What Should Foreign Directors Do When a D&O Insurer Refuses to Fund Defense Costs in Turkey? (2026 Updated Guide)

What can foreign directors do when a D&O insurer refuses to fund criminal, regulatory, civil or administrative defense costs in Turkey? A 2026 guide to policy wording, notification, exclusions, advancement of costs and insurance disputes.

Foreign directors serving on the boards or management teams of Turkish companies can suddenly face investigations, lawsuits or regulatory proceedings requiring substantial legal expenditure. Directors and Officers Liability Insurance—commonly known as D&O insurance—may provide important protection against these risks. A serious dispute arises when the insurer accepts notification but refuses to fund the director’s lawyers, experts or other defense expenses, or argues that the relevant investigation falls outside the policy.

For a foreign director confronted with proceedings in Turkey, waiting until the underlying case ends before resolving the insurance issue can create substantial financial pressure. The director should immediately review the policy wording, identify whether defense costs are advanced or reimbursed, examine notification requirements, challenge unsupported exclusions and preserve evidence of every defense expense. Fırat Fesih Kaya Law Office and Lawyer Fırat Fesih Kaya approach these disputes by separating the underlying director-liability proceeding from the contractual insurance dispute, while coordinating both strategically.

Why Can D&O Defense Costs Become Extremely Important?

A director may require representation long before any finding of liability. Defense expenses can arise during a criminal investigation, regulatory inquiry, shareholder claim, civil action, administrative proceeding or another matter falling within the policy’s definition of a claim.

The costs may include lawyers’ fees, expert reports, translations, technical consultants and other expenses depending on the wording of the policy.

For a foreign director, interpretation and cross-border coordination can add further expense.

The First Question Is Whether the Matter Constitutes a “Claim”

D&O policies usually define the events that trigger coverage. The wording can vary considerably.

A formal lawsuit may clearly constitute a claim, while questions can arise concerning prosecutor investigations, regulatory requests, interviews, dawn raids, subpoenas, administrative investigations or requests for information.

The actual policy definition should therefore be examined before accepting an insurer’s conclusion that coverage has not yet been triggered.

Criminal Investigations Can Create D&O Coverage Disputes

Foreign directors operating in Turkey can become involved in investigations concerning corporate transactions, customs matters, tax allegations, workplace incidents, environmental matters, financial reporting or alleged misconduct by employees.

The existence of a criminal allegation does not by itself answer whether defense costs are covered.

The policy wording and applicable exclusions must be examined separately.

An Allegation Is Not the Same as a Final Finding

An insurer may rely on exclusions concerning fraud, dishonesty, deliberate misconduct or unlawful personal benefit. However, the wording may distinguish between an allegation and misconduct established through a final determination.

This distinction can be decisive.

If the exclusion requires a final adjudication or another specified determination, the insurer should not automatically treat the allegation itself as proof that the exclusion applies.

Review the Exact Exclusion Wording

Do not accept a general statement such as “criminal conduct is excluded.”

Ask the insurer to identify:

the exact exclusion; the relevant policy provision; the facts allegedly triggering it; and whether the exclusion applies immediately or only after a specified determination.

The contractual language matters.

Advancement and Reimbursement Are Different

One of the most important issues is whether the policy requires the insurer to advance defense costs while proceedings continue or merely reimburse qualifying expenses later.

For directors facing lengthy proceedings, this difference can be financially significant.

The policy should be reviewed before assuming the director must personally fund years of litigation.

Who Has the Duty to Defend?

D&O policies do not necessarily operate like every other liability insurance product. Depending on the wording, the insured may appoint counsel subject to insurer consent, the insurer may have specific rights concerning defense arrangements, or approved panel counsel may be contemplated.

The precise contractual mechanism should be identified immediately.

Can the Foreign Director Choose Their Own Lawyer?

This depends on the policy.

A foreign director facing criminal or regulatory proceedings may reasonably require counsel with experience in the specific Turkish proceedings involved. However, the insurer may invoke consent, panel or reasonable-fee provisions.

The director should obtain the insurer’s position before incurring substantial costs where possible.

Emergency Representation May Be Necessary

Not every investigation provides time to obtain lengthy insurer approval.

A director may be summoned for questioning, face an urgent search or need immediate representation. The policy should be examined for provisions addressing emergency defense costs or expenses incurred before formal consent.

Where immediate action is necessary, document why the expense could not reasonably wait.

Notify the Insurer Immediately

Late notification is one of the most avoidable sources of insurance disputes.

Once a director receives a formal demand, summons, investigation notice or other potentially covered matter, the policy’s notification requirements should be reviewed immediately.

Notification should identify the matter sufficiently while preserving the insured’s legal position.

Do Not Admit Liability in the Notification

Insurance notification should communicate the relevant facts without making unnecessary admissions about wrongdoing.

The underlying defense and insurance claim should be coordinated.

Statements made casually to the insurer can later create complications if inconsistent with the director’s position in the underlying proceeding.

Review the Policy Period

Determine when the claim was first made and when it was notified.

Many D&O policies operate on a claims-made basis, making policy dates, prior notices and related-claim provisions particularly important.

