Sometimes the settlement of vehicle damage depends on the definition of the term "accident". This is as follows:
"An accident is a sudden incident involving the impact of an external mechanical force."

When the term "accident damage" is important, this is usually in connection with its demarcation from operational damage (see there).

"AKB" is the abbreviation for the German "General vehicle insurance terms" and more precisely "General terms and conditions for motor vehicle insurance". In the vehicle insurance bulk business the AKB serves to regulate the content of insurance policies. It provides the contractual rules of third party insurance for vehicles as well as the contractual rules governing any third party, fire & theft or fully comprehensive vehicle insurance. Naturally the AKB can only regulate the relationship between the policy holder and the insurance company. The extent of liability to third parties is regulated by the laws on third party damage. However, for the vehicle insurance the AKB provisions are virtually exhaustive. Although it might look like it, the AKB is actually not a law but just a set of general terms and conditions. However, the widely used general terms and conditions are superseded by the German Insurance Act (VVG). Until 1995 the AKB used to be identical for all insurance companies; however, since 1995 there have been changes to their contents. In case of doubt the relevant insurance policy must therefore be consulted.

Damage caused by game is covered by third party, fire and theft insurance. If a vehicle in motion collides with game (e.g. deer) as set out in section 2 (1) no. 1 of the Federal Hunting Act, damage caused by game is said to exist. Some insurance companies have by now also included collision with other vertebrates (dogs, sheep, cows etc.) in their cover. This can be checked in the actual insurance policy.

 
The practical settlement of damage caused by an actual collision with game is fairly straight forward. A distinction is only made if an animal that was already dead is run over: for example, if a roe deer has been lying dead on the road for a few hours and is then run over by the policy holder, there was none of the typical danger posed by game (i.e. sudden appearance on the road). Therefore this does not constitute damage caused by game (Higher Regional Court Munich, DAR 1986, 293). However, if two vehicles travel behind each other and the first vehicle runs over a roe deer, which the second vehicle cannot avoid either, then this does in turn present the effects of a typical danger presented by animals and is as such damage caused by game and insured against (OLG Nuremberg, DAR 1994, 214).

Potential disputes over damage caused by game only arise if the policy holder does not hit the game but has an accident while trying to avoid the animal. According to sections 62 and 63 of the German Insurance Act (VVG) such damage is in principle covered by insurance as it constitutes an "expense for unsuccessful rescue costs". However, this is contingent upon a number of requirements and insurance companies, quite rightly, check these very carefully. Otherwise this type of scenario would be only too tempting to cover up accidents caused by the driver himself, e.g. by veering off the road, and just dream up some game that supposedly caused the accident.

To start with the policy holder must fully prove, without a relaxation of the burden of proof, that such an animal was the cause of the accident. Due to the lack of objective traces of game (in this case the damage was cause by avoiding an accident, so there is no fur or anything similar on the vehicles and the animal has left the scene of the accident as quickly as possible), this is often very difficult and only possible with the help of eye witnesses. However, if the driver is not also the policy holder, he can function as a witness himself. But in those cases the courts evaluate the evidence provided very carefully.

Another requirement is that the game is so large in relation to the vehicle that a collision would actually have caused damaged. Because only then can an unsuccessful attempt to avoid the animal be classed as an appropriate rescue act. If the animal is too small (in relation to a passenger car a fox is the size of animal where opinions are divided) there is nothing to save due a lack of an impending damage. In those cases one must never forget that this is to be an attempt to save the vehicle not the animal. And if we are quite honest in this respect: very few policy holders would carefully consider all of this beforehand. In most cases swerving to avoid the animal is a reflex.

For that reason all court rulings on this issue must be considered very critically.

The term "natural forces" is used to cover all types of damages caused by the natural "elements", i.e. forces of nature. The individual facets of this are lightning and fire, flooding, storm and hail. Each of these is explained individually in this glossary. (Keywords: lightning damage, fire damage, hail damage, storm damage, flooding).

If a vehicle is no longer fully roadworthy after an accident it is usually towed away.  Just as often the towing company then keeps the vehicle until a decision about its further use has been made. That may be storage until the damaged vehicle is disposed or sold at its residual value, or it may be storage until an expert opinion has been drawn up and a decision made on its repair: That can easily take a few days. Depending on the vehicle and the extent of damage, there are different requirements for the storage location. If the vehicle can be locked and is "weatherproof", it is often stored outside. However, if the vehicle can no longer be locked or if rain was to lead to further damage due to broken windows or other leaks, then the vehicle must be stored in a lockable hall.

This storage is not usually subject to written or verbal contracts between the towing company and the claimant. The storage contract often comes about because both parties factually behave incorrectly. As a consequence it is common not to make detailed agreements about the daily charge for storage. In such situations the storage price - just as that for towing the vehicle itself - is determined by sections 317, 632 of the German Civil Code (BGB). The price is set by the towing company but must be within the normal limits. Normal prices are - depending on the circumstances, i.e. "open air" or "secure and locked hall", and the vehicle size - amounts between €2.50 and €5.00 per day for normal passenger vehicles.

The reason estimates are so frequently the subject of debates in the automobile trade is that they don't just have the same function as in any other trade.

