D&O – SUSEP Circular nº 553/201 COMMENTS
On May 24, the Superintendency of Private Insurance – SUSEP issued Circular 553/2017, which establishes general guidelines applicable to civil liability insurance for directors and administrators of legal entities (RC D & O insurance).
This is a standard whose preparation goes back to 2013, when the Municipality published Public Consultation Notice No. 26/2013, object of constructive criticism presented by the Sector to SUSEP, in particular by the Federation of Insurance Companies (Fenseg) and by the AIDA Brasil National Liability and Insurance Working Group.
Only in October 2016 did the subject return to the agenda, with the edition of SUSEP Circular nº 541, of 10/14/2016, bringing in its text the same problems verified in the previous draft, in addition to others that caused a real threat of strong decrease when contracting this type of insurance, especially: the prohibition of coverage for defense costs, with a consequent loss of interest from the Pension Funds; prohibition of hiring by an individual; impossibility of selling a D&O policy to Brazilian Publicly Traded Companies with securities traded on national and international exchanges; prohibition of sale of products in the condition of “all risks”; and numerous definitions totally unrelated to this type of business and, in particular, to the uses and customs of the Brazilian Insurance Market.
It was enough for countless entities to speak to SUSEP, such as the Brazilian Association of Management and Risks – ABGR (representing consumers of D&O insurance); the Insurance Commission of OAB / SP, FENABER (Federation of Reinsurance Companies); Fenseg; and AIDA Brasil’s National Liability and Insurance Working Group.
Upon realizing the difficulties created in the commercialization of D&O insurance and in response to requests from the sector’s Representation Entities, SUSEP, in a commendable way, edited Circular nº 546/2017, published on May 24, 2017, which suspended for ninety days the of Circular No. 541 and created a Specific Committee, with a mixed composition, in charge of analyzing the Circular and reformulating its lines.
It is exactly in this context that the then SUSEP Circular nº 553 appears, expressly revoking Circulars nº 541/2016 and nº 546/2017, with the acceptance of practically all the requests formulated by the Entities and, thus, creating greater legal security and undeniable attractions to commercialization of RC D&O insurance, whose lines we will comment on below.
COMMENTS ON THE CIRCULAR
Right from the start, Circular nº 553 resolves an important issue in the field of law by defining that D&O is an eminently civil liability insurance, so that the rules used for its interpretation will be those established for this type of insurance by the civil code, precisely those of article 787, of the Civil Code.
When establishing definitions for this type of insurance through article 3, the rule creates, in item III, a policy based on claims, with a notification clause, which is of great importance to those who know facts prior to contracting the insurance, potentially harmful, but has not yet received the third party’s complaint, which may not even occur.
In items V and VI, of the same article 3, the expression “illicit” is used in parentheses, which should not occur, after all, it takes into account exactly the illegality of the wrongful act, in item V, and the illegality of the willful act, in item VI. The only justification for using these parentheses would be to highlight the illegality of the act.
In item VII, the claim in the RC D&O insurance is characterized by the moment of the insured person’s claim of the third party, an absolutely praiseworthy fact that will contribute to eliminate numerous discussions of a temporal nature in the analysis of the technical coverage of the claim.
In item XVII, of article 3, it was established in a prophylactic way that the event that generates the coverage can only be determined through the competent administrative, judicial or arbitration process.
In item XIX, the maximum indemnity limit for contracted coverage (LMI) is defined with great objectivity, in the sense of not adding the indemnity limits, precisely because the premium is calculated individually.
In item XXI, it is defined that, specifically in RC D & O insurance in which the notification clause is contracted, this will be the act by which the legal entity contracting the insurance (policyholder) or the insured communicates to the insurer , in writing, exclusively during the term of the policy, facts or circumstances, potentially harmful, occurring between the retroactive deadline, inclusive, and the end of the term of the policy, which may lead to a claim in the future. It is a good measure to create a link between the acts notified and the policy in force, so that future policies will not carry a premium due to the possible increase in risk.
Item XXXI, also that of article 3, met a great demand from the Consumer Market by defining as insured, in the RC D&O insurance, the individuals who contract the insurance or for the benefit of whom a legal entity contracts it. This is an excellent measure of the infra-legal legislator.
Item XXXII – and its subparagraphs – establishes who are the individuals or legal entities that would not fit the usual meaning of the term, but who become insured, if extension coverage is contracted, such as auditors, depositaries, liquidators and / or interveners, individuals hired by the legal entity, such as lawyers, consultants, accountants, private secretaries, technicians. It is worth praising this measure, because the expansion of coverage ratifies the fact that many of these professionals act on behalf of the Policyholder, therefore, their actions can generate damages to third parties indemnified by the RC D&O policy.
Item XXXIV provides for the possibility of contracting insurance for subsidiaries of a subsidiary of the parent company, that is, the standard applies to large corporations that often operate in this type of corporate modeling, which facilitates the marketing of the product.
As for item 2, of item XXXIV, it provides that for the purposes of RC D&O insurance, the control, direct or indirect, must be established before or at the beginning of the term of the policy. The question that remains is if there is a change after the beginning of the policy, but advised to the insurer, could he expand the coverage by charging a premium? As the standard does not apply, we understand that it does.
Article 4 reiterates the legal nature of D&O’s civil liability, which is very good, because it attracts the rules related to this type of insurance in its analysis, especially regarding the legal nature, obligations and duties of the contracting parties.
Paragraph 1 establishes that RC D&O insurance must be contracted with a policy based on claims. Therefore, and notwithstanding the provisions of Article 3, Item I, the contracting of an occurrence basis policy is not permitted for the D&O insurance.
