A Foreign-Owned Turkish Company Is Sued: Liability Insurer Defence, the Five-Day Rule and Settlement Approval

Start with the insured legal entity and the actual third-party claim

A foreign-owned company operating in Türkiye is not automatically interchangeable with its shareholder abroad. The legal entity appearing in the court petition, the policyholder paying the premium and the persons named as insured can differ. A British holding company, a Turkish limited company and an individual board member should not be treated as one debtor. Before preparing a legal request, compare their names and capacities in the policy, trade registry, claim notice, insurance schedule and formal court documents. This comparison answers whose rights the insurer must protect and who is entitled to instruct counsel.

Article 1473 of Turkish Commercial Code No. 6102 places liability insurance within a defined relationship between the insured’s legal responsibility and a third-party loss, under the policy’s time and coverage conditions. Article 1476 concerns assistance and management of the legal response within that framework. It is not an automatic promise to pay a third party any sum it demands. Confirm the alleged liability event, insured activity, affected person, type of loss, territorial scope and exclusions. Keep the injured claimant’s account and the insured’s factual response separate until evidence permits meaningful comparison.

Where a company is sued together with its director, examine whether the policy actually includes the officer in that capacity. Corporate management authority under Turkish law is not the same as insurance status. An unauthorised instruction by a group company may create avoidable confusion even where all entities share a brand. A disciplined first review identifies the right policy, right defendant, right person to give instructions and the legal question being submitted to the insurer.

Distinguish the ten-day event notification from notice of the actual demand

Article 1475(1) requires the insured to notify the insurer within ten days about events capable of engaging liability. Article 1475(2) separately addresses notification, without delay unless otherwise agreed, of a claim actually made against the insured. An accident date and a later demand letter are therefore two different dates. Waiting until a lawsuit arrives can leave a gap in the incident-notification record. Conversely, notice of an incident does not necessarily communicate a subsequently quantified demand.

Under Article 1475(3), the consequences of a defective notification are assessed by analogy with Article 1446(2) and (3), rather than through a blanket assumption that any delay ends cover. The statutory analysis includes whether the delay affected the amount payable and the insured’s fault; actual prior knowledge by the insurer is also material under the referenced provision. Record the content and timing of each message instead of relying on the insurer’s general assertion that its preferred notice form was not used.

An adequate initial packet identifies the policy, insured company, date and place of incident, person making the demand, alleged acts, known loss and immediate procedural deadline. Send the packet by an authorised channel and preserve proof of receipt. If the director is abroad, assign a responsible person to monitor the email account and portal. The insurer’s five-day election under Article 1476 is measured from a compliant notification under Article 1475, so proof of receipt is a legally relevant exhibit.

What exactly must the insurer decide within five days?

Article 1476(1) specifies a five-day period from the notification made in accordance with Article 1475. Within that period the insurer informs the insured whether it will undertake the necessary legal acts and decisions relating to the injured party’s demands and assist in defending the insured. The legal acts are undertaken in the insured’s name; the statutory provision places responsibility and the relevant expenses for that undertaking on the insurer. This is a defence-election duty, not a five-day payment deadline for every indemnity claim.

A reference number, automated acknowledgement or request for another attachment may not answer whether the insurer has elected to handle defence. Read the substance of the response. Did it agree to undertake the legal acts, appoint counsel, issue instructions for urgent protective steps or decline to undertake them? Where the answer is unclear, request a dated written clarification, without letting a court time limit expire in the meantime. Keep separate the five-day duty and any requirement to respond to a civil action.

Check the actual transmission date and receipt rather than assuming that pressing a portal button proves legal receipt at the intended address. If an intermediary sent the notice, determine whether that person was authorised to receive and relay it. A timeline showing the event, formal notice, reply and next procedural act is more reliable than an email chain with unverified forwarding dates. The correct legal analysis must use the specific insurer’s communication and the current contract.

Protecting court deadlines while the insurer considers the defence

Article 1476(2) leaves to the insured the measures that must necessarily be taken before the first paragraph’s period ends. A Turkish court petition may require a timely procedural response even though the insurance company has not yet selected counsel. The insured should obtain the complete service record and determine the real court deadline. If an urgent evidence-preservation application is necessary, it should be evaluated and documented. No insurance provision authorises an insured defendant to ignore a binding court timetable.

The duty is targeted to acts that cannot wait. It does not justify unnecessary pleadings, admissions of liability or disproportionate expenditure. Obtain instructions from the proper corporate representative and explain why each measure was urgent when undertaken. Protect original photographs, technical data, correspondence and records before systems overwrite them. A foreign director should not rely solely on a short translation of the claimant’s opening page when the annexes contain the alleged facts.