 

Usually an estimate is a customer acquisition process by a company with the purpose of securing an order. In light of this it is only consistent that the law requires estimates to be provided free of charge, unless otherwise agreed (section 632 III German Civil Code (BGB)). However, in the automobile industry estimates are very frequently requested by the person who suffered the damage in order to provide a basis for their settlement with the insurance liable to pay. That means that the contractor often draws up estimates that he knows he will not be followed by an order. For that reason it is quite common to charge for estimates. Legally there are no objections to this as long as agreement is reached, when the estimate is requested, that this will be subject to charges. The correct procedure is to charge on the basis of time spent. A percentage of the damage amount as a price for the estimate leads to blatant imbalances between effort and price in cases of extensive damage.

With regard to costs for experts one must distinguish between damages covered by comprehensive insurance and third party liability insurance.

 
In case of damages covered by comprehensive insurance, the insurance company must pay the costs of an expert opinion (Federal Supreme Court, Versicherungsrecht 98/179). That does not mean, though, that the policy holder can commission an expert at the expense of the insurance company without first checking with the insurer. The issue of the absorption of costs must be separated from the commissioning authority. There is no doubt that in cases of comprehensive insurance the insurance company determines whether or not an expert is consulted and if so, which one. In practice there is absolutely no problem with this. The ruling by the Federal Supreme Court (BGH) originates from a case where an insurance company had completely negated its obligation to pay and had therefore not even commissioned a determination of the level of damage. In the end the policy holder won the case before the court. The insurance company had to cover the damage and with that also the costs of the expert. In those circumstances the policy holder had no other option but to commission an expert himself. But that is a special case, which sets no precedence for regular cases.

With third party liability the claimant himself can choose and consult an expert at the expense of the party who caused the damage or his insurance company. However, this requires that the damage is above the minor loss limit, which cannot be quantified in precise terms. As a rule of thumb any damage in excess of 750.00€ is no longer considered a minor loss. However, that is only a rough guide because in addition to the level of damage the intensity of the damage also plays a role. To be more precise: It is a matter of how transparent the damage is without an expert opinion. If its is very clear and obvious that only a bumper was damaged, which might however cost considerably more than 750.00€ for a particular vehicle, this would be an example of a damage in excess of 750.00€ which can be settled without consulting an expert. The level of appropriate fees for experts was subject to bitter debates for some time. However, these debates have mostly calmed down now.

Unlike cases of third party liability, comprehensive insurance initially prohibits recourse to the courts when the policy holder and the insurance company disagree on the level of damage. The reason for that is that all policies for comprehensive insurance provide for a mediation procedure in case of such disagreements; these procedures are called "expert proceedings" (section 14 AKB) in these policies.

 
The expert proceedings are not to be used, though, if the insurance cover itself is already in doubt, e.g. due to matters of evidence or the objection of gross negligence and other matters.

However, if there is no dispute "that" the payment will be made, just "how much" will be paid, then it is worth reading section 14 AKB.

The proceedings set out in section 14 are as follows:
Anyone who feels that further informal discussions as to the level of damage are no longer promising, i.e. either the policy holder or the insurance company, appeals to the expert proceedings. This is done by issuing the other party with a written declaration that expert proceedings are to be conducted. With this step the player nominates "his" expert as a member of the committee. There is no problem if this expert has already dealt with the matter prior to these proceedings. Impartiality or neutrality are not required.

Receipt of an invocation of the expert proceedings and the nomination of an expert mark the start of a 14-day deadline for the other party. Within this time limit the other party must then nominate his expert for the proceedings; this expert, too, may have been involved in the matter prior to these proceedings.

That is the end of the first formal steps. (If the other party misses the deadline, the right to nominate the second expert passes irrevocably to the party who invoked the expert proceedings. He can then effectively nominate both experts.)
The two experts, in their capacity as committee members, meet up as soon as possible. Their first step is to "elect" a chairman who must also be an automotive expert. Because this election involves two participants, they effectively have to agree upon a chairman. If they are successful the chairman is informed of his role as chairman of the proceedings.

If the two committee members cannot agree upon a chairman the relevant county court will be asked to determine a chairman. The district in which the damage covered by comprehensive insurance occurred, determines the jurisdiction of the court.
If the damaged occurred abroad there is no responsible county court and the proceedings have failed.

The chairman initially takes note of his appointment. At this stage there is no need for action on his part.

The two committee members are now called to deal with the arguments of the case provided by the other party. The objective is to find common ground. If both committee members are able to find common ground, either by a compromise on both sides or by the insight of one party that the other party is in the right, then both parties draw up a joint record of the now commonly supported result.  That is then the arbitral award, which is final.

However, if both parties cannot come to an agreement they pass the matter over to the chairman. In such a case either the initial positions have remained unchanged or there has been some approximation without resulting in agreement. It is now the duty of the chairman to come to a decision by himself (almost like a judge). This also explains why the chairman must be impartial and must not have been involved in the matter before the start of proceedings. However, the chairman must make his decision within the limits set as benchmarks by the committee members.  So if the policy holder considered a replacement value of €14,000.00 appropriate but the insurance company suggested €10,000.00 and on that basis both committee members have shown some flexibility, one towards €11,500.00 and the other towards €12,500.00, then the chairman's decision must fall within the limits between €11,500.00 and €12,500.00. If the chairman was to determine an amount outside these limits, the expert proceedings would have failed.

