The Professional Negligence Law Review: Germany


i Legal framework

Professional liability primarily follows the rules German civil law recognises for contractual and tort liability in general. While there exist several codes containing specific rules for different professions, the German Civil Code (BGB) provides the core legal framework from a liability perspective. It contains the applicable rules regarding both liability on the merits in contractual2 and tort law3 and the material rules for calculating the amount of damages.4

The BGB generally requires negligent conduct by a contracting party or a tortfeasor in liability claims.

As one can see, it is a peculiarity of German civil law that it recognises a strict segregation between liability from contracts and from tort. While it is possible that the facts of the case establish liability on the basis of both legal doctrines at the same time, the legal requirements of the two regimes are quite different. The most striking differences between the contract and tort regimes are:

  1. the law assumes fault by a contracting party whereas, in contrast, the plaintiff has to positively show and prove the tortfeasor's fault; and
  2. in cases of contractual liability, damage consisting of pure financial loss is recognised, while for tort liability this is only the case to a very limited extent.

German liability recognises strict liability, of course, but not necessarily in terms of professional liability – rather in such areas as product liability pursuant to the EU product liability directive, or motor liability.

The first question to be answered is whether an individual indeed breached a duty of care. This question is largely dependent on case law and there exists a vast multitude of judgments of German courts addressing various professions (e.g., doctors and other medical professionals, architects and engineers, lawyers, tax advisers and accountants, insurance brokers and banking professionals). Claims pursuant to tort law, however, are merely triggered if the tortfeasor violates certain 'absolute' legal positions (e.g., life, health, freedom, property) as defined by law. Thus, a breach of duty may lead to liability under contractual provisions, but not in tort. Needless to say, tort law only plays a role in certain areas of professional liability (e.g., medical malpractice and liability of construction professionals) while it is not applicable in other areas (e.g., insurance-broking malpractice and lawyers' liability). There exist, however, numerous overlaps between the different areas of liability law. If, for example, medical questions arise in a product liability damages claim, the court is required to deal with the peculiarities and settled case law regarding medical malpractice.5

Once a plaintiff is able to establish a certain breach of duty, one has to consider whether this breach indeed resulted in the damage claimed by the plaintiff. This causation aspect is one of the most relevant issues in professional negligence litigation and the German Federal Court of Justice (FCJ) has decided on these matters several times. Since it has not always taken the same legal position and, in particular, has resolved questions of onus and proof differently in different areas, such as lawyers' or banking professionals' liability, or in medical malpractice, the core issues of this very important aspect of professional liability are worth dealing with even at this stage.

As stated above, the client bears the onus of showing and proving causation between a breach of duty (especially wrong advice or omission of certain advice) and damage. The FCJ has acknowledged (from the early 1970s onwards, following a case that dealt with liability of an advertising agency)6 that it will generally be difficult for plaintiffs to prevail in litigation of this kind since it is nearly impossible to show and prove that one would have acted differently in full knowledge of the matter. The different senates of the FCJ have used different approaches to this issue. Some have taken the position that it is not incumbent on the plaintiff to show that it would have complied with the (omitted or wrong) advice provided by the defendant, and accordingly have proceeded on the assumption that the plaintiff would have complied, had the advice been rendered correctly.7 Some senates have taken the view that prima facie evidence rules are to be applied, which requires a situation that is suited to a generalised approach because of the circumstances at hand. According to the FCJ, this is the case when only one decision could reasonably have been made by the plaintiff, had correct advice been rendered to him or her.8 There might at first seem to be little difference in these positions, but the truth is that these different rules shift the onus onto the defendant significantly: if the legal assumption is made that the plaintiff would have complied with the defendant's advice (had it been given correctly), the defendant must strictly show and prove that this was not the case (which is usually impossible). If the court (merely) applies prima facie rules, it is sufficient for the defendant to show that there is no state of affairs that indicates a generalised approach, thus quashing the prima facie evidence.

A court will then determine whether a contracting party or a tortfeasor acted with fault, meaning at least a slight form of negligence is required. As described above, fault is assumed by law in contractual liability while the plaintiff has to positively show and prove the tortfeasor's fault. This distinction leads to different procedural requirements and eventually to a shift in the onus that can make the difference between winning and losing in litigation. Another notable difference is that a contracting party has to assume fault by its servants and auxiliary personnel while the tortfeasor is merely liable for its own conduct and only has to bear its own culpa in eligendo.

Common defences consist of contributory negligence by the plaintiff (or its servants and auxiliary personnel) and objections to the amount of loss alleged by the plaintiff. Those defences are available against both contractual and tort claims.

This is just a short introduction to the legal framework at hand and to the most common legal issues that parties argue about. It is, however, safe to say that the applicable legal doctrines regarding liability differ considerably across the various professions and these doctrinal differences are characteristic of the main legal questions – both material and recurring – that bear on the matter of liability in the different professions.

ii Limitation and prescription

Claims under German civil law are subject to limitation. There are several different limitation periods, but practitioners have seen an effort over the past few years to align those different periods to a similar standard to make the statute of limitations more predictable. However, a multitude of limitation periods is still in place, be it six months in certain claims arising from rental contracts, one year in certain commercial contracts, two years in warranty claims pursuant to sales contracts or even 30 years pertaining to rights in rem. The standard limitation period for liability claims is three years.

The standard limitation period depends on whether the plaintiff has gained knowledge of the defendant and of further circumstances establishing a claim. The three-year period commences on expiry of the year that the aforementioned requirements are fulfilled. However, to provide legal certainty, the law provides for a maximum limitation period of 10 or 20 years, depending on the violated right.

Other limitation periods merely depend on objective circumstances. For example, warranty and liability claims in sales contracts fall under the statute of limitations upon the elapse of two years after the good was handed over to the buyer (special rules apply to real estate).