Article 1474 separately regulates reasonable expenses associated with claims against the insured and provides an advance obligation on request. Keep the expense claim separate from the election under Article 1476. Counsel should document the work performed, timing, cost and the connection to the defence. Where the matter also involves a criminal file, administrative investigation or personal liability of a director, define those mandates independently rather than assume liability insurance finances every parallel proceeding.

Once the insurer undertakes the defence, it must protect the insured’s interests

Article 1476(3) expressly requires an insurer that undertakes defence-related steps to consider the rights and interests of the insured. A commercial defendant may have concerns beyond the amount claimed: the accuracy of factual allegations, the effect of an admission on other proceedings and the rights of a non-insured officer. The provision therefore cannot be treated as unlimited authority for the insurer to impose any litigation position irrespective of the insured’s interests.

The company should supply relevant records and cooperate with proper requests, while retaining its own authorised decision-making process. Identify the lawyer who is formally appointed, the actual scope of representation, and whether different defendants face conflicting factual positions. Where separate advice is required, its funding must be assessed against the policy and Article 1474 rather than promised without qualification. The insurer’s statutory undertaking does not magically transfer every corporate power or erase professional obligations owed by counsel.

Keep copies of filed defences, hearing notices and settlement proposals. The insured can ask how a proposed course protects its rights, including the consequences of a factual admission. At the same time, a company may not frustrate the defence through destruction of documents or false instructions. The best legal record distinguishes cooperation, protected company interests and the insurer’s independent coverage position.

If the insurer does not give the required election notice

Article 1476(4) states that where the insurer has not made the relevant notice, it pays compensation against the insured that has become final. The precise condition matters: a demand letter or provisional court order is not the same as a final compensation determination. The rule should be explained in conjunction with the insured entity’s liability and the policy’s actual scope. It does not automatically convert uninsured activity into insured activity or remove every other statutory requirement.

Obtain the actual Article 1475 notice, proof of delivery and all responses. Establish whether the insurer was truly silent about the election, rather than merely late in answering an unrelated customer-service question. Obtain the final judgment and its finality record, identify the insured defendant, and reconcile the awarded sums with the policy period and limit. A later internal note from an insurer does not substitute for an election properly communicated within the required period.

In cross-border groups, pay attention to the party against whom the judgment was entered. A final decision against a Turkish subsidiary does not necessarily impose the same legal debt on its foreign parent. Where an overseas court judgment is involved, the procedural effect in Türkiye requires separate analysis. Article 1476 sets a substantive insurance obligation; it does not function as an international recognition or enforcement treaty.

How the fifteen-day settlement approval provision operates

The final sentence of Article 1476(4) addresses settlements concluded by the insured without the insurer’s approval. Where approval is not given within fifteen days of notification, the settlement is ineffective against the insurer; however, the insurer cannot unjustifiably refuse consent. The provision governs the insurer-facing legal effect of the settlement. It does not state that the insurer must fund any privately negotiated number or that every agreement between claimant and insured is void in all respects.

Before signing, circulate the complete proposed settlement, payment schedule, release and factual acknowledgements to the insurer by an evidenced channel. Identify whether the agreement covers the Turkish defendant, the foreign shareholder and particular executives. Those persons may not have identical insurance protection. If the insurer rejects approval, ask for a written explanation tied to the policy and disputed liability rather than accept a bare statement that the company should settle at its own risk.

Keep drafts and timestamps. A foreign director should verify that the signatory can bind the Turkish company and that bank details have been independently confirmed. A short oral reassurance from a broker is not adequate substitute for proven insurer approval when a substantial dispute turns on Article 1476. Where an agreement already exists, examine its exact wording and when it was reported; do not retrospectively label a completed settlement as an unfinished negotiation.

Reasonable legal costs and advance requests under Article 1474

Article 1474(1) regulates the insurer’s payment of reasonable expenses where a claim is brought against the insured. It also identifies the need for a contractual provision when expenses exceed the sum insured. Article 1474(2) requires an advance upon the insured’s request for expenses. These provisions should be cited directly in an expenditure claim. They are not the same as Article 1426, which addresses reasonable expense incurred to establish the insured risk or the extent of the insurer’s payment obligation.

A properly itemised schedule records the lawyer’s work, procedural necessity, dates, consultant services and invoices. The insured cannot prove an unlimited claim with a single unexplained total. Where the company initially paid counsel from abroad, keep proof of which legal entity actually bore the liability, the engagement letter and any later reimbursement. If a payment is made to another group company, document the legal basis. A request for an advance should identify the work that must be funded, not simply demand an unspecified litigation budget.