Article 5, when stipulating that the insurer guarantees reimbursement to the insured, prevents any legitimacy for the third party to sue the insurer directly, as well as prohibiting direct payment to that insurer, unless the Insurer voluntarily wishes to do so. It is clear that only with judicial and arbitral decisions passed in a final and unappealable decision or by an agreement authorized by the insurer will the technical insurance coverage be guaranteed.
Paragraph 2 of the referred rule, in turn, creates an option for the insurer to reimburse the insured or pay directly to the third party, such option, under no circumstances, creates legitimacy or obligation to the third party, with whom the insurer has contracted nothing and in favor of who has nothing stipulated.
Paragraph 3, of the same article 5, on the other hand, when saying that the guarantee may cover the defense costs and the lawyers’ fees of the insured, made it clear that the main guarantee may have only these items, because there is no express prohibition at any time of the Circular under analysis.
Paragraph 4, of Article 5, brings an excellent measure in protecting mutuality, since it recognizes the insurer’s right to reimbursement if the willful act – bad faith – is proven or confessed by the insured in situations of winning complaint. The reimbursement will take place in the face of the insured person, who normally benefits from this type of coverage.
Paragraph 5, of Article 5, crystallizes the old demand from insurance consumers by guaranteeing the coverage of civil and administrative fines and penalties imposed on policyholders as coverage of D&O, which, certainly, will cease to exist in cases of bad faith of the insured and in situations after all, insurance is not carried out to protect against illegal criminal acts.
Paragraph 6 of Article 5, when expressing that the guarantee does not cover damages caused to third parties, to which the company has been held responsible, as a result of wrongful acts committed by an individual, who holds, and / or has held, positions directors and / or management, executives, unless specific additional coverage is contracted, makes it clear that the insurance will only cover administrators and executives in general, such as managers and superintendents, among others, if there is a specific mention in the insurance policy .
Paragraph 8, of Article 5, on the other hand, by forbidding insurance companies to act simultaneously as policyholder and insurer of RC D&O insurance, has created a technically and legally praiseworthy preventive measure, as it prevents the unjustifiable accumulation of risks and possible conflicts of interest.
Paragraphs I and II, of Article 6, except for situations in which the responsibility falls on RC General insurance, exactly to avoid the exhaustion of this traditional coverage. In item III, environmental damage was correctly excluded, because its insurance is much broader, technically and economically, which is why it deserves to be prestigious, above all because there is great interest c olive / diffuse.
In the sole paragraph, of article 6, the Regulator acted well in fixing the exclusive damages to third parties as RCG coverage when marketed as principal and not in the condition of accessory coverage of the policy.
In item “b”, of item I, of article 7, it is worth saying, although the choice of lawyer is the insured’s right, the rule does not prohibit the appointment of professionals by the Insurer, but the decision on hiring will always be the insured’s. . Another unsealed point is the insurer’s right not to accept professionals whose fixed fees are significantly above the standards used for the work to be performed.
In item III, of article 7, of item “a”, 2, there is an interesting extension of justified material and legal justification, insofar as it is natural for the insured to protect his assets and thus all the good that is communicable with his heirs and / or spouse.
In item “b”, of the same item III, there is an obligation to stipulate arbitration arbitration clause in RC D&O insurance contracts, to resolve any conflicts between the insured and the insurer. However, such mandatory / compulsory insertion is contrary to the principles of autonomy of the contractual will and voluntariness, essential elements established by the STF, in SE No. 5206 AgR, as well as Article 4, of Law No. 9.307, for the purpose of validity of this type of clause. Therefore, it can be understood as null if the insurer compels the policyholder / policyholder to accept it.
As for the emergency expenses included in the same item “b”, the establishment of a specific clause is justified because there are cases in which their values are extremely high, which is why listing it in a specific clause and collecting the respective premium is an effective and useful measure to both parties, just so as not to eliminate the LMG to the detriment of the main coverage and, ultimately, not to harm the insured himself who would see himself without funds to guarantee what he tried so hard to avoid, which is exactly the loss of his personal property.
The sole paragraph of article 10, when establishing that the maximum indemnity limits for each coverage (LMI), as well as the respective aggregate limits (LA), do not add up or communicate, was well covered, as it avoids the exhaustion of one budget and the use of another that, in reality, was not technically communicable.
Paragraph 1 of article 12 provides that, if the geographical scope of coverage extends to international jurisdictions, reference to foreign laws will be allowed. The standard acted well, as there are countless companies that contract this type of insurance precisely to guarantee and protect themselves from acts provided for in foreign standards, since they operate in other countries or are branches of companies headquartered abroad.
An important and rare stipulation in the infra legal regulations of the insurance regulator in Brazil is that inserted in §2, of article 12, recognizing the uses and customs of this special type of business, often of an eminently international character.
Paragraph 5, of article 12, stipulates that if the aforementioned contracts use policies based on claims, at the end of their terms, the provisions relating to the granting of additional term and supplementary term, subject to the hypothesis of non-renewal, will apply , stipulated in the regulations that regulate those policies. It translates into a balanced and adequate norm to defend the insured’s acquired rights and the insurer’s interest in complying with its obligations established in policies already commercialized, under the terms of the rules previously in force.
Circular nº 553/2017 corrected almost insurmountable defects of Circular nº 541/2017, which practically took CR insurance in the D&O modality to great difficulty in marketing, by eliminating the demands of consumers of this type of insurance. The great collective effort, it must be said, with the sensitivity of the Insurance Regulator (SUSEP), who perceived the need for immediate alteration of the norm and the efforts of the Representative Entities of the Sector (Fenseg and FENABER), ABGR, OAB / SP and AIDA Brazil led to an appropriate and correct solution, the objective of which will certainly be achieved with the establishment of modern and objective guidelines for this type of insurance, the result of which will certainly be its even more consistent growth in the near future with absolute legal certainty. We hope.