Provided it is within these limits and is also transparent, the chairman's decision is final and conclusive.

Only if the chairman makes formal errors in terms of the limits or if his decision is not transparent to other experts (which is something entirely different to someone not liking the decision!) can the parties go to a normal court.

As a result expert proceedings are therefore arbitration proceedings that avoid court trials.

The costs of the proceedings are split in a similar way to that used in court trials. They are shared pro rata depending on the party's success and failure. Section 81 of the German Code of Civil Procedure (ZPO) can be used analogously in these cases.

The term "expert" is not legally protected. There is no recognised procedure for awarding this job title. Which means that anyone can call himself an (automotive) "expert".

 
However, there are some limits. While there are no demarcations in terms of professional laws, competition law has by now developed a few stable rules of the game.  The term "competition law" is always used when a competitor or an association with a right of action can have another competitor banned from doing something because that is misleading.

The term "misleading" is then usually measured against the expectations of the "audience".

The Federal Supreme Court has ruled, and published in DAR 1997, page 400, that the term "vehicle expert" may only be used by a person who, in his capacity as an automotive engineer or a mechanical engineer, has gathered many years of experience with vehicle damage or who, in his capacity as a motor vehicle master technician has gathered many years experience in a body shop.

 
In summary one might say that a master craftsman certificate in the automotive trade or that of a body maker, possibly also that of a body painter, is the minimum requirement for using the professional designation "vehicle expert".

In addition there are a number of further, objectively verifiable criteria. Anyone who has been publicly appointed and sworn in by a chamber of industry and commerce or a chamber of trade will surely meet all formal requirements to call himself a reputable vehicle expert.

Anyone who has undergone a process of certification, especially that of the German IfS (Institute of Experts), can also be considered a reputable expert. The same applies to people belonging to renowned professional associations such as the German BVSK.

This also applies to experts in large expert organisations as their in-house rules take into account all necessary requirements.

Different institutions even make a fortune by issuing certificates bearing the title "expert" after a three-day or one-week course. However, without the basic requirement of "motor vehicle master technician" the certificate is worthless.  And yet, if this basic requirement is met, the certificate is superfluous.
The motif of some people attending such courses is occasionally to then write the expert opinions for vehicles they would subsequently repair in their own body shop. However, such expert opinions are not accepted in damage laws, County Court Cologne, ref. 123 C 340/94

Damage by flooding is an issue related to third party, fire & theft insurance. In insurance terms "flooding" is defined as follows: flooding is said to exist if water does not drain off as normal but instead appears in areas not usually claimed and overflows these. That is what the Federal Supreme Court (BGH) decided and published in VersR 64, page 712. Nowadays there are good chances of repairing flood damage to vehicles. The vehicle can be cleaned, dried and smells eliminated to the greatest possible extent.

 
However, in many cases the flood water is anything but clean (heating oil tanks carried along, domestic, agricultural and commercial chemicals, liquid manure etc.), The long-term effects of this on the vehicle's electronic controls are as yet unknown. In this case there is still technical uncertainty about the elimination of damage.

An eternal issue of flooding damage is the so-called "water shock" to the engine. If water gets inside the engine while the engine is running, this regularly results in the engine having to be written off. That is due to the fact that water cannot be compressed. This water shock is only insured if it occurred during an attempt to remove the vehicle from a danger zone (rescue costs). However, anyone not wanting to take longer routes after heavy rain and taking the direct route through a flooded underpass, thereby producing a water shock, will be successfully blocked off by the insurance company for having been grossly negligent.

According to section 12 (1) no. 2 AKB fully comprehensive insurance covers everything that is also covered by third party, fire and theft insurance (see there). In addition it also covers accident damage, excluding braking damage, operational damage and pure breakage damage, as well as damage by vandalism or malicious acts committed by non-company employees.

Damage caused by hail is covered by third party, fire and theft insurance. Hail damage usually occurs in a limited region only, but en masse in those areas.  The cause of the damage is therefore hardly ever a contentious issue.
Over the last few years, the arguments related to the subject of damage by hail revolved around the "paintless dent removal".
The Higher Regional Court Karlsruhe, as published in DAR 2003, page 559, has now ruled that the affected party must accept such repair methods if the vehicle can be repaired that way.

Anyone suffering damage through a third party (third party liability) to the extent that his own vehicle can temporarily not be used, is entitled to a hire car at the expense of the party that caused the damage.

 
This is an issue related to third party liability insurance.

The question of hire cars has been hotly disputed for more than a decade now, in as far as the amount of the agreed hire charges is concerned.
But let's start with some basics:

Anyone who only drives on such an occasional basis that the use of a taxi for each journey would be considerable cheaper than hiring an accident replacement vehicle, violates his duty to minimize damages. That may be different if the actual need for travelling turned out to be low at the end, without this being foreseeable at the outset. Someone who is on standby for example and therefore dependent upon the permanent availability of a vehicle can use a hire vehicle even if he was ultimately not called out while on standby and his need to travel therefore remained little. There are occasional questions about the debate whether the use of a hire vehicle was impossible due to injuries sustained. What is often overlooked in these cases is that a vehicle is not just used by one person. A "family car" can also be replaced with a hire vehicle if the person involved in the accident has sustained injuries of a type that will not allow him to drive (hospitalisation etc.).