Some expenses concern urgent defence; others concern investigation, mitigation, business continuity or reputation management. Separate them, because the applicable legal test can differ. Do not include unrelated public-relations invoices as though all post-incident expenses are automatically reasonable legal costs. Proper categorisation protects the integrity of the claim and makes an insurer’s reasons for partial acceptance or refusal easier to scrutinise.

The injured third party’s direct right under Article 1478

Article 1478 allows the injured person to claim payment directly from the liability insurer, within the insurance amount and the limitation period applicable to the contract. The third party’s direct action and the insured defendant’s request for defence assistance can therefore coexist. They are not the same legal claim. A direct claim does not transform a named policy limit into a general guarantee of the assets of every company in an international corporate group.

Article 1479 permits the insurer to request appropriate information from the injured person to determine the event and damage. It addresses the consequences of failing to provide reasonably obtainable documents after the specified written notice. The insurer’s evidentiary interaction with the third party should be kept separate from its communications concerning defence of the insured. Each participant has a distinct legal role, and the file should show who supplied which documents and why.

International jurisdiction requires its own inquiry when the injured person resides abroad or the relevant policy has foreign elements. Our English guide to Law No. 5718 Article 46 discusses the protected forums for insurance disputes. Neither Article 1478 nor the insurer’s defence election alone decides every cross-border jurisdictional issue.

Intentional acts, coverage restrictions and non-insured directors

Article 1477 provides that the insurer is not liable for losses arising from an event intentionally caused by the insured. An allegation that a manager acted knowingly is not identical to a proven statutory exclusion; the event, insured person and applicable facts need careful examination. Insurance counsel should avoid both unsupported assertions that all conduct is covered and unsupported denials relying on the claimant’s preferred description of the conduct.

Coverage restrictions, territorial scope, deductibles and insured sums remain distinct from the procedures in Articles 1474–1476. A claim arising from professional services may require different cover from ordinary property or general business liability. The fact that the injured person names a company in the petition cannot establish that the event arose from an activity insured under that policy. Identify the exact exclusion or limitation relied on and its legal effect.

A foreign shareholder, Turkish subsidiary and individual director may need different counsel and potentially different insurance policies. Parallel criminal proceedings should not be treated as identical to a civil liability suit; their deadlines, rights and authorised representatives differ. Preserve original evidence and obtain advice before making admissions that may affect separate matters.

Practical evidence management when the board is abroad

Build a chronology showing the incident, first claim, Article 1475 notification, Article 1476 election and court deadline. Reference documents by number and store exact copies of emails and portal receipts. The insured entity’s authorised representative should be identified in a separate page together with the authority to engage counsel and to negotiate settlement. This prevents a parent-company employee’s informal email from being mistaken for a valid company decision.

Provide counsel with the complete signed policy, endorsements, registered entity details, service records and technical material. If a cross-border power of attorney is required, verify its form and scope for the intended Turkish proceeding. A foreign director should not assume that a general corporate letter is legally sufficient for all acts. Our guide to managing Turkish legal work without travel provides separate practical context.

Request a written summary after each material event: what occurred, which deadline remains, who must act and what expense or insurer instruction is outstanding. Where the insurer proposes a settlement, record when the complete terms were sent and what answer was received. Accurate cross-border file management reduces avoidable procedural risk without making unwarranted promises about a claim’s merits.

Final legal checklist before sending a formal insurer demand

Confirm the insured name, policy scope, incident date and identity of the injured person. Identify the actual notification under Article 1475, including its receipt date. Read the insurer’s communication against the five-day election duty in Article 1476(1), and determine which urgent acts the insured had to undertake under paragraph two. Where the insurer elected to defend, assess its conduct against the protection of insured rights under paragraph three.

Where the insurer was silent, establish the full conditions of paragraph four, including the final status of a compensation decision. Separate a settlement made without approval and apply the distinct fifteen-day consent rule. Document reasonable defence costs and any advance under Article 1474. If the injured person claims directly, analyse Article 1478 and any jurisdictional or limitation issues rather than confuse that case with the insured’s instructions.

A professional demand should specify the exact action sought and attach supporting documents. The insurer should be able to identify the alleged statutory breach and the evidence for it. A broad accusation that an insurer failed to help is less effective than a verifiable account of the notice, response, court stage, expenses and insured interests. This article is a general guide; the actual policy and procedural record remain decisive.

Frequently asked questions

Official law, related guides and contacting counsel

Check Commercial Code No. 6102 and Law No. 5718 in the official Turkish legislation database. Related legal guides: international insurance jurisdiction, assessment expenses under Article 1426, foreign company branch matters and managing legal matters without travel.

Bakırcı & Keskin Law Office coordinates legal matters across Türkiye from its physical offices in Istanbul and Mersin. A claim assessment requires the complete policy and procedural documents, not assurances of an outcome. English contact information is provided for document-based enquiries.