Právny obzor

6

Ročník 105

2022

 

 
T E O R E T I C K Ý  Č A S O P I S  P R E  O T Á Z K Y  Š T Á T U  A  P R Á V A

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

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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