Nimes Court of Appeal, 5 October 2017: Duty to advise based on the insured’s personal knowledge
An insured who was a judge requested a partial redemption of his assets under the life insurance policy he held. On the pre-printed document, he ticked the following option: “for tax purposes, I do not opt for the flat-rate withholding tax”. Some time later, he sued the general agent for having failed to advise him, claiming the difference between the tax he would have paid if he had opted for the flat-rate withholding tax instead of having the proceeds taxed as general income. The general agent argued that the insured was a judge and should therefore be considered an experienced client, with sufficient personal knowledge to make an informed choice on his own.
The court held the agent liable on the grounds that it had not fulfilled its duty to advise and rejected the agent’s argument that the insured was an experienced client. It also stressed the fact that intermediaries owe a reasonable endeavours obligation, requiring them to inform the insured about the substance of the cover and its limits, and to draw the insured’s attention to the risks resulting from an exclusion clause.
French decisions usually hold that the duty to advise can be enhanced if the insured is lawfully unaware of what he needs to know about the policy, or attenuated if the insured has the skills to make an informed decision. The duty is therefore modulated depending on the complexity of the policy and the ability of the insured.
In this case, the decision is interesting because it assessed the obligations of the intermediary based on the concrete facts of the case, focusing not on the personal skills of the clients, but on whether or not the general agent satisfied its obligations.