Negotiations between the parties suspend the limitation period. Since it often is unclear when negotiations have begun and were eventually terminated, relying on this provision is usually not preferable. Parties would usually choose to waive the statute of limitations for a certain amount of time, which is legally possible. However, since German courts interpret this provision quite broadly, there is usually at least a short period, of a few days or weeks, in which the limitation period is suspended and the plaintiff given the time it needs to commence litigation.

German law recognises means by which limitation periods can be suspended for a longer period. These means suspend the limitation period and thus, ultimately, annul the defendant's potential objection that a claim has expired under the statute of limitations. The most usual means are by commencing litigation, entering into alternative dispute resolution (ADR) or serving third-party notices. Since the standard limitation period usually elapses at the year's end, it is often at this time of year that plaintiffs commence litigation. Third-party notices are an adequate procedural means for a defendant seeking to secure possible subrogation claims from becoming time-barred.

Limitation under German civil law is an objection (i.e., the defendant has to raise this objection to make it effective). The fact that a claim has expired under the statute of limitations does not need to be reviewed ex officio by the judge. In fact, if a claim is raised, even if it has obviously become time-barred – but the defendant does not raise this objection – the court will not (and is not even allowed to) dismiss the claim for this reason. The legal theoretical effect of this is not that the claim will cease to exist but rather will become unenforceable. In practice, it does not make a difference except that the defendant has to plead limitation.

The legal term 'prescription' is (obviously) used with different senses in common law countries. It can mean acquisition of a right or of an obligation as a result of a certain amount of time having elapsed. It can, however, also be used in a negative sense, meaning that a claim ceases to exist after a certain time has elapsed. While German civil law recognises this concept (e.g., Section 13 of the Product Liability Act contains this rule), it does not play a role in professional negligence claims pursuant to common German contractual or tort law.

iii Dispute fora and resolution

The civil court system in Germany consists of county courts, district or regional courts, higher regional courts and the FCJ. The county courts deal with matters of a value up to €5,000 and certain areas of law regardless of the amount at stake (e.g., family law and rental law). Matters concerning an amount in dispute of above €5,000 have to be brought before a district court. County and regional courts are virtually the only courts of first instance. District courts also serve as appellate courts for decisions by county courts. The higher regional courts serve as appellate courts for appeals against county court decisions in family law and against all regional court judgments where the procedural requirements for lodging an appeal are fulfilled. They serve as courts of first instance in a very limited way only (e.g., for litigation pursuant to the Capital Markets Investor's Model Litigation Act). The FCJ only deals with appeals against appellate judgments (and very seldom with first instance decisions) and only on the legal aspects of a matter (i.e., it does not serve as a trial court). As professional liability claims usually involve damages in excess of €5,000, they are generally dealt with in a district court or – upon appeal – in a higher regional court. Most district courts have established special chambers (e.g., for medical malpractice cases). The FCJ has issued several decisions in various professional areas as well.

Various means of ADR are recognised in Germany, such as arbitration, mediation or ombudsperson procedures. However, none of these proceedings is mandatory (at least not in professional liability matters) before litigation in court is commenced. Since litigating cases in Germany is not extraordinarily expensive and legal costs insurance is common, there seems to be a smaller call for ADR (except in medical malpractice cases) than in other countries. Moreover, courts are bound by law to try to settle cases at every stage of litigation and most courts offer mediation by specially qualified judges, thus there is simply no need to commence ADR proceedings when these means are addressed as part of litigation anyway.

Mediation through ombudspersons has become established in quite a number of areas over the past few years, especially since the Alternative Dispute Resolution for Consumers Act came into force. While ombudspersons existed beforehand and were active in professional liability cases, especially in insurance and banking, the past few years have seen an increase in ombudspersons acting in matters such as lawyers' professional indemnity (and fee disputes), investment funds or real estate. Decisions of those ombudspersons are binding only to a limited extent, usually dependent on the amount in dispute (e.g., below an amount of €15,000 or €5,000, depending on the respective ombudspersons' procedural rules). That said, since professional liability claims are generally higher than the aforementioned amounts, they are commonly litigated in the courts.

Civil litigation is predominantly governed by the German Act on Civil Proceedings (ZPO). While other codes, such as the German Act on the Constitution of the Courts are also relevant, the ZPO covers all principal aspects. For example, it contains rules regarding the course of litigation (including all appeals) and the court's conduct, service of documents, requirements regarding the parties' submissions, means of taking evidence, rules regarding judgments (including appellate judgments) and their enforcement, rules on arbitration and so on. As such, the ZPO is applicable to all professional liability claims litigated in court.

iv Remedies and loss

German civil law recognises a multitude of remedies, depending on the particular area of law.

The most important contractual remedy is 'performance'. A contracting party can claim for performance by its counterpart. In particular, in sales and working contracts when, under certain circumstances, it is possible to repeat performance of a contractual duty (usually when the original performance was not successful, such as in the delivery of a purchased product), remedies for performance and repeated performance are relevant in litigation practice.

Many professional liability claims, however, are based on irreversible damage (e.g., injuries that cannot simply be undone or progressive diseases that have been overseen and become untreatable in the interim). Claims for performance would be preposterous in these situations.

Basically, four remedies must be considered that may serve the plaintiff's desire best:

  1. avoidance (thus urging both parties to a contract to restitute all contractual performances);
  2. disclosure of certain information or documents;
  3. claim for damages (from contract or tort); and
  4. claim in restitution for unjust enrichment.

Avoidance and claims in restitution for unjust enrichment are certainly limited to rare occasions since they do not result in an award of damages, but in a 'reversed' performance. Disclosure and claims for damages are the remedies generally sought by plaintiffs – usually in an action by stages – since plaintiffs need disclosure of information or documents and use those to substantiate their claims for damages (e.g., in medical malpractice). German civil procedural law does not recognise discovery.