Related Claims Can Create Difficult Questions

A current investigation may be connected to an earlier shareholder complaint, regulatory inquiry or internal investigation.

The insurer may argue that the matter relates back to an earlier date.

The director should therefore review prior notifications and policy periods carefully.

Prior-Knowledge Exclusions Should Be Examined

The insurer may argue that the director knew of circumstances likely to produce a claim before the policy began.

Such an argument should be tested against the actual policy wording and evidence of what the director genuinely knew at the relevant time.

General awareness of a corporate problem does not necessarily answer the contractual question.

Review the Proposal Form

Where the insurer relies on alleged non-disclosure or misrepresentation, examine the original insurance application, renewal declarations and information supplied by the company.

Determine who completed the documents and what questions were actually asked.

Side A Coverage Can Be Critical for Directors

D&O programs commonly distinguish between different coverage components. In broad terms, Side A protection can become particularly important where the company cannot or does not indemnify the individual director.

The actual policy structure should be examined rather than relying solely on general D&O terminology.

Can the Turkish Company Pay the Director’s Defense Costs?

This requires separate corporate-law and contractual analysis.

The company’s ability or obligation to indemnify a director should not automatically be assumed merely because D&O insurance exists.

The policy may also treat company-paid defense expenses differently from costs personally incurred by the director.

Foreign Parent Company Policies Should Also Be Checked

A foreign director serving in a Turkish subsidiary may potentially fall within a multinational D&O program issued to the parent group.

Review master policies, local policies, endorsements, territorial provisions and definitions of insured persons.

Do not assume that the Turkish subsidiary’s local policy is the only potentially relevant insurance.

Multiple Policies May Be Triggered

Corporate groups sometimes maintain overlapping or layered insurance programs.

The director should investigate primary, excess and local policies and determine how they interact.

Notice may need to be provided to more than one insurer.

What If the Insurer Says the Investigation Is Not Covered?

Request a reasoned written coverage position.

The insurer should identify the policy provisions on which it relies. The director can then analyze whether the investigation satisfies the relevant definition of claim, investigation, insured person or wrongful act.

What If Only Part of the Case Is Covered?

Proceedings can contain both covered and allegedly uncovered allegations.

This raises allocation questions.

The insurer should not necessarily be permitted to treat the entire defense as uncovered merely because one allegation potentially falls outside coverage. The allocation mechanism in the policy should be examined carefully.

Defense Costs and Fines Are Different Issues

Even where defense costs are covered, administrative fines, criminal sanctions, taxes, restitution or other financial consequences may receive different treatment under the policy and applicable law.

The director should analyze each category separately.

Consent-to-Incur-Costs Clauses Matter

Many policies require insurer consent before significant defense costs are incurred.

The insured should follow these provisions where reasonably possible.

If consent is withheld, preserve the request, the insurer’s response and evidence showing why the proposed expenditure is necessary and reasonable.

Challenge Unreasonable Delay

An insurer that repeatedly requests documents without providing a substantive coverage position can create serious difficulties for an insured director.

Maintain a chronology showing every notification, information request, response and coverage decision.

This record may become important in a later insurance dispute.

Keep Detailed Defense Invoices

Legal invoices should identify the matter and work performed sufficiently to support the insurance claim while also protecting privileged or confidential information where appropriate.

Separate unrelated corporate advice from the director’s defense work.

Expert Costs Should Be Documented

Complex proceedings may require forensic accountants, engineers, customs specialists, financial experts or other professionals.

Before incurring substantial expert expenses, determine whether insurer approval is required.

Translation and Interpretation Costs Can Matter for Foreign Directors

A foreign director who does not speak Turkish may require translations and interpretation throughout proceedings.

Whether these expenses qualify as covered defense costs depends on the policy and circumstances, so they should be recorded separately.

Preserve Evidence of Every Payment

Maintain invoices, bank transfers, receipts and engagement agreements.

If the director personally pays costs that should have been advanced by the insurer, a complete payment record becomes essential.

What If the Insurer Pays Only Part of the Lawyers’ Fees?

The insurer may challenge hourly rates, staffing, duplication or scope of work.

The director should request the contractual basis for reductions and compare them with the policy’s reasonableness and consent provisions.

Settlement Discussions Require Coordination

If the underlying claim may settle, review policy provisions concerning insurer consent.

A director should avoid entering a settlement that could jeopardize insurance recovery without first understanding the contractual consequences.

Do Not Allow the Insurance Dispute to Damage the Criminal Defense

Where the underlying proceeding is criminal, the defense strategy should remain the priority.

Information supplied to the insurer should be carefully managed so that the director does not compromise confidentiality, privilege or defense strategy unnecessarily.

Privilege and Confidentiality Need Attention

Insurers may request extensive information concerning the underlying proceeding.

The director and counsel should distinguish documents necessary for the coverage assessment from privileged defense material and consider appropriate arrangements for sensitive information.

What If the Insurer Reserves Its Rights?

A reservation of rights does not necessarily mean the insurer has denied the claim.

Read it carefully.

