Breach of duty of care

What we do

Insurer's Duty of Care
The duty of care is an important concept in Dutch law. In its capacity as a financial service provider, the insurer has a general duty of care towards consumers. Violation of the duty of care can lead to exorbitant fines from the financial authorities.

Duty of Care of an Insurance Intermediary
An insurance intermediary (insurance agent for short) is typically used in international trade and by international companies. The task of an insurance agent is to take out multiple insurance policies on behalf of the prospective insured. In international trade, a separate insurance policy often needs to be taken out for each shipment. It is therefore convenient to outsource the taking out of these insurance policies. An insurance agent has a special duty of care to safeguard the interests of the principal. Breach of this duty of care usually results in liability.

We have the experience and expertise to assume diverse roles, from advisory services to dispute resolution. We have an experienced team of lawyers and legal experts in insurance law. Contact us to discuss the possibilities.

What is the duty of care in insurance law?

Within insurance law, the duty of care is the obligation of a professional party to safeguard the legitimate interests of its client. In the context of insurance, this duty rests on two levels. The insurer, as a financial service provider, is subject to a general and a specific duty of care, based in part on Article 4:24a of the Financial Supervision Act (Wft) and on the requirements of reasonableness and fairness under Article 6:248 paragraph 1 of the Dutch Civil Code (BW). The insurance intermediary has its own duty of care as a contractor pursuant to Article 7:401 BW. At MKB Juristen, our lawyers and in-house counsel bring these standards together, for the international group insuring its fleet as well as for the baker on the corner who discovers that his buildings insurance is not paying out.

Duty of care of the insurance intermediary (Article 7:401 of the Dutch Civil Code)

The insurance intermediary (also known as an insurance broker or agent) must act as befits a reasonably competent and reasonably acting professional. This standard from Article 7:401 of the Dutch Civil Code has been refined by the Supreme Court and goes further than many entrepreneurs suspect. The duty of care is not limited to applying for and concluding the insurance, but continues as long as the policy is held in the portfolio (aftercare). Concrete obligations adopted in case law include:

• the intermediary must actively familiarize himself with the client's business operations and risks and inquire whether all relevant insurance policies are in place;
• he must warn of coverage gaps, for example the absence of environmental or business interruption insurance;
• he must periodically assess the insured sum against the actual value and warn against underinsurance;
• He must draw the client's attention to facts known to him that may be relevant to the coverage, such as vacancy or a property's sales situation.

If the intermediary falls short in this regard, he may be liable for the damage suffered by the insured as a result. However, an important nuance applies: a breach of the duty of care does not automatically lead to compensation. There must be a causal link between the failure and the damage, and the court may order the insured to bear part of the damage on the grounds of contributory negligence (Article 6:101 of the Dutch Civil Code) if the insured could have inferred from the policy documents sent that he was underinsured.

Duty of care of the insurer

In addition to the intermediary, the insurer itself has a duty of care. As a financial service provider, it must carefully safeguard the client's interests pursuant to Article 4:24a of the Financial Supervision Act (Wft). Furthermore, special duties of care arise from the principles of reasonableness and fairness and from specific statutory provisions, such as the duty to warn regarding the imminent lapse of coverage due to premium arrears (Article 7:934 of the Dutch Civil Code). The insurer must communicate clearly regarding the policy conditions, warn of coverage limitations, and the consequences of cancellation. The extent of this duty of care depends heavily on the circumstances: stricter standards apply to consumer insurance than to exchange insurance between professional parties, and the bar is set higher for a direct writer (without an intermediary) than when an expert intermediary is engaged.

What to do in case of a breach of the duty of care?

Do you suspect that your insurer or intermediary has breached their duty of care? If so, you may be able to recover the damages suffered. Our approach typically follows these lines: first, we determine which standard has been violated and whether there is a causal link to your damages; subsequently, we hold the party liable and attempt to reach a settlement. If this is unsuccessful, two avenues remain open. If you are a consumer or a small business owner, you can turn to the Financial Services Complaints Institute (KiFiD); we will guide you through the complaint procedure at KiFiD. For business and complex disputes, our lawyers conduct the proceedings before the ordinary courts. A duty of care issue is often linked to a coverage dispute; in such cases, we combine the duty of care claim with the handling of your policy dispute and the interpretation of the policy conditions.

Frequently asked questions about breach of duty of care

Does the duty of care also apply after the insurance has been taken out?
Yes. The duty of care of the insurance intermediary is an ongoing obligation. As long as the policy remains in his portfolio, he must warn you of changes and risks that affect the coverage, such as an outdated insured sum.

Does every breach of the duty of care lead to compensation?
No. There must be a causal link between the error and your damage. Moreover, contributory negligence (Article 6:101 of the Dutch Civil Code) may leave you responsible for part of the damage, for example, if you could have gathered from the policy documents that the coverage was insufficient.

Who should I hold accountable: the insurer or the intermediary?
That depends on who made which mistake. Sometimes it is the insurer who breached their duty to inform or warn, and sometimes it is the intermediary who gave incorrect advice or failed to provide aftercare. We assess who is liable and, if necessary, hold both parties liable.