Where damages are concerned, it is important to know which damages a plaintiff may demand. Basically, German civil law differentiates between pecuniary (especially property and personal injury damages) and non-pecuniary loss (especially bereavement damages and damages for pain and suffering). Another categorisation differentiates between damages for positive interest and damages for preservation of the legal status quo (comprising negative interest and loss of integrity). Positive interest describes the plaintiff's interest to be awarded the equivalent of the promised bargain of a contract. Negative interest describes the plaintiff's interest to be awarded the loss resulting from the plaintiff's belief in a contractual declaration or avowal. Loss of integrity means the violation of the right to the integrity of certain legal positions (life, body, health, freedom, etc.), which is usually protected not only by contract, but also by tort law. German law recognises neither punitive damages nor bad-faith claims.

It is usually incumbent on the plaintiff to show there was damage that resulted from professional negligence. If the existence of damage or the amount of damages claimed by the plaintiff are in dispute, it is incumbent on the plaintiff to prove the facts in dispute. While the strict rules of proof pursuant to Section 286 ZPO apply, Section 287 ZPO contains relaxations of the aforementioned burden of proof that apply to the existence of damage and the amount of damages.

Specific professions

i Lawyers

Lawyers in Germany are bound to become members of the lawyer's chamber that supervises the area in which their firm or their office is located by way of compulsory membership. There are several chambers (one in each higher regional court's circuit, and a federal one). The relevant chamber gives advice to its member lawyers in, for example, fee disputes, disputes between lawyers, advice regarding employments, acquisitions of other firms and assessments of firm values. Furthermore, it represents the interests of its member lawyers in legislative and executive affairs, licensing questions and questions of education and training, and serves as the regulatory body for disciplinary affairs. Lawyers' courts are affiliated to each chamber, dealing with violations of rules of professional conduct.

The German Federal Code for the Legal Profession (BRAO) governs the profession itself, and the Rules of Professional Practice for Lawyers govern professional conduct. Moreover, lawyers' fees are regulated in the Scale of Lawyers' Fees.

All lawyers (and law firms) offering their services in Germany need to obtain and maintain compulsory insurance pursuant to Section 51 et seq. BRAO. All licensed liability insurers may offer professional insurance for lawyers, but it must fulfil the requirements of the aforementioned provisions. Section 51 et seq. BRAO, for example, provides for certain minimum limits, maximum deductibles and a catalogue of admissible coverage exclusions. The most relevant procedural effect of the lawyer's liability insurance being a compulsory insurance is that in cases of bankruptcy or where the policyholder vanishes, the plaintiff can commence litigation directly against the liability insurer pursuant to Section 115 of the German Insurance Contract Act (VVG), which is impossible otherwise.

As explained above, the FCJ has dealt with causation matters in different ways and one way of handling this issue is to apply prima facie evidence rules. Especially the FCJ senate dealing with lawyers' professional liability is of the opinion that wrongful or omitted advice by a lawyer typically falls under the prima facie evidence rules. This doctrine is, however, inapplicable if, according to the lawyer's advice, more than one form of conduct is reasonable, since in that case a generalised situation leading to only one reasonable reaction on the plaintiff's part does not exist.9

Courts in the past applied the doctrine of secondary liability. This doctrine dated back to case law of the Supreme Court of the German Reich10 and was adopted by the FCJ.11 This doctrine says that there is a duty of care for a lawyer to apprise its client of its own professional liability and on the statute of limitations that would apply in a claim against the lawyer. However, this obligation on the lawyer was justified by the fact that the BRAO recognised a special limitation that would be beyond the scope of the client's knowledge of the defendant and of further circumstances establishing a claim (unlike the current rules under the BGB, as mentioned above). Since the aforementioned special limitation has ceased to exist, it is doubtful that the doctrine of secondary liability still exists. On abrogating the aforementioned special limitation, the new legislation explained that since the standard rules have become applicable and these are dependent on the client's knowledge, there was no call for the doctrine of secondary liability any more.

The FCJ decided whether lawyer's instructions are to be interpreted as extending protection not only to the client, but also to third parties.12 Well acknowledged in German case law, this legal doctrine (protection of third parties under contract) holds that persons that may not have their own original contractual claim against a party in breach of a contractual duty may nevertheless be entitled to protection under an existing contract. Basically, the doctrine requires that the contractual performance may typically have an impact on the third party, that the contracting party has an interest in the protection of these third-party interests, and that these circumstances are perceptible to the obliged party. However, these requirements are not considered to be fulfilled merely when a lawyer has an indication that potential claims of third parties close to the claims of the laywer's client's claims may exist.

ii Medical practitioners

Medical practitioners in Germany are bound to become members of the medical practitioners' chamber that supervises physicians in their particular state (only the German state of North Rhine-Westphalia maintains two chambers, and there also is a federal chamber organised in the form of an unincorporated association). The chambers' areas of competence are similar to those of the lawyer's chambers.

The Federal Medical Practitioners' Act governs the profession (and especially the licence to practise medicine), and professional conduct is governed by the (Model) Professional Code for Medical Practitioners, which serves as a model for the (binding) Code of Professional Conduct of Medical Practitioners that each state chamber issues for its members. Moreover, physicians' fees are regulated in the Scale of Physician's Fees.

