Consequential loss in private liability insurance

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According to German law, you are obliged to compensate for damages you cause to another person or their property - § 823 BGB (German Civil Code). In addition to compensation for damage to property or personal injury, you are also liable for indirect losses, i.e. consequential losses, which may arise from one of these two types of damage. If you have taken out a private liability insurance policy before the occurrence of a claim, this will also cover claims related to consequential losses. If damage to your property has occurred due to a storm, hail, water or burglary, your household insurance will usually cover this.

What are consequential losses?

In personal liability insurance, a distinction is made between different types of damage, namely:

  • Material damage: This is all damage to a person's property, for example, if objects are damaged or destroyed. This also includes animals, which are not legally considered to be objects, but are treated as such in terms of regulations. This means, for example, that it is property damage if someone hits your dog with their car.
  • Personal injury: This refers to all cases in which people are injured, their health is impaired or they are even killed.
  • Financial loss

As a result of damage to property and personal injury, consequential losses may occur:

  • Consequential losses are those resulting from property damage or personal injury. In particular, this also includes so-called "unreal" financial losses, such as reduction of income, loss of earnings or loss of use, which are a consequence of the previous event. Also immaterial damages, which for example affect the body, right to respect, or freedom of a person can be consequential damages.

Pecuniary and immaterial damages in the German Civil Code

The German Civil Code (BGB) not only deals with the type and extent of compensation for damage to property or personal injury, but also with financial losses in the form of lost profits and with immaterial damage. According to § 252 BGB, a profit is deemed to have been lost if it could have been expected with high probability before the occurrence of the damage. According to § 252, damages for immaterial damage must only be paid in cases determined by law. In the case of injury to body or health, a monetary claim is legal, for example, as compensation for pain and suffering. In the case of immaterial damage, the so-called sentimental value must also be taken into account, which will be explained in more detail later. In principle, the injuring party does not have to compensate for interests whose economic value cannot be measured.

Some examples of consequential damages in liability insurance:

Damage event
Consequential losses
Types of damage
You left a box in the hallway that your neighbour tripped over. She broke her leg.
Your self-employed neighbour can't go about her business for several weeks and suffers financial losses.
Financial loss as a result of personal injury
You hit a passer-by with your bike and injured him.
The passer-by was on his way to sign a contract for a new job. Due to the injury, he could not keep the appointment and he lost the job.
Financial loss as a result of personal injury
After the accident, the passer-by still has pain in his knee for a long time and demands compensation.
Non-material damage as a result of personal injury

A consequential loss under home contents insurance is, for example, if the household contents have been damaged by water after a house fire.

What benefits does my private liability insurance offer in the case of consequential loss?

In general, damages in private liability insurance that are caused by the policyholder to third parties - unintentionally or through minor negligence - are insured within the scope of the agreed sum insured and the insured risks. All of Coya’s tariffs also cover damages caused by gross negligence. This includes personal injury and property damage as well as the consequential losses resulting therefrom, provided that a legal obligation exists. Depending on the type of damage, the insurer covers, for example, the following:

  • Damage to property: Assumption of the invoice amounts for the repair or replacement of the damaged objects
  • Personal injury: Assumption of claims for compensation for medical treatment of the injured party, as well as remedies or aids required by the injured party
  • Pecuniary loss as a result of personal injury (consequential loss): assumption of loss of earnings, compensation for pain and suffering, or pensions.

Depending on your chosen tariff or the individual stipulations in the insurance contract, the insurer will pay compensation not only in the event of direct or indirect damage caused by you, but also if the damage was caused by co-insured members of your household. In addition, damages caused by small animals living in your household, such as rabbits and cats, are also usually covered. The insurer also provides passive legal protection by defending against unjustified claims and, in the event of a legal dispute arising from them, for a lawyer, for experts and for court fees.

When does my private liability insurance not cover consequential losses?