Identify every potential coverage issue raised and respond where the insurer’s assumptions or factual statements are inaccurate.

Can the Director Challenge a Formal Coverage Denial?

Yes, depending on the policy, governing law, jurisdiction and dispute-resolution mechanism.

The first step is usually to analyze the denial against the complete insurance contract rather than only the insurer’s letter.

Governing Law Can Be Crucial

Multinational D&O programs may contain foreign governing-law or jurisdiction provisions.

A dispute concerning proceedings in Turkey may therefore involve both Turkish law and foreign insurance-contract issues.

Arbitration Clauses Should Be Checked

Some insurance or related contractual arrangements may provide for arbitration or another dispute-resolution mechanism.

The forum should be identified before proceedings are initiated.

Limitation Periods Must Be Protected

The director should not allow lengthy correspondence with the insurer to create a limitation problem.

Relevant limitation periods and contractual procedures should be assessed early.

Consider an Interim Funding Solution

Where the underlying defense cannot wait for the coverage dispute, the director and company may need a temporary funding arrangement while preserving reimbursement claims.

Any such arrangement should be documented clearly.

Directors Should Coordinate With the Company—But Maintain Their Own Position

The company’s interests and the individual director’s interests may initially appear identical but can later diverge.

Foreign directors should therefore assess whether separate legal representation is necessary.

Internal Investigations Can Affect Coverage

An internal company investigation may generate reports, witness statements and findings relevant both to the underlying proceeding and insurance dispute.

The creation and disclosure of such material should be managed carefully.

D&O Coverage After Resignation

A director who resigns after the relevant events may still have potential coverage depending on the policy period, run-off arrangements and definition of insured person.

Resignation alone does not answer the insurance question.

Insolvency of the Company Makes Coverage More Important

If the Turkish company becomes insolvent or cannot indemnify the director, personal exposure to defense costs can increase significantly.

Side A and other applicable coverage should be examined immediately.

Cross-Border Enforcement Should Be Considered

Foreign directors may have assets or corporate positions in multiple jurisdictions. A Turkish proceeding can therefore have broader consequences.

The insurance strategy should be coordinated with the overall cross-border defense.

Immediate Action Plan After Defense Funding Is Refused

The foreign director should immediately obtain the complete D&O policy and endorsements, review the definition of claim and insured person, determine whether defense costs are advanced or reimbursed, identify the exact exclusion relied upon, check notification history, examine consent requirements, preserve every invoice and payment, investigate parent-company and excess policies, respond formally to the insurer’s coverage position and protect applicable dispute and limitation deadlines.

Frequently Asked Questions

Does a criminal investigation automatically eliminate D&O coverage?

No. The policy wording and applicable exclusions must be examined. An allegation of misconduct should not automatically be equated with a final determination where the exclusion requires something more.

Can a D&O policy pay lawyers before the case ends?

Potentially. Some policies provide mechanisms for advancement of covered defense costs during proceedings. The exact wording controls.

Can a foreign director appoint their own Turkish lawyer?

Potentially, subject to the policy’s counsel-selection, consent and reasonable-fee provisions.

What if the insurer refuses consent for the director’s chosen lawyer?

Request the contractual basis for the refusal and preserve the correspondence. Whether the refusal is justified depends on the policy and circumstances.

Are interpreter and translation expenses covered?

Potentially, if they qualify as covered defense expenses under the policy. They should be separately documented.

Can the insurer rely on a fraud exclusion before conviction?

That depends heavily on the wording. Some conduct exclusions may require a final adjudication or another specified determination before becoming operative.

What if the company already paid the director’s legal fees?

The policy should be reviewed to determine whether and how company indemnification or reimbursement affects insurance recovery.

Can a foreign parent company’s D&O policy cover a director of a Turkish subsidiary?

Potentially. The master policy, local policies, insured-person definition, territorial scope and endorsements should all be reviewed.

Should the director continue paying lawyers after the insurer refuses funding?

The underlying defense may require continued representation regardless of the insurance dispute. All payments should be documented and rights against the insurer preserved.

What should a foreign director do first after receiving a defense-cost denial?

Obtain the complete policy and require the insurer to identify precisely which contractual provision allegedly permits refusal. The director should then compare the denial with the claim definition, defense-cost provisions, exclusions, consent requirements and the actual procedural status of the Turkish proceeding.

Client-Focused Legal Support for D&O Defense Cost Disputes in Turkey

D&O coverage disputes involving foreign directors can arise alongside criminal investigations, regulatory proceedings, shareholder claims, civil litigation and corporate liability disputes in Turkey. Fırat Fesih Kaya Law Office assists foreign directors, officers, international companies and Turkish subsidiaries in evaluating D&O defense-cost disputes and coordinating the insurance issue with the underlying proceeding. Lawyer Fırat Fesih Kaya provides legal assistance concerning policy interpretation, coverage denials, advancement of defense costs, insurer correspondence, exclusions, multi-policy issues and claims for reimbursement of defense expenses.

Phone: +90 312 434 22 22
Mobile: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No:221, Yıldırım Tower, Office No:148, 06520 Balgat, Çankaya, Ankara, Turkey