Policy Condition / Duty (Obliegenheit)
A policy condition (Obliegenheit) is a duty imposed on the policyholder whose culpable breach does not give rise to a damages claim but can lead to a reduction or denial of the insurer's benefit.
Concept
A policy condition (German: Obliegenheit) is a duty imposed on the policyholder under the insurance contract, whose breach – unlike a genuine legal obligation – does not directly give rise to a damages claim by the insurer, but can instead, as a sanction, lead to a reduction or complete denial of the policyholder’s benefit entitlement.
Types of Policy Conditions
A distinction is made between pre-contractual duties (particularly the duty of disclosure upon contract formation), duties during the contract term (such as the prohibition on increasing the insured risk without the insurer’s consent), and duties following the occurrence of an insured event (particularly duties of notification, information, and loss mitigation). The legal consequences of a breach differ depending on the category and degree of fault involved.
Legal Consequences of a Breach
Under modern insurance contract law, complete denial of the insurer’s benefit is generally justified only in the case of an intentional or grossly negligent breach of a duty, with a fault-proportionate, pro-rata reduction of the benefit applying in cases of gross negligence; in cases of ordinary negligence, by contrast, the insurer generally remains obligated to pay the full benefit, provided the breach had no relevant bearing on the loss event (rebuttable presumption of causation).