With regard to the amount of hire car charges the Federal Supreme Court ruled in 1996 (BGH NJW 1996, 1958) that a claimant does not violate his duty to minimize damages if the hires a car at an accident replacement tariff. However, this ruling must be considered very clearly from the perspective of the claimant: Anyone not familiar with the going hire car prices and involved in an accident for the first time might not clearly recognise that the accident replacement tariff is often more expensive than other tariffs. That is all this court rulings amounts to - nothing more, nothing less. It is therefore not a rubber stamp for car dealers to come up with accident replacement tariffs at whatever level they like.

The issue of hire car charges results primarily from the fact that there are many different tariffs on the market. If a hire car company promotes its business tariffs in full-page adverts in glossy magazines, but its accident replacement tariffs are more than double the advertised rates, a number of questions crop up. The same applies to a currently very topical issue, i.e. car dealerships offering mobility vehicles (for the period of inspection or a period of other necessary repairs) at very reasonable rates while the same vehicle is hired out a much higher or even drastically higher price in case of an accident repair.

In this context the question of the claimant's duty to minimize damages keeps recurring. A violation of this duty to minimize damages must be assumed if the claimant eliminates damage at too high a price even though he could have realised, after conducting some reasonable research, that this damage could also have been repaired more cost-effectively. Jurisdiction demands that the claimant collects two or three offers for comparison if he hires a vehicle for longer than approximately one week. In doing so the claimant is not expected to have particular insights into the market. So if he researches two or three prices and in each case points out  - as a matter of honesty - that he requires the hire vehicle as an accident replacement vehicle, and is then only quoted accident replacement tariffs, then the above quoted ruling by the Federal Supreme Court applies.

However, if the incoming vehicles area of the body shop where the claimant takes his vehicle for repairs and hires a replacement vehicle, displays big signs pointing out the favourable hire care prices for mobility vehicles, then the claimant does not even need to conduct any research to realise that there are cheaper rates than the accident replacement tariff he was offered. Against this background there are already numerous court rulings that blame the claimant for a violation of his duty to minimise damages, or at least oblige the claimant to yield his potential claims for damages from the hire company due to misleading advice to the insurance company liable to pay.

To summarize we could say that there is no unanimous jurisdiction in terms of the liability for hire car charges and that the outcome of legal disputes on this issue are not foreseeable for either the insurance company or the claimant. In this case you can expect surprises of all kinds.

Legal expenses insurances are very common among drivers. They don't just offer protection in case of administrative of criminal matters but also cover the settlement of accident damage. In this case we must distinguish between the following:

 
In cases of damage to a third party the legal expenses insurance must pay up immediately. The "legal offence" that triggers the event insured against is the accident as such. Causation of the accident by the other party is legally considered as a "tortuous act".

In cases of clear liability the other party or his insurance must absorb the legal fees at the end. In such cases the legal expenses insurance only provided additional security.

However, legal expenses insurance is really serious in cases of third party liability when the liability cannot be clearly established and liability is spread between the parties or where the claims of the policy holder could not be enforced at all.

In cases of fully comprehensive insurance the legal expenses insurance is not obliged to pay up from the outset. Only when the insurance commits an error in the settlement, i.e. settles incorrectly or with considerable delay, does this behaviour constitute an "event insured against" which then obliges the legal expenses insurance to pay out.

In cases of an accident caused wholly or partly by another party the German law on damages permits the consultation of a lawyer under the aspect of "equal weapons". That is due to the well-known fact that insurance companies employ many legal experts while the average claimant has no legal expertise. For reasons of fairness the claimant may then buy in the lacking legal expertise wholly or partially (in cases of accidents with more than one person responsible) at the expense of the other party involved in the accident.

In principle that also applies to all smaller cases.

However, there are two exceptions:
Many courts expect commercial vehicle owners, especially hire car companies, fleet operators and similar trades, to make the first approaches towards the settling insurance without the help of a lawyer. To be more precise: At this early stage help from a lawyer will not be at the expense of the party causing the accident. Only when the insurance company responsible for settling the accident causes problems can the help of a lawyer be recruited at the expense of the party who caused the accident. However, jurisdiction on this issue is by no means unanimous.

The second group of cases was decided on the basis of a motorway maintenance business. This motorway maintenance business was continuously dealing with damages to the crash barriers. The Federal Supreme Court (NJW 1995, page 446) assumed the position that due to the regularly recurring item of damage and a usually clearly defined liability (one could hardly claim "co-responsibility" of the crash barrier!) the claimant should not be encumbered with the item of "legal fees" provided the claimant or his insurance settled strictly and swiftly.