Those acts promulgated by the state chambers contain the requirement for medical practitioners to obtain and maintain 'sufficient' insurance cover. These provisions may serve as an order to obtain and maintain compulsory insurance (without explaining what sufficient coverage means, but the minimum requirements of Section 114 VVG will apply in this case). The fact that the duty to obtain and maintain sufficient liability insurance is enacted in acts promulgated by the state chambers is sufficient to qualify the insurance as compulsory pursuant to Section 113 VVG, as the states have empowered the chambers to impose the obligation (although this is contested in German literature with regard to some states). Moreover, some state laws provide a requirement for compulsory insurance, but there does not exist federal law in this respect. Ultimately, EU Directive 2011/24/EU requires health service providers to maintain a guarantee or similar security measures for their professional liability, and this directive has been transposed in some states, and in some of those, lawmakers decided to introduce the requirement for compulsory insurance as well (which is also applicable to hospitals). The legal effects of Section 115 VVG are the same as those described in the section concerning lawyers above.

ADR plays a relevant role in medical liability cases. First of all, patients may ask their statutory health insurance to cover the issue of expert reports (at no charge) when they believe a physician's conduct has amounted to malpractice. Furthermore, the chambers have introduced arbitration boards that can conduct expert procedures upon the consent of both parties (patient and physician), thus giving parties an opportunity for early settlement; the results, however, are non-binding. These procedures are also free of charge for the patient, as the costs are borne by the medical practitioner's liability insurance.

Medical practitioners in hospitals are usually liable under tort law, and the patient's contractual partner – either the hospital or the medical practitioner who entered into a contract with the patient – is (additionally) liable under contract law. Any breaches of duty by employed physicians are to be attributed to its employer (usually a hospital) by law. German courts have developed a differentiated system of liability resulting from medical malpractice and from violation of the duty to inform the patient. Medical malpractice is established when a medical practitioner is in breach of medical standards that derive from medical science and clinical experiences, and this must be shown and proven by expert evidence in litigation. This breach of medical standards must cause damage to the patient's health to establish the physician's or hospital's liability. Liability from a breach of duty to inform the patient is led by the idea that a physician's medical intervention violates the patient's bodily integrity even if this conduct is lege artis. The intervention may be justified if the patient has given prior consent; however, this, requires prior and proper elucidation of the proposed medical procedure for the patient's benefit, which again requires an explanation of the general risks of the procedure, so that the patient may form an accurate picture of the medical intervention that will be suffered. The level of detail to be provided to the patient depends on the medical indications for the planned intervention. The patient must then show and prove that the risk that was not explained to him or her has indeed been realised in the health damage suffered.

Medical malpractice litigation recognises some peculiarities especially regarding substantiation of a claim: the patient does not need to substantiate his or her claim in detail – it is sufficient to allege the facts establishing a claim. While the onus lies with the patient, the courts have developed an assumption of the physician's malpractice when entirely controllable risks materialise or when the physician's documentation in the patient's file is incomplete. Furthermore, the patient will usually not be able to show causation between the breach of duty and his or her health issues. Thus, the courts have adopted a shift of the onus onto the medical practitioner in cases where the malpractice was grossly negligently or where the physician abstained from proper assessment of diagnostic findings. It is not necessary for a patient to demonstrate concrete indications for a breach of duty. It is sufficient for the patient to demonstrate facts that allow a presumption of a certain medical malpractice from the consequences suffered by the patient.13 Ultimately, proper conduct regarding informing the patient has to be shown and proven by the physician. The individual liability of one medical practitioner expires at the point where another medical practitioner's malpractice begins. The FCJ had to decide on the liability of a radiologist who was called in by an accident insurance consultant and negligently made a diagnostic mistake after an occupational accident had occurred. The FCJ decided that the (public) accident insurance consultant's public duties ended and the subsequent treatment contract (governed by private law) began as soon as the decision for a special medical treatment had been made and documented in the accident insurance consultant's report.14

iii Banking and finance professionals

Unlike lawyers, accountants, auditors, architects and medical practitioners, banking and finance professionals are not organised in chambers since the existence of chambers is first and foremost justified historically by the idea that certain professions complement governmental duties and responsibilities, and thus access to and the conduct of those professions should be properly monitored. From a regulatory perspective, that is not the case for banking and finance professionals. German civil law, however, recognises special banking law in several regulations contained in the German BGB and in other acts such as the Securities Trading Act or the Banking Act.

It is common that banking products (e.g., funds, company shares, derivative instruments or bonds) are sold by banks (through their employees) themselves, thus professional liability of banking and finance professionals is usually litigated against the bank itself. Any breaches of duty by those professionals are attributed to their employers, usually a bank. Besides, there exist other professionals engaged in selling banking products, such as investment brokers or financial services brokers (whose conduct is usually not attributable to a bank). Their professional conduct (especially the requirements to be fulfilled to obtain a licence) is governed by Section 32 et seq. of the Banking Act and Section 34f/34h of the Trade, Commerce and Industry Regulation Act (GewO), depending on which type of business they specialise in.

Section 34f/34h/34i GewO requires liability insurance for finance brokers, making coverage of this kind compulsory pursuant to Section 113 et seq. VVG. The option under Section 33 Paragraph 1 Section 2 of the Banking Act to fulfil the statutory capital requirements by substitute insurance coverage does not qualify as compulsory insurance.

As explained above, the FCJ has dealt with causation issues in different ways and one way of handling this issue is to concede to the plaintiff that it would have complied with the defendant's advice, had it been rendered correctly.15 The FCJ applies this doctrine in banking and finance professionals' liability.16 In 2012, the FCJ extended this judicial principle to professional liability in investment broking cases (and especially with regard to kickback fees).17

Another notable example of the FCJ case law regarding banking law and banking professionals' liability pertains to the FCJ's tendency to assume that contracting parties (bank and customer) enter into an advisory contract virtually upon the 'first meeting' of the parties. While German literature has discussed and criticised this standpoint multiple times for imputing to parties a non-existent will to enter into a contract,18 the FCJ has adhered to this position so far and it has been upheld by the German Federal Constitutional Court.19

iv Computer and information technology professionals

There are no notable peculiarities regarding professional liability of computer and information technology professionals.

