Insurance Law: Latest decision of the Higher Regional Court of Cologne on the allocation of the burden of proof in D&O insurance

• Even in direct proceedings between the insured company and the D&O insurer, the burden of proof is still reversed in accordance with Section 93 (2) sentence 2 Stock Corporation Act ("AktG"). The assignment of the coverage claim does not change the legal position of the debtor. The D&O insurer is obliged to demonstrate and prove that the company director has fulfilled his duty of care or is not at fault.
• A managing director who acts carefully and protects the interests of the company must, among other things, ensure adequate insurance cover against business interruption due to fire. This applies at least if the company works with highly flammable material (here: producer of highly flammable sealing material).

Note

In its decision of November 22, 2023 (case no. 9 U 206/22), the Higher Regional Court of Cologne ("OLG") had to deal, among other things, with the - highly controversial - question of the allocation of the burden of presentation and proof in the company's direct action against the D&O insurer.

Some of the insurance and corporate law literature argues that the burden of presentation and proof under section 93 para. 2 sentence 2 AktG changes to the detriment of the company as a result of the assignment of the coverage claim. This is justified, among other things, by stating that the actual reason for the reversal of the burden of proof stipulated in section 93 para. 2 sentence 2 AktG is the particular proximity of the board member to the company in terms of facts and evidence, which, however, cannot apply to the D&O insurer after the assignment has taken place. The opposing view, on the other hand, is essentially based on the fact that the assignment of the coverage claim does not change the legal position of the debtor, so that the (analogous) application of the burden of proof rule of section 93 para. 2 sentence 2 AktG must remain.

The OLG Cologne has now endorsed the latter view in its ruling of November 22, 2023. As far as can be seen, this is the first higher court decision on this topic. Even if other courts are not bound by the opinion of the OLG Cologne, a certain signal effect cannot be denied. The decision is therefore of considerable practical relevance and further case law on this topic should be kept in mind. In addition, it remains to be seen whether and to what extent D&O insurers will react to this new situation in their future terms and conditions. It would be conceivable, for example, to include an explicit contractual provision on the distribution of the burden of proof after assignment or even the formulation of a prohibition of assignment. At least in the case of so-called "major risks", such a modification of Section 108 (2) Insurance Contract Act ("VVG") should be possible.