GERMANY Law and Practice Contributed by: Oliver Sieg, Helmut Katschthaler, Philipp Koch and Charlott Kujath, Noerr
Consequently, beyond the wording and structure of a contract and its terms, extrinsic circumstances – eg, pre-contractual negotiations – are also relevant for contract interpretation. However, when it comes to insurers’ standard policy wordings, whether or not used in relation to consum- ers or businesses, German courts apply different, more objective standards. Such insurance terms and conditions must be interpreted from the perspective of an average policyholder seeking to understand the specific type of insurance, without specialist knowl- edge of insurance law. German courts, therefore, tend to construe exclusion clauses in a restrictive manner. Even though not a general principle of German law, in the particular context of standard terms and condi- tions, including insurers’ standard policy wordings, a contra proferentem rule of interpretation also applies. If policyholders use insurance brokers for arranging coverage based on broker wordings, as is increasingly common nowadays, German courts may deviate from their general tendency to interpret insurance terms in the policyholder’s favour. 4.3 Cyber and Technology-Related Coverage Issues Cyber insurance is a young line of insurance. The sub- ject matter of coverage is technically complex and dynamic. While model terms were published by the industry association, in practice insurers and brokers frequently use their own proprietary wordings. Against this background, it is hardly surprising that cyber- insurance is still having teething problems. Typical points of dispute relate, for instance, to ambiguities in the definitional framework of triggers for coverage or exclusions. Several court proceedings have also concerned questions of policyholders’ pre-contractu- al duty of disclosure with respect to the structure and security of their IT systems. In particular, within the context of systemic losses, war and terrorism exclu- sions, as well as delineation from other lines of insur - ance, such as fidelity insurance, are also discussed. 4.4 Aggregation and Limits of Liability Aggregation, batch and serial loss clauses have long been, and remain, frequent sources of dispute in both direct insurance and reinsurance. This is largely
because such clauses are often ambiguous and the issue can be economically decisive: it may determine whether cover is available in a particular case. In the context of direct insurance, batch or serial clauses are regularly meant to operate as a means of limiting the insurer’s liability by restricting the avail- able coverage to one limit amount. Consequently, German courts, in line with the rather policyholder- friendly principles of contract interpretation (see 4.2 Policy Wordings and Interpretation Developments ), have ruled in various cases against insurers by curtail- ing excessive aggregation. In reinsurance, by contrast, a broad approach to aggregation is often crucial. It may allow the cedant to combine multiple losses so that their total exceeds the attachment point under an excess-of-loss pro- gramme, thereby triggering reinsurance cover. This issue became especially contentious in the aftermath of the COVID-19 pandemic, when parties disputed whether numerous business interruption losses could be aggregated and treated as a single “event” or oth- erwise meet the applicable aggregation criteria. 4.5 Sanctions and Illegality Issues Coverage of Fines and Penalties Is Prohibited Under German law, the insurance of fines or criminal penalties is prohibited, and corresponding payment transactions are void under Section 134 of the BGB. Systematic violations of these prohibitions by insur- ance undertakings can be sanctioned by the German Federal Financial Supervisory Authority ( Bundesan- stalt für Finanzdienstleistungsaufsicht – BaFin) as part of its ongoing supervision of deficiencies pursuant to Section 294 paragraph 2 of the German Insurance With regard to economic sanctions, German insurers are primarily subject to the sanctions regime of the European Union, which, for example, imposes exten- sive insurance prohibitions in the Russia sanctions Regulation (EU) No 833/2014 (and subsequent or supplementary regulations). While compensation for own losses connected to sanctioned countries is, in many cases, likely to remain permissible for EU-based companies, EU sanctions can, for instance, result in Supervisory Act (VAG). Economic Sanctions
131 I NSURANCE L I T IGATI O N 2026
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