v Real property surveyors

The German federal government has engaged in the process of substantially changing the law of brokerage with regard to real property. The BGB contains rules that should make sure that the party employing a broker should pay for his or her services, but the reality is that – at least where real property is concerned –the buying party is usually obliged to pay brokerage fees, no matter if the seller, as is often the case, employed the broker. Given that the real property market has become very narrow in recent years, buyers often faced this situation but were unable to escape it. Moreover, common market principles in terms of pricing competition for brokerage fees do not take place as the seller has no keen interest in negotiating a reduced brokerage fee.20

It is expected that the new Sections 656a to 656d BGB will be inserted, which contain, inter alia, the following essential innovations:

  1. real property brokerage contracts concerning apartments and single-family homes require text form (e.g., email) to be valid;
  2. if the real estate agent acts as a representative of the interests of both buyer and seller on the basis of two real property brokerage contracts, he or she can only demand commission from both parties in equal parts;
  3. if only one party has made the decision to engage a broker, that party is obliged to pay the brokerage fee; and
  4. agreements with the aim of passing on the costs to the other party are only effective if the costs passed on do not exceed 50 per cent of the total brokerage fee to be paid.

According to Section 34c Paragraph 1 GewO, real estate agents, loan brokers, property developers, construction supervisors and residential property managers require permission to engage in their commercial activities. Pursuant to Section 34c Paragraph 2 number 3 GewO, this permission is not granted if the residential property manager cannot provide proof of professional liability insurance. The minimum scope of such insurance is regulated in Section 15 of the real estate agent and property developer regulation (MaBV). A similar obligation for real estate agents does not exist. However, Section 34c Paragraph 5 GewO contains certain exceptions from Section 34c Paragraphs 1 to 3 GewO. An example of this would be traders who, for the sole purpose of financing the sale of goods or the provision of services, arrange for the conclusion of loan contracts or provide evidence of the opportunity to conclude such contracts21 or contracts, insofar as part-time use of residential buildings within the meaning of Section 481 BGB is proven or arranged in accordance with Paragraph 1 sentence 1 No. 1.22 Section 34c GewO is a statute protecting not only the fact of there being certain public requirements of professional conduct, but also the interests of individual persons or parties. Hence, an individual person or party is able to assert claims in accordance with Section 823 Paragraph 2 BGB in cases of a breach of that statute. However, the FCJ found that Section 34c GewO does not give rise to liability for pure financial loss against a loan broker in cases of absence of a business licence.23 The FCJ found that lawmakers did not intend that statute to give rise to tort protection in that particular case.

If a real estate agent takes out professional liability, it should be noted that the insured risk is not limited to the classic brokerage model. According to the Higher Regional Court of Naumburg,24 a contract is to be interpreted as a brokerage contract as long as the essential elements of the performance-related remuneration, the proof or mediation activity and the client's freedom of entering into the sales contract are present. The contract's designation is not decisive in this respect.

The interest of a real estate agent who chooses to take out professional liability insurance is typically directed towards cover for his or her entire professional activities. This includes areas that a real estate agent may need to address in the course of his or her professional activities. Nevertheless, he or she leaves the boundaries of the insured risk when his or her professional conduct is no longer a performance-related and remunerated proof or mediation activity.

In the case of surveyors, including real property surveyors, it is possible to become appointed as a public expert in terms of Section 36 GewO. However, such public appointment is not a legal requirement to work as a surveyor since the term 'surveyor' is not protected by law. Anyone who is confident of having sufficient special skills and experience in a particular field can call himself or herself an expert or a surveyor in Germany (but not a publicly appointed one).25 This has also been confirmed by the German Federal Court of Justice.26

vi Construction professionals

Architects in Germany are bound to become members of the architects' chambers that supervise architects in their respective states; the state chambers are members of the federal architects' chamber, which is organised as an incorporated association. The chambers' areas of competence are similar to those of the lawyers' and medical practitioners' chambers. There also exist engineers' chambers, which are assigned to the corresponding architects' chambers.

Individual state architect acts govern the profession itself, and a code of professional conduct issued by each state chamber governs professional conduct. Architects' and engineers' fees are regulated in the Scale of Architects' and Engineers' Fees. Ultimately, architects and engineers are subject to a multitude of federal and state laws (building codes, safety regulations, public procurement laws, etc.).

The situation regarding compulsory insurance is the same as that faced by medical practitioners: rules for compulsory insurance are not regulated in one specific law but in each applicable state law (because the professional architect's and engineer's law is state law for constitutional reasons). To a very limited extent, there exist rules for compulsory insurance of real property surveyors, mainly in eastern Germany.

The doctrine of secondary liability (which has probably ceased to exist in legal professions) is still applicable in the liability law of construction professionals. According to this doctrine, there is a duty of care for an architect or construction professional to apprise his or her client of building defects and the root causes of the defects, as well as the legal situation arising, even if that pertains to planning or supervisory errors by the construction professional himself or herself.27 The customer's claim for damages arising from planning or supervisory errors also includes a claim against the architect for the advance financing of rectification measures. This claim follows from the fact that the customer has the right to rectify defects on his or her own in accordance with Section 642 BGB. Thus, the FCJ found that the customer is to be protected against the necessity of having to financing such measures in advance of the claim.28 Since the limitation of professional liability claims is (like the above-noted legal situation in legal professions) still independent of the client's knowledge of the defendant and of further circumstances establishing a claim, there still exists a necessity for this doctrine. Claims for damages are often based on the expected but as yet unpaid costs for necessary remedial actions. However, value added tax (VAT) is only to be paid as damages29 if and when it is actually incurred. That means that the full amount of compensation only has to be paid if VAT has actually been incurred. Hence, there is no opportunity to claim fictitious remedial costs inclusive of VAT if the injured party does not actually repair the damaged property.

vii Accountants and auditors

Tax accountants and auditors in Germany are bound to become members of their respective chambers. There are 21 tax accountants' chambers, which supervise the area in which their firm or their office is located by way of compulsory membership. Furthermore, there exists one federal tax accountants chamber and one federal auditor's chamber. The aforementioned chambers' areas of competence are similar to those of the lawyers' chambers, but, unlike the lawyers' chambers, they also execute and supervise the exams that must be passed to become a tax accountant or an adviser.

