Who is actually suing when an insurer brings a recourse claim?
The claimant is the insurer by way of statutory subrogation, not the injured party itself. Under section 86(1) sentence 1 of the German Insurance Contract Act (VVG), the policyholder’s claim against a third party passes to the insurer to the extent that the insurer has indemnified the loss. The insurer therefore steps into an existing legal position.
This yields the single most important practical point for the contractor being pursued: the insurer can never claim more than its own policyholder could claim. Every defence that works against the client also works against the insurer. A missing notice of defects, an acceptance without reservations, limitation, contributory causation by other trades — all of it survives, even though the party across the table is a complete stranger to the contract.
It is also always worth checking whether the policyholder had any claim at all and whether the sum indemnified matches what the client itself could have demanded. An insurer that settles generously does not thereby enlarge the recourse claim.
Who bears the burden of proof for a defect after acceptance?
After acceptance the client bears the burden of pleading and proving that the work was already defective at the time of acceptance. Before acceptance the burden runs the other way and the contractor must prove that its work was free of defects (Federal Court of Justice, judgment of 23 October 2008 – VII ZR 64/07). The decisive moment for conformity is the passing of risk under section 644(1) of the German Civil Code (BGB), which as a rule occurs upon acceptance (Federal Court of Justice, judgment of 19 January 2017 – VII ZR 301/13).
Acceptance is therefore the turning point of the entire dispute. Under section 633(1) BGB the contractor owes work free of material and legal defects, and damages come into play through section 634 no. 4 in conjunction with section 280(1) BGB. Whether that claim is enforceable, however, depends solely on who carries the risk that the cause cannot be established.
An acceptance protocol without reservations is the strongest document a construction business can hold. If the cause remains unresolved, that non liquet falls on the client and therefore on the subrogated insurer. We cover the allocation of the burden of proof in construction disputes in our article on the burden of proof for construction defects.
Is damage occurring after acceptance enough to prove a defect?
No. The Federal Court of Justice has held expressly that a condition arising after acceptance cannot on its own establish that the work was defective (judgment of 7 February 2019 – VII ZR 274/17). The client must prove a defect existing at the time of acceptance, not merely the damage that followed.
This is precisely where most recourse claims are built as a circular argument: there was water damage, so the installation must have been faulty, so the installer is liable. That chain skips over exactly the proof that matters.
On a site where trades work in sequence, inferring a particular contractor’s fault from the symptom of a defect is especially unreliable. After acceptance, drywallers, electricians and tilers continue working in the same section of wall. Anyone who shifts a waste pipe after acceptance, dents it, or damages it while fitting a connection produces a picture of damage that looks outwardly identical to an installation error.
What is a privately commissioned expert report actually worth in court?
A private expert report is not expert evidence but qualified party submission. The court may not base its findings on the report as such, only on the forms of evidence that the Code of Civil Procedure provides for. If a party names the author of the report, that person will as a rule be examined as an expert witness (sachverständiger Zeuge).
Section 414 of the German Code of Civil Procedure (ZPO) governs that examination: where persons with special knowledge are examined to prove past facts or conditions whose perception required that knowledge, the rules on witness evidence apply. Such a witness therefore reports on his own perceptions, not on evaluations.
That marks out the line of attack. Anything the private expert did not himself see, measure or open is not a perception but an inference, and inferences are not the subject of witness evidence. A question from the opposing party about the witness’s “view” on the cause of the damage is therefore inadmissible and should be objected to at the hearing.
Which questions dismantle a private expert at the hearing?
The decisive question is always which facts the expert established himself. Someone who never saw the point of failure cannot testify to its cause, however professionally plausible the assessment may sound. These questions bring that into the open:
- Had the point of damage already been repaired or stripped out by the time of your inspection?
- Did you personally remove, open or dismantle the component?
- Was the removed part handed over to you, and if not, why not?
- Did you carry out your own measurements or a pressure test on the pipework?
- Who supplied the statement on the cause of damage recorded in your report?
- Was the contractor invited to the inspection, and was a representative present?
- Did you investigate whether other trades could have damaged the pipework?
- Can you rule out that the damage arose only after acceptance?
If the answer is ultimately that the finding rests not on the expert’s own perception but on information from third parties and on a “typical picture of damage”, the burden has not been discharged. A typical picture of damage is a rule of experience, not proof that the typical course of events in fact occurred in this particular case.
