Are Administrative Fines Insurable In Luxembourg?

Nemo auditur propriam turpitudinem allegans - in what way can parties invoke their own misconducts to claim rights?

Under Luxembourg insurance contract law, loss resulting from the misconduct of policyholders or insureds is insurable; Article 14(2) of the Insurance Contract Act1 states that an insurer will cover even gross misconduct unless the contract provides otherwise.

Misconducts' insurance

Misconducts' insurance is a fundamental principle under Luxembourg insurance contract law and has proven to be an effective method of risk management with respect to professional liability incurred by companies and their executives.

This is evidenced by the increasing popularity of directors' and officers' (D&O) liability insurance. D&O insurance is intended to cover pecuniary consequences of civil liability incurred as a result of professional misconduct, which becomes more likely as the responsibilities incumbent on economic actors and their managers increase. Nonetheless, the Insurance Contract Act provides exceptions to the misconducts' insurance principle.

Wilful or malicious misconduct

Wilful or malicious misconduct is specifically excluded from the insurance cover pursuant to Article 14(1) of the Insurance Contract Act, as the intention to cause the claim removes the uncertainty that characterises an insurance contract.2As an exception to this rule, if a person with life insurance were to commit suicide more than one year after the conclusion or reinstatement of the insurance contract, they would be covered by the contract.3

Fines and penal transactions

According to Article 97 of the Insurance Contract Act, no fine or penal transaction may be subject to an insurance contract, except in cases where such fines and penal transactions are borne by the person civilly liable.

Administrative fines

The Insurance Contract Act does not specifically provide for the regime applicable to fines imposed by administrative authorities. Should they be assimilated with criminal fines and prohibited as such? Or, are administrative fines another category for which insurance can be envisaged?

Criminal fines

The non-insurability of administrative fines is generally justified by their assimilation with criminal fines (among others) because of their punitive nature. The parliamentary works of the former Belgian law of 25 June 1992, which inspired the Insurance Contract Act, specify that agreements that derogate from the public policy are void and, as regards criminal...