The German Tax Accountants Act governs the profession itself, and the Act of Professional Conduct of Tax Accountants governs professional conduct. Moreover, tax accountant's fees are regulated in the Scale of Tax Accountant's fees. The German Auditors Act governs the profession itself, as well as professional conduct and auditors' fees.

All tax accountants and auditors (and tax accountancy and auditing companies) offering their services in Germany must obtain and maintain compulsory insurance pursuant to Section 67 et seq. of the German Tax Accountants Act and Section 54 of the German Auditors Act. All licensed liability insurers may offer professional insurance for accountants and auditors, but it must fulfil the requirements of the aforementioned provisions. Like Section 51 et seq. of the German Federal Code for the Legal Profession, the aforementioned provisions provide for certain minimum limits, maximum deductibles and a catalogue of admissible coverage exclusions. The procedural effects of Section 115 VVG also apply.

The causation issues as explained in the chapter on lawyer's liability pertain to tax accountant's and auditor's liability as well since these professions' liability is supervised by the same FCJ senate as the lawyer's liability.

The secondary liability of tax accountants and auditors is likely to have ceased to exist as well pursuant to the same reasons as explained in the chapter regarding lawyer's liability.

viii Insurance professionals

Like banking and finance professionals, insurance professionals are – for the same reasons – not organised in chambers. German civil law, however, recognises special insurance law in several regulations contained in the VVG, the GewO and the German Insurance Supervision Act.

It is common that insurance products are sold by either insurance agents (usually as salesmen for one or a few insurers) or insurance brokers, who enter into a contract with the policyholder.

That differentiation is picked up in Section 6 VVG, which provides for duties of information and elucidation to be fulfilled by the insurer, except when the policyholder has entered into a contract with an insurance broker. Violations of Section 6 VVG give rise to claims against the insurer itself. As insurers working with insurance agents usually fulfil their duties under Section 6 VVG through these insurance mediators, any breaches of duty by these persons are attributed to the insurer.

Section 61 et seq. VVG provides for the same duties to inform, and explain to, the policyholder, but these duties pertain to the insurance agent and insurance broker only. Any breach of these duties by insurance agents or brokers may give rise to claims against the aforementioned insurance mediators.

The professional conduct (especially the requirements regarding obtaining a licence) of both insurance agents and insurance brokers is governed by Section 34d GewO.

Section 34d GewO requires liability insurance for insurance agents and insurance brokers, making such insurance compulsory pursuant to Section 113 et seq. VVG. The extent of the minimum coverage is regulated by Section 8 et seq. of the German Regulation on Insurance Mediation.

The causation issues explained in the section on banking and finance professionals' liability also pertain to insurance professionals' liability.30

Year in review

The BGB contains provisions for working contracts that, until the end of 2017, applied to architects' and engineers' contracts, under the FCJ's authority. In 2018, following new legislation, a completely revised law of building contracts entered into force. The most relevant provision regarding professional liability is the new Section 650t BGB, which addresses the following issue: Since the 1960s, it had been a commonly held view in Germany that a contractor and the architect (despite legal concerns) are jointly and severally liable to the builder if the contractor executes a planning error by the architect, or if the architect fails to recognise faulty work by the contractor and fails to correct defects where the architect has been retained to supervise the work.31 This regime led to the problem that the builder could choose whom to make a claim against, the architect or the contractor. Since the contractor had a right to repeat its performance, the builder often instead raised direct claims against the architect and went for damages, thus effectively taking the chance to obtain repeat performance from the contractor, while coercing the contractor to satisfy the architect's internal subrogation claim that resulted from the joint and several liability pursuant to Section 426 BGB. Section 650t BGB now eliminates this flaw by granting the architect a right to deny the claim if the builder has not requested, unsuccessfully, repeated performance from the contractor beforehand.

The FCJ had to deal with the question of when and whether a defect is sufficiently well described by a party in litigation against a construction professional. In cases of damages claims due to defects, the customer will meet the requirements for a sufficiently specific request for the removal of defects, as well as a conclusive description of the defects in the process, if he or she describes with sufficient clarity the phenomena attributed to deviations from contractually agreed characteristics; he or she is not required to describe the causes of a defect in detail (the 'indication theory').32

With regard to construction or defective product claims, legal practitioners were awaiting a further decision of the FCJ that may have quite an impact on the question as to the extent to which 'fictitious damages' may be claimed. In 2018, the FCJ amended its decades-old regime dealing with damages arising from a building defect. While previously the builder was generally able to make a claim for correction costs even if the defect was not remediated, the FCJ has since taken the exact opposite view. In February 2018, the Seventh Civil Senate of the FCJ decided that builders can only make a claim for correction costs once the defect has in fact been remediated. This is also the case for damages claims against construction professionals if the claim is based on planning or supervision errors that have already been executed in a building.33 Courts of first instance over the past few years have been asked to extend this case law to other areas of law, such as sales law and tort law, and it will be interesting to see whether other senates of the FCJ (different senates are competent for different areas of law) will follow the Seventh Civil Senate in future. The Higher Regional Court of Frankfurt already confirmed that the rationale behind this decision is also to be applied to sales law,34 but the Higher Regional Court of Düsseldorf denied it.35

Now the Fifth Senate of the FCJ, which is competent for real estate purchases, has decided that a contractual claim for damages due to defects in the acquired property can still be calculated on the basis of the (fictitious) costs for remedial measures likely to arise but not yet incurred. Buyers do not have to pay potentially high amounts of money for repairs in advance.36

