The policyholder and the insured persons
In D&O insurance, it is common for the company to take out the policy to protect its directors and senior managers. Article 7 of the Insurance Contracts Act permits the taking out of a policy on behalf of others: being the policyholder does not necessarily mean being the insured party. The fact that the company pays the premium does not mean that all proceedings in which it is involved are covered.
This distinction becomes important when a legal person is appointed as a director of another company. Article 212 bis of the Companies Act permits such an appointment and requires the designation of a natural person to permanently carry out the duties of the post. Therefore, in the event of a claim, it must be ascertained who holds the post and whether the proceedings are directed against the managing company, its representative or both. Each position must then be checked against the definitions of ‘director’, ‘senior manager’ and ‘insured person’ in the contract.
The case examined by the Supreme Court
In the case in question, the company that had taken out a D&O policy sat on the board of directors of a subsidiary. Once the subsidiary had been placed in administration, the insolvency administrators requested that several directors, including the managing company, be considered persons affected by the insolvency proceedings. The policyholder bore the costs of solicitors, legal representatives and experts to defend itself; subsequently, the insolvency proceedings were classified as fortuitous.
The company claimed 62,138.34 euros from the insurer for those costs. The policy defined the insured director or executive by reference to natural persons and contained an extension relating to representatives in investee companies. The Supreme Court dismissed the claim: the amounts related to the defence of the policyholder itself as a legal person acting as a director, a status not covered by the definition of ‘insured’ in that policy. The extension to investee companies did not alter this conclusion.
Identification of the insured party must precede assessment of the expense
Article 73 of the Insurance Contracts Act defines the civil liability risk as the obligation to pay compensation that may arise on the part of the insured in respect of an event provided for in the contract. Article 74 regulates, unless otherwise agreed, the legal representation and defence costs in relation to a claim by the injured party. Thus, before assessing an invoice or the need for legal action, it must be determined whether the person being defended is insured.
In Judgment 433/2026, the Court did not deny that the company had faced legal proceedings and incurred actual costs. The reason for refusing reimbursement was that it was seeking cover for its own defence and the policy restricted the status of ‘insured director’ to natural persons. This does not mean that every director who is a legal entity is always excluded from D&O insurance: other policies may expressly include them.
In cases involving several parties, this distinction makes it advisable to obtain, from the outset, the procedural rulings, corporate appointments, engagement letters and a breakdown of invoices. Only in this way can each expense be attributed to the defence of the person who actually incurred it.
The individual representative and the investee company
The managing company and the natural person appointed to perform the duties of the post occupy different legal positions. Coverage for the representative, where requested, requires verification of their status as an insured person, the actions attributed to them and the cover provided for the functions performed within an investee company.
The judgement examined a policy containing a clause relating to representatives in investee companies, but the claim it resolved was that of the policyholder company for its own expenses. Therefore, it does not automatically determine the treatment of a potential separate claim by the individual representative. For the insurer, a general notification of proceedings ‘against the directors’ must give way to an individual analysis of each person and each expense.
Direct action by the policyholder
The Supreme Court also distinguishes between two situations that may be confused. A policyholder may, in principle, suffer loss caused by an insured director and bring a claim as the injured party. In contrast, in this case, the policyholder sought to recover the costs of defending itself in relation to its actions as a director.
The Chamber explains that, in a case of a director and officer liability claim, the aggrieved company could bring a direct action against the insurer, depending on the terms of the policy. In the contract under consideration, the definition of ‘claim’ excluded claims for compensation made directly by the policyholder. However, that scenario differed from the dispute in question: the policyholder was not alleging damage caused by an insured director, but rather her own defence costs.
The judgement does not, therefore, establish a general prohibition on the policyholder acting as an aggrieved third party. To respond correctly, the insurer must specify what is being claimed, by whom, and in relation to the liability of which insured party.
Adapting the policy conditions to Spanish law
The Supreme Court notes that certain D&O definitions stem from models designed for legal systems in which a director must be a natural person. Incorporating them without adaptation may give rise to inconsistencies in Spain, where a legal person may act as a director. In the case in question, the Chamber applied the existing contractual definition and dismissed the claim, but its observation suggests that the consistency of the policy conditions should be reviewed.
At the time of taking out the policy, it is advisable to ascertain whether group companies hold directorships in investee companies and to expressly decide whether cover is to be provided for those legal persons, their representatives, or both. This decision should be consistently reflected in the definition of the insured, the extensions to investee companies, the cover for defence costs and the definition of a claim.
Claims handling based on specific legal positions
When opening a D&O claim, the insurer should determine who took out the policy, who the insured parties are, who holds each position, against whom the proceedings are directed, and to which defence the costs relate. With this information, the insurer will be able to communicate a decision on cover based on the facts and the full terms and conditions, without applying the same treatment to all parties involved in the proceedings.
At Belzuz Abogados S.L.P., as a law firm specialising in insurance law and the defence of insurance companies, we consider that Judgment 433/2026 reinforces a guideline for the D&O market: to precisely identify the person whose liability is in dispute and who is requesting payment for the defence. This verification enables the claim to be settled in accordance with the contracted risk and allows the lessons learnt to be applied to the drafting of more precise future policies.