DIRECTORS AND OFFICERS LIABILITY INSURANCE – LEGAL NATURE AND APPLICATION

In theory, this insurance is classified as a special type of professional liability insurance because the title of a director and/or manager of a joint stock company is perceived as profession.
In the special Article (Article 905), the Law on Contracts and Torts stipulates rules for insurance on behalf of someone else or for „whom it may concern“. These rules may be applied to all insurance lines. However, some of them present difficulty when it comes to liability insurance (particularly that the policyholder cannot avail himself of rights from the contract without the approval of the person whose interest is insured) and thus, this poses a question whether these latter norms prevail over the general rules for insurance on behalf of someone else.
The author analyses differences between norms of the two mentioned institutes and identifies the following: a) insurance scope of protection, b) legal position of the beneficiary, c) cover of intentionally caused losses. In case of insurance of intentionally caused losses, in line with the compulsory rule of the Law on Contracts and Torts (Article 929), the insurer is obliged to indemnify any loss caused by a person for whose actions the insured is held responsible on any grounds, regardless of whether the loss was caused by negligence or intentionally. In case of a company acting in the capacity of a policyholder or insured, since insurance relates to the company’s liability for actions of its directors and officers as the liability for the other person, insurance also covers the losses intentionally caused by such persons, provided that the insurer has the right of recourse against the person who acted intentionally