The decision was eagerly awaited, because the Seventh Civil Senate had given up its long-standing case law on contract-based claims for damages, according to which the damage assessment was permissible on the basis of the likely costs necessary for defect removal. It has become clear now that this legal doctrine cannot be transferred to liability for material defects under commercial law. In particular, the buyer is not entitled to an advance payment (unlike the customer under contract law). However, it would not be justifiable if the buyer of an item had to finance in advance the intended removal of defects. An exception only applies with regard to VAT, which, as in tort and contract law, only has to be reimbursed if and to the extent that it is actually incurred. Incidentally, a submission to the Grand Senate for Civil Matters on account of the divergence between the two Senates was not necessary after the Seventh Civil Senate, on request, deepened and supplemented the reasons for amending its long-standing stance on this question.

The European Court of Justice (ECJ) decided that Germany had violated its obligations under Article 15 I, II(g) and III of Directive 2006/123/EC of the European Parliament by providing binding (minimum and maximum) fees for planning services retained by architects and engineers.37 Hence, Germany amended the fee statute for architects and engineers (HOAI) from 1 January 2021 onwards. If an architect or engineer demands a fee calculated according to the minimum rates,38 it is up to that professional to demonstrate and, if necessary, prove that he or she has been provided with the services charged for according to the minimum rates. The ECJ decided that while mandatory minimum fees might help prevent bargain offers, maximum fees, on the other hand, violated European law. The new law allows for a more variable approach but makes it clear that the new HOAI preserves a reasonable (but no longer binding) fee structure.

Outlook and future developments

As explained in Section I, the FCJ has in the past shown inclinations to be quite consumer-friendly. There have not been any indications that this trend will stop in the near future.

For example, liability of legal advisers, especially lawyers, has been expanded significantly over the past few years. A notable judgment of the FCJ in 201539 – despite claiming the opposite – overturned the Roman law axiom of iura novit curia in deciding that a lawyer has to not only accurately show the facts of the case, but also convince the court that its legal assessment is incorrect – and even rectify the legal errors the court is succumbing to, thus asking more from a lawyer than from the court itself. The FCJ continued this line of reasoning in a recent decision.40

This is just one example showing that the FCJ is prone to assuming liability on the merits quite quickly – and thus allocating liability to professionals maintaining liability insurance.

It is, however, a completely different matter when it comes to the amounts of damages awarded to plaintiffs in the past. While this issue is not exclusive to professional liability, it has certainly had some impact in this area and especially in relation to medical malpractice. Traditionally, German courts have been reluctant to award extensive damages for pain and suffering. Seldom has a German court awarded damages in excess of €500,000 for pain and suffering. This Pandora's box could, however, be opened in the near future in the wake of new legislation regarding damages for pain and suffering for survivors: pursuant to German law de lege lata until mid-2017, survivors could not be awarded damages for pain and suffering had they not suffered a condition that culminated in shock or even in their own injury. Suffering the 'usual' feelings that attend the loss of loved ones was not deemed sufficient. The aforementioned new legislation now dispenses with personal shock or injury as a requirement to be awarded damages for pain and suffering upon injury or death of loved ones (although harm from shock or bereavement may still be incurred). Legal professionals will have to wait and see if this new law will lead to a more liberal handling of damages for pain and suffering, and in turn lead to new 'record-breaking damages' in the near future. In a very recent decision,41 however, the FCJ denied damages for pain and suffering of the heirs of a patient who was kept alive by doctors even though he was multimorbid and unable to communicate because of dementia. Where lower instance courts had awarded damages because the patient (who had not issued a patient's provision) was alleged to have suffered needlessly, the FCJ held that life as such cannot be seen as a cause for damages. This does not necessarily reflect upon future decisions in regard to the amount of damages awarded, but it shows that a certain reluctance concerning damages for pain and suffering is still ingrained in the German legal system.

It will be interesting to see how – and if – the downside of these developments will be absorbed by the insurance industry. In the face of constantly increasing claims expenditures in relation to medical malpractice, some well-known insurers have retreated from that business. This has led to discussions in Germany as to whether and how medical malpractice coverage, especially in obstetric medicine, will sustain in the years to come.

It remains to be seen how Germany will react to the decision of the ECJ on binding fees for planning services retained by architects and engineers. It is quite probable that the federal government will promptly cancel the mandatory character of the binding fee. There will be no effects With regard to mandatory fees for lawyers.

The lasting effects of the global covid-19 pandemic, however, will have noticeable effects on case law in the near future, especially in cases of closure insurance. The controversial issue is whether existing closure insurance includes coverage for official measures due to the coronavirus pandemic. Most closure insurance contracts were entered into before the coronavirus became known, which means that general policy conditions typically do not include this special variant of the coronavirus as a reason for closures. To date, this question has yet to be decided by the FCJ. The Higher Regional Court of Stuttgart and other Higher Regional Courts have actually denied that such closures are covered42 because if policyholders had indeed wanted to insure plant closures on account of official measures due to upcoming or future pandemics, the wording would have had to consider potential events of this kind. This even applies in cases of (allegedly) rather unpredictable events – as the coronavirus of 2019 undoubtedly was. It remains to be seen how this question will be decided by the FCJ and what effects this will have on the liability of insurance brokers who sold closure insurance.

Computer and information technology professionals find themselves in an ever faster-spinning world – cloud computing, new hardware solutions and the fact that day-to-day life is managed by apps and computer devices gives rise not only to new opportunities, but also to abuse and criminal conduct. This steadily advancing technological development makes it necessary for insurers to offer more and more complex services to their IT professional policyholders, such as tech errors and omissions insurance and cyber insurance.