Damage by lightning is an issue related to third party, fire & theft insurance. In this case there could be damage by the immediate effect of lightning, such as scorching and singing which might result from lightning hitting the vehicle. However, there are also forms of indirect lightning damage.  The most common one is probably an object being hit by lightning and a part of that object (such as a branch of a tree) then hitting the vehicle. However, the insurance will only cover the initial impact upon the vehicle. What is not insured in this case is if the driver, after the initial impact of lightning (branch hits the vehicle), looses control of the vehicle because he was startled and then causes an accident. Neither will the insurance cover a case where somebody startles due to lightning that has not even directly hit the car, and then causes an accident.

Damage caused by misappropriation is an issue related to third party, fire and theft insurance. The term "misappropriation" covers the following: theft, embezzlement, robbery and the unauthorised use by non-company employees.

There is statistical evidence of a not insignificant number of cases where the vehicle owner who had been the "victim of a theft" was actually involved himself. Spectacular cases reveal that such manipulation affects all social strata. Infamous cases are those of a football player from the German Premier League and the widow of a plastic surgeon. Consequently damage caused by theft centres largely around the issue of provability. On the one hand people must understand the insurance companies are initially sceptical when damage by theft is reported, on the other hand fraudulent cases must not lead to making a claim settlement for honest policy holders impossible.

There is a finely balanced system of the burden of proof. A policy holder who has actually had something stolen from him always has the same problem: he can usually not provide any information on the circumstances of the theft. At best he can provide information on when he parked the vehicle where and when he returned to not find it there any more. Because of this situation the Federal Supreme Court has decided that such a conclusive and consistent argument by the victim of the theft can (initially) be considered sufficiently substantiated.

The policy holder then benefits from the assumption of integrity, so the insurance will (initially) believe him.

However, if the insurance company can call the policy holder's integrity into question on the grounds of substantiated arguments, this relaxation of the burden of proof is reversed. It is generally accepted that occasionally an actual victim of theft falls foul of this system (there is no guarantee that a person with a previous conviction for insurance fraud might not later became the victim of a car theft himself), because the assumption of integrity cannot be an unlimited burden to the insurance company.

In addition to the difficulty of furnishing proof, damages caused by theft are often also accompanied by issues of gross negligence. If the policy holder has made the theft by the thief significantly easier by carelessly lowering his safety standards, insurance cover may not apply at all.

Someone who leaves his car at a petrol pump with the key in the ignition, while paying for his petrol, is no compensated by the insurance if a thief drives away in his car while he is paying. Anyone leaving his car keys in his jacket pocket hanging on a restaurant's coat rack while sitting a few tables away is also likely to not see a penny. An example to the contrary would be that, in the majority of court rulings, a motor vehicle certificate kept in the car does not risk the insurance cover provided it cannot be seen from the outside. Reason: as the thief was unable to see that the certificate was inside the vehicle this circumstance did not affect his decision to commit a theft. The fact that he was then possibly able to get away more easily with the document (or with the vehicle registration document found inside the car), was of no further relevance because at that point the theft had already been committed and the event insured against had already occurred.  There are countless individual cases revolving around both the relaxation of the burden of proof and gross negligence; rendering all those cases would go beyond the scope of this explanation.

Insurance against theft also covers vehicle parts, provided these are included in the parts list detailed in section 12 AKB.

Damage caused by attempted theft is also covered by third party, fire and theft insurance. However, in this context there are many problems as to where to draw the line to damage caused by vandalism, which is not covered by third party, fire and theft insurance. One classic example is the hood of convertibles. Was it slit open because somebody intended to get into the car that way or was it merely an act of vandalism provoked by envy? In this case the onus is on the policy holder to prove that the damage was caused in the line of an attempted theft.

If a vehicle is recovered it is usually damaged. At the very least there are those damages caused by the theft itself (ignition lock, glass etc.). Those damages must be covered by the third party, fire and theft insurance. There is some debate, though, as to whether other damage that the thief caused during "his" use of the vehicle (e.g. accident damage) is covered by third party, fire and theft insurance. In most cases this responsibility has been affirmed (see Federal Supreme Court VersR 1975, page 225 ff.).

Robbery of a vehicle (i.e. seizure by force or violence or with threats of violence against the authorised driver, such as "car napping") is also covered by third party, fire and theft insurance.

Embezzlement, however, is another matter. Embezzlement describes a situation where a delinquent already has a vehicle "in his possession" and then makes it disappear.

The most common case is that of a person hiring a vehicle who decides during the rental or lease period (or even hires/leases the vehicle for that purpose) to not return the vehicle to the hire/lease company. Such embezzlement is not covered by third party, fire and theft insurance.

The second frequently cited case is that of a potential purchaser taking a vehicle for a test drive and not returning the vehicle. In most cases this is classed as a form of embezzlement and not insured (e.g. Higher Regional Court (OLG) Hamm, VersR 1985, page 490). However, the Higher Regional Court Munich considers such a case as theft, and therefore insured, if the "test driver" had intended from the outset to disappear with the vehicle (OLG Munich, VersR 1995, page 954).

