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Good to know: legal bases for liability

Jul 22, 2020.

In this article, we explain the benefits of professional indemnity insurance. But what is it legally based on and what do service providers need to know? We spoke to Generali expert Ali Avci about fault-based liability and causal liability in order to shed more light on these legal bases for service providers.

Ali, what exactly is liability?

Liability is defined as the requirement laid down by law to indemnify any harm inflicted on others. If you cause harm by not being careful, you are probably also liable for it. Lawyers call this “fault-based liability”. However, liability doesn’t always arise from a person directly causing harm to another person. In many cases, it is already sufficient if your action – or failure to take action – was the cause of the harm.



So is there also the concept of indirect fault?

Let’s take icy steps as an example: the owner can’t do anything about the frost, but is still liable if someone slips on it and injures themselves. However, this only applies if the owner doesn’t have the steps de-iced, even though he knew about their condition or at least could have known about it. In this case, his failure to de-ice the steps has a causal connection to any possible harm. Lawyers call this “causal liability”.



What does this mean in practice?

If the frost occurs at three in the morning, the owner may have an excuse for not having acted, as he or she has the same right as anyone else to be asleep at this time – and the injured person will have used the stairs at this time of night at his own risk. It’s another matter at nine in the morning. The “causal liability” depends on there being an objective connection between an action or an omission to take action that gives rise to the harm. It also depends on general experience according to which an action would have been necessary to avert another person from being harmed. Ultimately, however, the burden of proof lies not with the injured party, but with the person who is held liable. In this way the legislator extends the protection of the injured party. Because in case of doubt, it is always up to the liable party to provide evidence that absolves him of fault.



What mistakes should consultants avoid in order not to be held causally liable?

An auditor is liable for a deficient audit, the board of directors for making wrong financial decisions and the investment advisor in the event of a breach of his information obligations.

Such and similar claims involve “contractual liability”. If, for example, a contractor fails to comply with his contractual ancillary obligations, such as the statutory duty of care or the duty of loyalty, the customer could suffer damage. It is the responsibility of the contractor to provide evidence that exonerates him of guilt.



Is it worth taking out professional indemnity insurance?

Professional indemnity insurance always covers both: the customer and the contractor. Contractors who have sufficient insurance cover for possible liability claims can concentrate on their core business free of worries.


Ali, thank you for this assessment.

The expert
Ali Avci works at Generali as Operational Lead Financial Lines. He focuses on all issues relating to pure financial loss, such as professional liability, cyber insurance and D&O liability.