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BUHALA, O.: D&O Insurance in contrast
to the ban of exclusion and limitation of the liability of members of the
corporate bodies.
Právny obzor, 101, 2018, č. 3,
s. 247 – 266.
Abstract. The D&O
insurance represents a barely known and virtually unexplored phenomenon in
Slovak Republic environment even today. In regard to separation of ownership and
control in the agency process, which occurs in corporation’s environment, its
coexistence with liability regime of members of corporate bodies may appear to
be problematic, in particular with regard to the explicit legal prohibition of
socalled indemnification agreements. The liability of members of corporate
bodies is a special type of commercial law liability. In our opinion, the
dominant function of this liability system is a preventive function, which
generates incentives to motivate members of corporate bodies to act in
accordance with their fiduciary duties, thereby reducing the risk of so-called
moral hazard. This provides an important scope for comprehending the purpose of
the legal prohibition of the indemnification agreements, which is to preserve
these incentives as precisely as possible. Logically, the possibility of
limiting or even excluding liability would result in their minimization or even
complete elimination. Even though the conclusion of D&O insurance provides
effect similar to the conclusion of a indemnification agreement, we do not
consider it illegal. At the same time, however, we insist that the principles of
corporate governance important for mitigating the risk of moral hazard must be
taken into account. We believe that the optimal approach to address this purpose
is to apply the deductible as a way of partially exoposing insured managers to
risk.
Key words: member of
corporate bodies, moral hazard, indemnification, D&O insurance
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ISSN 2729-9228
(online)
ISSN 0032-6984
(print)
THEORETICAL REVIEW FOR ISSUES OF STATE AND LAW.
Právny obzor is peer-reviewed journal and is indexed in SCOPUS and HeinOnline database (INDEX TO FOREIGN LEGAL PERIODICALS).
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