The next form of misappropriation is the unauthorised use, or in layman's terms a "joyride". If the perpetrator plans from the outset to just take the vehicle for a ride and then return it, the issue of insurance cover hinges on the person of the perpetrator. If the perpetrator is an employee of the policy holder or is generally permitted to use the vehicle, just not at that moment, then the damage is not covered. However, if the perpetrator is a "non-company employee" than the damage caused during such a joyride is covered by the insurance.

Condition: The policy holder must not be guilty of facilitating or enabling the joyride through grossly negligent conduct.

But even people who have actually been victims of theft are not always happy when their vehicle is recovered. Some of them have already got used the idea of a new vehicle after the theft, others no longer trust their vehicle and think along the lines of "What might the thief have done to my car?"

However, if the vehicle is returned to the policy holder within one month of the notice of claim, he is obliged to take the vehicle back (section 13 (7) AKB). However, where more than one month has passed since the notice of claim, the policy holder is entitled to refuse to take the vehicle back and can instead demand financial compensation.

The term "operational damage" only applies if the damage was caused by the incorrect operation of a vehicle. This must be distinguished from accident damage (see there), which is often insured, while operational damage is not. Example: The bonnet of a vehicle is not shut properly. While driving the wind gets under the bonnet; the bonnet in turn hits the windscreen and the edge of the roof, causes damage and is damaged itself. Most courts would class this as operational damage (exemplary for many cases: County Court Essen, SP 2001, 278). Further examples: A dump truck at a building site is parked at an angle, due to the nature of the site, rather than level. While the tipping trough is lifted hydraulically the vehicle looses its balance and tilts to the side. In doing so the frame twists in itself (buckling damage). Further damage results when the vehicle hits the ground. In this case we see an example of both operational damage and accident damage. The damage caused up to the point of hitting the ground is operational damage while the damage caused by hitting the ground is accident damage (Federal Supreme Court DAR 1998, 310). Separating these is not always easy.

There is a certain statistical likelihood, that could be even higher depending on the purpose of the vehicle's use and the type of driver, that a vehicle will be involved in accidents including the occurrence of smaller damage several times in its life. From the second accident onwards there is a question of the effects of previous damage on the claims settlement.

 
Fully and expertly repaired previous damage affects the replacement value from a certain level of damage onwards.

The real problem occurs if previous damage that was not or not expertly repaired (sometimes also referred to as 'old damage') is in the area where the new damage occurred. If the claimant is honest and mentions the previous/old damage or if such damage is obvious to the expert due to rust setting in or because the appearance of the damage is not consistent with the new damage, the problem of separating the old and the new damage is considerable. There is a wide spectrum, starting with the consolidation of pre-existing damage to a constellation where the old damage had already affected the vehicle component so severely that it should have been replaced in order to eliminate the damage. The claimant then often argues at an emotional level, stating that the damage had not bothered him prior to this, but that the component now needed to be replaced. "For him" the need for replacement had only arisen as a consequence of the new accident. This debate is very common when it comes to bumper damager. However, these are often phantom debates. Although the claimant and the body shops behind them often try to claim for a replacement part when the bumper just shows scratches that go slightly deeper than the surface, the use of plastic repairs can make a big difference to the repair costs.

The demarcation of damages in relation to one another is definitely always a case for the expert.

If the claimant is dishonest and tries to make the previous damage "disappear" in the new damage, then the court rulings in these cases are justifiably very strict. In such cases of attempted fraud the courts predominantly react by applying clear principles of the laws on damages that oblige the claimant to prove the level of the new damage. This he is claimed not to have done (since he had submitted a claimed for the total damage, old and new). Therefore he does not receive any compensation. An expert who turns a blind eye to recognisable old damage causes huge problems for the claimant if the insurance company knows of this previous damage for one reason or another - which is not that unlikely. The same applies to car dealers who "expect" this type of behaviour from the expert. Just as an aside and to complete the picture, let us also mention that such behaviour gets close to aiding and abetting fraud.

The term "repair damage" is the opposite of "total loss" (see there). If the difference between the replacement value and the residual value is smaller than the sum of the repair costs and, where applicable, the reduced market value, the damage is considered repairable or "repair damage". The term only has particular legal relevance in cases of notional settlement. In those cases the damage may always be repaired.

The replacement value is defined by the Federal Supreme Court (BGH) as the amount that would have to be paid for an equivalent vehicle at a reputable commercial car dealer. So the benchmark for the replacement value is the commercial car trade.

 
During the course of amendments to the law on damages this definition was found to be incomplete for the first time. Although the underlying problem has always existed, its practical implications have only come about since section 249 of the German Civil Code (BGB) was changed (please refer to the keyword "Value Added Tax").

The problem is that there are entire vehicle segments that are no longer available in the reputable commercial car trade. Large parts of the car trade have pulled out of these segments, not least of all due to their fears over the consequences of the modernisation of the law of obligations (dispensation with the  non-warranty clause for the so-called "consumer goods purchase"). For vehicles older than seven or eight years, and therefore no longer available as used cars on the reputable commercial market, the replacement value must be determined on the private market.

