligation by the policyholder. The policyholder was able to present when he last had the electrical systems inspected, thereby fulfilling their secondary burden of presentation. The insurer would not have been able to prove a violation of relevant safety regulations by the policyholder. Incorrectly, the insurer informed the policyholder that he would need to provide causality counter-evidence to avoid deductions. For the policyholder in the example, this uncertainty alone was enough to accept the insurer's inadequately calculated settlement offer.

This is often the case in practice as well. Policyholders should therefore be aware of which basic prerequisites of the insurance claim they have to prove (and which they do not). Statements by the insurer and also statements by experts, agents, and other service providers acting on behalf of the insurer during the settlement process should be critically questioned. In case of doubt, an independent claims adjuster or a specialized lawyer should be consulted.          

Author: Jem Schyma

This is the translation of an article that was first published in: Die VersicherungsPraxis 05-2023, p. 28 ff.