1 Martin Alexander and Carsten Hösker are partners at BLD Bach Langheid Dallmayr.

2 Section 280 et seq.

3 Section 823 et seq.

4 Section 249 et seq.

5 German Federal Court of Justice (FCJ), decision of 16 February 2021 – VI ZR 1104/20, NJW 2021, 1398.

6 German Federal Court of Justice (FCJ), decision of 5 July 1973 – VII ZR 12/73, NJW 1973, 1688.

7 FCJ, decision of 22 November 2983 – VI ZR 85/82, NJW 1984, 658 (medical malpractice); same, decision of 16 November 1993 – XI ZR 214/92, NJW 1994, 512 (banking professionals); Federal Constitutional Court, decision of 08 December 2011 – 1 BvR 2514/11, NJW 2012, 443 (banking professionals).

8 FCJ, decision of 30 September 1993 – IX ZR 73/93, NJW 1993, 3259; same, decision of 23 September 2004 – IX ZR 137/03, NJW-RR 2005, 494 (lawyers); same, decision of 15 May 2014 – IX ZR 267/12, NJW 2014, 2795 (lawyers and tax advisers); same decision of 16 July 2015 – IX ZR 197/14, NJW 2015, 3447.

9 FCJ, decision of 30 September 1993 – IX ZR 73/93, NJW 1993, 3259; FCJ, decision of 23 September 2004 – IX ZR 137/03, NJW-RR 2005, 494; FCJ, decision of 15 May 2014 – IX ZR 267/12, NJW 2014, 2795; FCJ, decision of 16 July 2015 – IX ZR 197/14, NJW 2015, 3447, and FCJ, decision of 22 June 1993 – XI ZR 215/92, NJW 1993, 2434 before the FCJ changed its position.

10 RGZ (civil law decisions of the Supreme Court of the German Reich), 158, 130.

11 FCJ, decision of 7 February 2008 – IX ZR 194/04, NJW 2008, 2041.

12 FCJ, decision of 9 July 2020 – IX ZR 289/19, NJW 2020, 3169.

13 FCJ, decision of 18 February 2020 – VI ZR 280/19, NJW-RR 2020, 720.

14 FCJ, decision of 10 March 2020 – VI ZR 281/19, NJW-RR 2020, 790.

15 FCJ, decision of 30 September 1993 – IX ZR 73/93, NJW 1993, 3259; same, decision of 23 September 2004 – IX ZR 137/03, NJW-RR 2005, 494 (lawyers); same, decision of 15 May 2014 – IX ZR 267/12, NJW 2014, 2795 (lawyers and tax advisers); same, decision of 16 July 2015 – IX ZR 197/14, NJW 2015, 3447.

16 FCJ, decision of 16 November 1993 – XI ZR 214/92, NJW 1994, 512.

17 FCJ, decision of 08 May 2012 – XI ZR 262/10, NJW 2012, 2427; same, decision of 15 March 2016 – XI ZR 122/14, NJW-RR 2016, 1187.

18 cf. Emmerich in MünchKomm-BGB, vol. 2, 7th ed. 2016, § 311 margin No. 97 et seq.

19 Federal Constitutional Court, decision of 8 December 2011 – 1 BvR 2514/11, NJW 2012, 443.

20 Bundestagsdrucks. 19/ 15827, p. 10.

21 Section 34c Paragraph 5 number 2 GewO.

22 Section 34c Paragraph 5 number 4 Gewo.

23 FCJ, decision of 14 July 2020 – VI ZR 208/19, VersR 2020, 1452.

24 Higher Regional Court of Naumburg, decision of 14 March 2018 – 4 U 58/ 17, VersR 2019, 614, 615.

25 Bleutge, Landmann/Rohmer, GewO, Section 36 item No. 21.

26 FCJ, decision of 6 February 1997 – I ZR 234/94, GRUR 1997, 758.

27 FCJ, decision of 26 October 2006 – VII ZR 133/04, NJW 2007, 365; same, decision of 10 October 2013 – VII ZR 19/12, NJW 2014, 206.

28 FCJ, decision of 8 October 2020 – VII ARZ 1/20, NJW 2021, 53.

29 Section 249 Paragraph 2 BGB.

30 FCJ, decision of 22 May 1985 – IV a ZR 190/93, NJW 1985, 2595; same, decision of 30 November 2017 – I ZR 143/16, VersR 2018, 349.

31 FCJ, decision of 01 February 1965 – GSZ 1/64, NJW 1965, 1175; same, decision of 22 December 2011 – VII ZR 7/11, NJW 2012, 1071.

32 FCJ, decision of 4 November 2020 – VII ZR 261/18, ZfBR 2021, 150.

33 FCJ, decision of 22 February 2018 – VII ZR 46/17, NZBau 2018, 201.

34 Higher Regional Court of Frankfurt, decision of 21 January 2019, 29 U 183/17, BeckRS 2019, 370.

35 Higher Regional Court of Düsseldorf, decision of 9 October 2018, I-24 U 194/17, BeckRS 2018, 31442.

36 CJ, decision of 12 March 2021 – V ZR 33/19, IBR 2021, 266.

37 ECJ, decision of 4 July 2019 – C-377/17, (Kommission / Bundesrepublik Deutschland), NVwZ 2019, 1120.

38 FCJ, decision of 14 May 2020 – VII ZR 205/19, ZfBR 2020, 658.

39 FCJ, decision of 10 December 2015 – IX ZR 272/14, NJW 2016, 957.

40 FCJ, decision of 18 October 2017 – LwZB 1/17, NJW 2018, 165.

41 FCJ, decision of 2 April 2019 – VI ZR 13/18 – NJW 2019, 1741.

42 Higher Regional Court of Stuttgart, decision of 15 February 2021 – 7 U 351/20, r+s 2021, 139.

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