Private liability insurance will not cover property damage, personal injury or consequential damage in the following cases, among others:

  • damage caused in the exercise of your profession
  • the damage was caused intentionally
  • the claim for compensation is unjustified (in this case, the insurer will reject unjustified claims)
  • the damage was caused to a person who is covered by your liability insurance
  • the damage was done to your pet
  • the damage was caused by a larger pet, such as a dog or horse, of which you are the owner
  • the damage was caused by you as a car user
  • the consequential losses relate to sentimental value

Damages caused by a professional activity

Personal liability insurance is not responsible for claims for damages if the damage results from your professional activity. If, for example, a customer in your shop is injured because he or she stumbles over a loose tile, personal liability insurance does not provide benefits either for the personal injury or for any consequential losses resulting from it. In this case, professional liability insurance is necessary.

Intentionally caused damages

If you have caused damage intentionally, your personal liability insurance will refuse to settle the claim. This would be the case, for example, if you got angry with your boyfriend and punctured his bicycle tyre. Neither the claim for compensation for damage to property nor for any consequential losses arising from it would be covered by the insurer. These could be, for example, loss of earnings due to a delay in getting to work. In this case, the property damage and the consequential losses will be completely on you if your boyfriend claims for compensation.

Gross negligence

If you have been negligent and are therefore responsible for damage to someone else’s property or person, the insurer will distinguish between minor and gross negligence. As a rule, minor negligence is present in the case of a temporary lack of attention. An example of this: A glass bottle fell out of your bike basket onto the bike path unnoticed by you and broke. The following cyclist was unable to brake in time and his front tyre was damaged. As a rule, your liability insurance will settle any damages in this case. However, if you were aware of a dangerous situation and damage occurred, gross negligence can be assumed. To stay with the example: you noticed the glass bottle falling out of your basket and breaking, but you did not pick up the pieces. The next cyclist accidentally ran over it with his front tyre and now has a flat. The insurer will refuse to settle the claim for property damage and any consequential losses, such as loss of income, if the insurance cover does not include gross negligence. All of Coya’s tariffs include gross negligence so this loss would be settled.

Unjustified claims for damages

Before your personal liability insurance company settles claims, it will carefully examine the injured party’s claims and defend against unjustified claims. If a legal dispute arises as a result, the insurer will bear the costs. This is why it is often referred to as passive legal expenses insurance. 

Damages to co-insured persons 

Personal liability insurance does not grant any compensation for damages that are caused by you to co-insured persons. For example, if you break your husband's smartphone, he usually cannot claim compensation from your personal liability insurance. You will then have to pay for the financial loss yourself, unless there is a reason for the household insurance to settle the claim.

Damage to your pets

If your own pet has been harmed by the carelessness of another person, that person is liable to pay damages and also bears liability for consequential losses.

Damage caused by animals that are not covered by private liability insurance

Only small, domesticated animals can usually be covered by private liability insurance. Nevertheless, as a private pet owner, you are also responsible for damages caused by larger animals such as horses and dogs. Pet owner's liability insurance is necessary here. Although it’s not obligatory in every federal state, it’s advisable in any case.

Damage caused while driving a motor vehicle

Property damage, personal injury and consequential losses caused by driving a motor vehicle are not covered by personal liability insurance, but by motor vehicle liability insurance. This is obligatory in Germany.

Consequential losses relating to sentimental value

The injured party has little chance of compensation if it is a consequential loss relating to sentimental value. This is the case, for example, when personal photographs are lost because you accidentally break your neighbour's smartphone. The claim for compensation for the property damage can be settled, but the cost of replacing the personal photos cannot be determined. The situation might be different, however, if your neighbour regularly sells semi-professional photos and suffers a loss of income due to the loss. This can be clearly calculated economically.

Sentimental value

In tort law, the term “sentimental value” denotes an interest in damages that cannot be measured economically. In this case, the injured party is entitled to compensation for the object, but the emotional consequential losses caused by the loss or destruction of the object cannot be measured in monetary value. This means that neither you as a private person, nor your insurance company, can be called upon to settle the claim.

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