The fact that the BGH definition is not final becomes quite obvious when taking a closer look at the case at that time: this was a newish vehicle from a premium manufacturer with a mileage and age that was also available on the market in large quantities as a year-old employee car. The year-old cars were traded at slightly lower prices than comparable vehicles sold by commercial dealers, and that was the issue disputed between the claimant and the insurance company obliged to pay. The definition by the Federal Supreme Court cannot be final if for no other reason than the fact that older vehicles would otherwise have no replacement value at all - which would be a rather absurd outcome.

The issue of a "representative" usually crops up in connection with gross negligence and comprehensive insurance. The reason for that is as follows: comprehensive insurance, both third party, fire and theft and fully comprehensive insurance, provide cover against a number of damages without any or only limited liability to third parties. However, this cover is not unlimited. If "gross negligence" is involved, insurance cover may be cancelled. With regard to road traffic accidents, jumping a red light would almost without exception be classed as grossly negligent causation; driving under the influence of alcohol, obvious fatigue and similar situations are other factors.  In the area of third party, fire and theft insurance, gross negligence is often an issue in cases of the misappropriation of a vehicle. Someone who leaves the key in the ignition when filling up with petrol and then watches his vehicle being stolen while paying at the till will not receive any compensation.

 
The case groups are very diverse and cannot be presented in detail within the scope of this glossary.

What is important to know, though, is that the insurance company is entitled to refuse insurance cover on the grounds of gross negligence only, if the policy holder himself committed the blatant mistakes.

However, if a third party has caused the damage through gross negligence, the insurance company is still obliged to pay out to the policy holder. The insurance company can then seek recourse from that third party.

However, there is a case group in between: if the policy holder's "representative", in terms of insurance law, has made the mistake, this mistake is actually assigned to the policy holder himself. The representative is the person who is not only allowed to use the vehicle but has also been assigned overall responsibility for the vehicle. So anyone who can independently decide about necessary repairs, is responsible for monitoring deadlines and ultimately has the overall responsibility for the vehicle is the policy holder's representative.

This is generally easy to illustrate with the example of a grandfather and grandson. If the grandson occasionally uses his grandfather's car, he is not his representative. However, if it is really the grandson's car and only insured through the grandfather, who no longer drives himself but still has a policy with a good no-claims-bonus, then the grandson is the representative with regard to the grandfather's insurance policy. That is because the grandfather does not take care of anything, while the grandson is in charge of everything.

If an employer allows an employee to use a car, but all necessary issues are taken care of by a fleet operator, then the employee is not a representative. However, if the organisational structure is different and the employee has to take care of all vehicle related issues himself, while his employer only pays the bills, then it can be assumed that the employee is a representative.

For damages under comprehensive insurance, section 7 III AKB provides that the policy holder must request instruction from the insurance company before having the damaged vehicle recycled.  This rule is accepted by the courts (Higher Regional Court (OLG) Frankfurt/Main, division for civil matters in Kassel, ruling dated 0.03.2004, ref.no. 14 U 184/02).

  
In cases of third party liability the claimant can rely on the residual value of the expert in his expert opinion.  He can sell the damaged vehicle at that price without first requesting permission from the insurance company liable to pay (Federal Supreme Court BGH NJW 1992, 903).

If the insurance can provide a concrete offer for a higher residual value before the claimant has sold the vehicle, the claimant must accept having this amount offset (BGH NJW 2000, 800).

The comment by the Federal Supreme Court in its ruling NJW 1992, 903, that the expert may determine the residual value on the "local market", is based on facts that are no longer tenable. Nowadays the used car trade is greatly influenced by large used car exchanges. The earlier assumption that the customer was determined to return to "his" dealer after an accident, is no longer tenable in light of the actual market situation.

Even if one insisted on sticking to the "local market", in spite of the current situation, the expert must activate the market to a sufficient extent. If the trade margin between the highest "local" offer and the potential reuse by the bidder is excessively high, there are obvious indications that the forces of the local market were not sufficiently activated. The way to counter this is to use a resale price, determined via a salvage exchange or another suitable medium, and deduct a reasonable profit margin no greater than the usual margin for used car dealers. In the opinion of the Regional Court Koblenz (SP 03, 251) this is the only way that offers the expert protection from legal recourse.

Because value added tax (VAT) is a tax paid by the end customer, businesses (with a few exceptions) are entitled to deduct VAT spent on expenses for their self-employment as input tax from their monthly VAT liability to the tax office.
That means that the VAT included in sales expenses is only ever a transitory item that will be neutralised by the next VAT return.
Because of this, VAT paid on expenses for the elimination of damage to objects that are business assets, are an expense that does not present a permanent burden to the business. For that reason businesses that are entitled to deduct input tax cannot claim VAT as part of the damage suffered and will only be reimbursed the net damage.

Damage caused by storm is an issue related to third party, fire and theft insurance. In insurance terms storm is classed as wind speeds from 17.2 m/sec, which on the Beaufort scale equals force 8. The air movement must be caused by the weather, not suction or pressure waves. A storm damage is not only classified as such when the storm affects the vehicle directly, i.e. forcing it off the road (example:  trailer) or toppling it over. Storm damage is also classified as such when an object is blown against the vehicle. Even if the storm blows an object so close to the vehicle that it is impossible to avoid a collision, would this be classed as storm damage insured against.

