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OLG Schleswig: Limitation of the liability claim
in the case of a direct claim in the D&O insurance.

There is a new, exciting ruling from the world of D&O insurance. We recently reported on the decision of the Higher Regional Court of Cologne in the context of direct action. Now the Higher Regional Court of Schleswig has also made a groundbreaking decision.

What was it about? The focus was on the question of the statute of limitations. However, it must be borne in mind that the question of the limitation period in D&O claims is not trivial. On the one hand, there is the original claim for damages (statutory directors' and officers' liability separate from the D&O insurance) as well as a claim under cover law that arises between the parties - insurer, insured persons and insured companies - due to the conclusion of the D&O insurance. Now both the claim for damages and the contractual claims under the D&O insurance can become time-barred. If the limitation period for the claim under cover law is now suspended by filing a direct claim or a direct action with the insurer, what does this mean for the necessary liability claim? Can an insurer release itself from liability in this case if the claim is already time-barred? The decision of the Higher Regional Court of Schleswig has now clarified this question.

Background: A fire in a bakery caused considerable damage, of which the fire insurance only covered part, justifiably due to the contractual conditions. (Note: We therefore recommend regularly documenting and reviewing the sums insured and the content of the insurance cover). The operator of the bakery claimed the remaining loss by holding the managing director liable for breach of duty. As a result, the managing director assigned his claim for indemnification under the D&O insurance policy to the company (see the attached diagram). D&O insurance usually covers a company's executives. In the event of a claim, claims must first be asserted against the insured person before they can be enforced against the insurer. This often results in complex and time-consuming liability and coverage disputes. In practice, the dispute is increasingly being conducted in direct proceedings by assigning the insured person's right to indemnification to the policyholder. This allows the policyholder to assert its claims directly against the insurer. The decision: In its ruling of 26.02.2024(case no. 16 U 93/23), the Higher Regional Court of Schleswig stated that this assignment of the right to indemnification constitutes a "truce agreement" (pactum de non petendo) was implicitly concluded. This agreement prevents liability proceedings against the managing director as long as the claim against the insurer exists and suspends the limitation period for statutory liability claims. The suspension under cover law by filing a direct action or a direct claim with the insurer therefore also suspends the statutory limitation period.

The ruling by the Higher Regional Court of Schleswig fundamentally strengthens the position of companies that wish to take direct action against their D&O insurers. It deprives insurers of a further opportunity to reject claims without an indemnification. This makes it more attractive to take direct action against the D&O insurer rather than against the responsible managers. In addition to the transfer of control by the manager concerned, especially in the case of an assignment on account of performance in accordance with section 364(2) of the German Civil Code (BGB), there are other aspects to consider. These include, for example, the effects on public limited companies under the strict AG regime and, in principle, the disadvantages associated with the "direct action", such as contractual insurance obligations in the event of a claim. For this reason, Risk Partners will continue to closely monitor developments relating to direct action on behalf of our clients. We at Risk Partners will stay on the ball for you.

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