Federal Court of Justice: „Seriousness“ of claim no precondition for insured event in D&O insurance – assignment is permissible

Wednesday, April 13, 2016 Pressemitteilungen

With two recent decisions, the German Federal Court of Justice (BGH) has clarified that the written claim is decisive for the occurrence of an insured event in D&O insurance.

It is not required that the aggrieved policy holder proves “seriousness” of its claim in the internal liability case. Furthermore, the insured manager’s assignment of his indemnification claim to the company claiming against him is permissible. By this, the BGH creates legal certainty for policy holders and insured persons in D&O insurance. The view represented by Wilhelm for years has prevailed.

In the two cases handled by Wilhelm, companies had claimed for compensation against their current managers for different breaches of duty (in Germany, most D&O cases are insured vs. insured cases where the company claims compensation from its own manager). Subsequently, the mangers (insured persons) assigned their indemnification claim (insurance cover) under the D&O insurance to their respective company (policy holder).

In both cases, the insurer refused coverage. It assumed that the companies had no serious intention to enforce their claim for compensation from the managers who were still working with the companies. It argued that the companies brought the claim only as a matter of form in order to trigger the insured event collusively collaborating with the insured persons. Furthermore, the insurer assumed the assignment to be impermissible. The policy holding companies, represented by the law firm Wilhelm, subsequently sued for coverage. In two often criticized decisions, the Higher Regional Court of Düsseldorf followed the view of the defendant insurer: according to the court, the insured event not only needed a formal letter of claim, but also required a “seriousness” of the damage claim. Whether a claim was “serious” in this sense, would then be a case-by-case decision of the trial judge.

The BGH now allowed the claiming companies‘ appeal (file numbers IV ZR 304/13 and IV ZR 51/14 of 13 April 2016) and by this followed the argumentation of the law firm Wilhelm.

  • The manager’s right to assign his indemnification claim to the company is permissible.
  • The „seriousness of the claim for compensation“ is no precondition for the insured event in D&O-insurance.

The decision of the BGH is pointing the way for D&O-insurance in Germany. It eliminates legal uncertainties that existed for policy holders and insureds in D&O-insurance and general liability insurance since the decisions of the OLG Düsseldorf in 2013. “In the future, insured persons will again be able to assign their insurance cover to the aggrieved company without the insurer being able to assume contract violation”, explains Dr. Wilhelm, partner at the law firm Wilhelm. Also, a claim for damages against the manager will no longer be an obstacle to a continued employment of the insured manager.

The BGH will publish the reasons for the decision within the next weeks.

Dr. Mark Wilhelm and Lars Winkler, both partners with Wilhelm Rechtsanwälte, were responsible for the handling of both matters. The appeals were performed by BGH-lawyers Dr. Mennemeyer and Dr. Scholz.