Initially, the term "total loss" only serves to define the damage. It has no direct meaning for the claim settlement.
One must distinguish between a technical total loss and an economic total loss.

A technical total loss is said to exist where it is technically not possible to repair a car. In that case economic aspects such as the costs of repair are not taken into consideration. It is simply a matter of whether or not the car can be repaired or not. Technical total losses are therefore fairly uncommon. Ever recurring examples are completely burnt out vehicle wrecks or vehicles cut up by the emergency services in order to gain access to the passengers.

An economic total loss, in terms of claims settlement, is said to exist where the difference between the replacement value and the residual value is less than the repair costs, to which a reduced market value might also have to be added. However, the existence of such a total loss does not automatically "prohibit" repair work. The area of third party liability offers the option of repairs if the damage is no greater than 130% of the replacement value. However, that requires complete and expert repair work and further use of the vehicle by the claimant.

Please refer also to the keywords "Right to deduct input tax“ and "Differential taxation“

The treatment of value added tax in terms of damage has three different facets in the laws on damages.

In both cases, third party damage and the fully comprehensive damage, the policy holder or the claimant who is entitled to deduct input tax, are in a position where the VAT due on the individual items of damage is not an item of damage in itself. Because a claimant who is entitled to deduct input tax can settle the VAT paid out in the process of repairing the damage with the tax office, he will not be reimbursed for this value added tax. If the claimant settles on a notional basis, he cannot offset the VAT against his tax liability, but even in this case the same principle applies: for notional settlements the amount owed is the same as the sum that would have been owed, had the settlement been a concrete rather than a notional one. Therefore the right to deduct input tax also applies in the case of "notional" settlements.

Where the claimant is not entitled to deduct input tax, a distinction must be made between damages covered by fully comprehensive insurance or third party liability insurance.

For fully comprehensive insurance the insurance policy must be checked as to whether the insurer had agreed with the policy holder on how to proceed regarding VAT in the case of notional settlement. Because many policies stipulate that value added tax will only be reimbursed when there is specific proof that it had actually arisen. That means that VAT will then not be reimbursed in the case of notional settlement.

Several courts have reviewed whether this clause is in line with the statutory provisions regarding General Terms & Conditions. The vast majority of rulings has affirmed the validity of this clause.

For third party damages that occurred after 31 July 2002, the amended version of section 249 ( 2) sentence 2 of the German Civil Code (BGB) applies. This stipulates:

"Upon damage of an object the monetary amount required under sentence 1 only includes value added tax if and to the extent that it is actually incurred."

In the case of damage that can be repaired this is fairly simple: VAT that is not documented by invoices is not reimbursed.

There had been considerable irritation revolving around the issue of taking unrepaired vehicles that were not total losses in part exchange, but also the issue of the settlement of total losses. In cases of taking unrepaired vehicles that were not total losses in part exchange, the forecast amount needed for repairs (as per quote or expert opinion) must then be reduced by the VAT contained therein. However, if the claimant purchases another vehicle he is reimbursed the VAT paid out on this vehicle.

If he makes a private purchase he does not pay any VAT. In that case the settlement will not include any VAT.

When purchasing from an automotive dealer, two options are available: either buying a vehicle subject to regular VAT or a vehicle subject to differential taxation. When purchasing a vehicle subject to regular VAT, the matter is once again fairly simple. The purchase invoice shows the VAT.

 

Usually it exceeds the amount deducted on the (notional) repair side.

 For the claimant a settlement of this type usually balances out, because he is reimbursed the full amount of VAT deducted on the repair side as he has also spent not just as much but even more VAT.

If he purchases a vehicle subject to differential taxation from a dealer, the matter is slightly different: The invoice will not specify the amount of VAT in Euro and Cents.  The amount of VAT can only be estimated. For further details please refer to the keyword "Differential taxation" that provides additional information.

There may be a case where the amount of VAT spent on procuring a used vehicle subject to differential taxation is lower than the VAT reduction of the (notional) repair side. In that case the claimant is stuck with this "VAT discrepancy". This is due to the new statutory provisions.

In cases of total loss the procedure is as follows: initially the replacement value must be reduced by the amount of VAT included therein. All reputable damage investigation reports now contain a note as to whether vehicles of the relevant type, when purchased on the second hand market, are predominantly subject to regular taxation, differential taxation or predominantly traded between private vendors and buyers. That determines whether the replacement value is reduced by the regular VAT rate, the differential VAT amount or no VAT at all.

Then the focus must be directed to the vehicle replacement: what did the claimant buy instead? If he purchased a vehicle subject to regular VAT, it is obvious how much VAT he spent. He will then be reimbursed up to the amount of VAT that the replacement value was reduced by. However, if the claimant purchased a second hand vehicle subject to differential taxation, then the amount of VAT included in the invoice amount must be estimated and reimbursed as outlined under the keyword "Differential taxation". In case of unfavourable constellations the claimant may once again come across a "VAT discrepancy" that he will have to put up with as a consequence of the new statutory provisions.

If he purchases his second hand car privately, he does not pay any VAT at all. In that case he will not be reimbursed any VAT. In case of unfavourable constellations that can once again result in "VAT discrepancies", these must also be accepted as a consequence of the statutory provisions.