What does it mean if the contractor was never invited to the inspection?
A contractor who was not invited to the site inspection never had the chance to examine the alleged defect. It may therefore deny the facts asserted in the report for want of knowledge (section 138(4) ZPO), because those facts concern neither its own conduct nor the object of its own perception.
In practice this shifts the burdens markedly. The client shaped the evidentiary position unilaterally, without involving the other side, and must now prove the defect with the material it secured itself. If the pipework was repaired before the inspection, the party carrying the burden of proof has deprived itself of its own evidence.
For the contractor the lesson runs the other way: always respond to a damage notification in writing, expressly request participation in a site inspection, and give the details of your own insurer. That correspondence later proves that the investigation did not fail because of the contractor. How a unilaterally prepared protocol is to be assessed is covered in our article on acceptance of construction works.
Why the removed component decides the case
In pipework losses the removed component is the only piece of evidence capable of demonstrating the cause directly. A sealing ring fitted at an angle looks different from one displaced or mechanically damaged by later external pressure. Once the part has gone, an installation error can no longer be distinguished from third-party interference.
Such a part is normally handed to the expert and placed on the loss file. If that does not happen, the evidence lacks its factual foundation, and to the detriment of the party that has to prove the defect. After acceptance that party is the client.
The same rule applies in reverse to your own documentation. A business that repairs a leak itself should keep the removed part, photograph it and record the condition in which it was found.
Does German law apply to a foreign subcontractor at all?
Absent a choice of law, a contract for work is governed under Article 4(1)(b) of the Rome I Regulation, as a rule, by the law of the country where the service provider has its habitual residence. For a Polish subcontractor that would be Polish law. Article 4(3) of the Rome I Regulation, however, contains an escape clause: where it is clear from all the circumstances that the contract is manifestly more closely connected with another country, the law of that other country applies.
Such a closer connection is typically indicated by the place of performance, the place where the contract was negotiated, the language of the contract, the agreed currency, and references in the contract to national provisions. A contract negotiated in German in Germany, covering work on a German construction project, referring to the BGB and to German accident prevention rules and invoiced in euros, will as a rule lead to German law.
The sequence matters. The mere location of the site in Germany is not sufficient on its own. There is no “law of the building site”. Only the bundle of circumstances carries the exception. A party that prefers not to leave this to a court makes an express choice of law — what to watch out for is set out in our article on the choice of law clause.
You have received a recourse claim after water damage
Retrieve the acceptance protocol and establish the date of acceptance. Establish when the damage occurred and document the interval since acceptance. List which trades worked in the same area after acceptance. Secure pressure and tightness test records and photographic documentation from the build.
Frequently asked questions
As a contractor, do I have to prove that I installed the work correctly?
Not after acceptance. At that point the client must prove that the work was already defective at acceptance (Federal Court of Justice, judgment of 23 October 2008 – VII ZR 64/07). Before acceptance the position is reversed.
The insurer has already paid. Does that establish my liability?
No. Payment to the policyholder says nothing about your liability. Under section 86(1) sentence 1 VVG only a claim that actually exists passes to the insurer.
Is the other side’s private expert report enough evidence against me?
No. A private report is party submission. If its author is examined as an expert witness, section 414 ZPO allows him to report only on his own perceptions, not on evaluations.
What if nobody can establish where the damage came from?
If the cause remains unresolved, the risk falls on the party bearing the burden of proof. After acceptance that is the client, and therefore the subrogated insurer.
I was never invited to the site inspection. Does that count against me?
It tends to count in your favour. You can deny the facts asserted in the report for want of knowledge, because they were not the object of your own perception.
Does German or Polish law apply to my Polish company?
Absent a choice of law the starting point is Polish law (Article 4(1)(b) Rome I). Where there is a manifestly closer connection with Germany — German as the contract language, place of performance, reference to the BGB, invoicing in euros — the escape clause in Article 4(3) applies.
This article takes account of the judgments of the Federal Court of Justice of 23 October 2008 (VII ZR 64/07), 19 January 2017 (VII ZR 301/13) and 7 February 2019 (VII ZR 274/17), as well as sections 280, 633, 634, 644 and 823 BGB, section 86 VVG, sections 138 and 414 ZPO and Article 4 of the Rome I Regulation. This article is for information only and does not replace legal advice in an individual matter.