Your employer has made claims for damages against you but your D&O-insurer refuses cover? Often, insurers are not willing to pay full defense costs in German liability proceedings. In many cases of adjudged liability the insurer refuses to indemnify the manager.

We enforce your insurance claims against your D&O insurer and advise on how to safeguard your insurance cover claims during the liability proceeding.

What you should know

regarding the procedure and costs.

How does a D&O-insurer proceed in claims settlement in Germany?: First of all, the potential liability for damages of the board member is to be determined in a liability proceeding. Already such proceeding can take years, because there are usually complex company-internal facts to be reviewed.

If a liability for damages has been determined by a court, the insurer examines whether it has to indemnify the manager against the liability claim of the aggrieved company. The insurer may for example be released from payment if the manager consciously acted contrary to duty or if other exclusions apply. The question of the insurer's liability often has to be clarified in another legal (cover) dispute. This dispute may take several years as well.

At any point in time, the parties (aggrieved company, insured board member and D&O-insurer) may agree out of court on a settlement of the claim. A court proceeding is though often inevitable.

How much does it cost to have my insurance claim enforced?: Our fees for the assertion of your insurance claim depend on the scope and complexity of the case and are in an economically reasonable relationship to the value in dispute of the proceedings.

If you have D&O legal expenses insurance, this insurance covers the costs of asserting your liability insurance claims.

If the D&O-insurer loses the court proceedings, it has to pay your attorney and court fees to the extent required by law. The payment of these costs by the insurer is often part of a settlement agreement.

regarding your rights and duties.

I don’t have my D&O-insurance policy. Does my (ex-)employer have to provide it to me?: Under German law, there is no legal right to receive the complete D&O-policy and the associated insurance terms.

We recommend stipulating such right in your employment contract.

Do I have to provide the insurer with all documents and information requested?: As insured person under German insurance law, you have to provide the insurer with all requested and available records and documents - usually even if the documents are confidential. If you do not comply with your obligation to provide information, the insurer may be wholly or partially released from payment. Only if the insurer entirely and definitively refuses coverage, the so-called duty of disclosure no longer applies.

You might thus jeopardize your insurance coverage if you refuse to provide requested information. Should you have a problem with providing specific documents, it is urgently recommended to consult your legal advisors.

Can I conclude an agreement with the aggrieved company that any liability claim against me will only be pursued by the company if the D&O-insurer indemnifies me?: From a director’s point of view, such agreements are possible if the company agrees. From the company’s point of view, however, such agreements are problematic, as they may violate German stock corporation law, and endanger insurance coverage. The insurer might object that there is no cover without a valid liability claim against the insured.

We would be happy to advise you on how to conclude an ironclad agreement with your company.

regarding the insurer's obligations.

To what extent does D&O-insurance cover losses?: The scope of insurance cover is limited to the maximum sum insured per insurance period stipulated in the insurance contract, even if the actual loss is higher. In extensive cases of D&O liability with many board members being claimed against, the defense costs and the early indemnification of individual insureds from their claims can lead to the sum insured being completely exhausted before all liability proceedings are concluded. Some managers will then be left without insurance coverage.

Besides, D&O-insurance in Germany only covers pure financial losses. Property damage and personal injury are generally not covered.

In addition, a statutory deductible applies to members of the management board of stock companies: they must in any case defray 10 percent of the loss up to a maximum of 1.5 times their annual gross salary. A lot of managers insure this risk with additional deductible insurance.

In a settlement solution, the statutory deductible may eventually not apply, but in practice many agreements include such personal participation of the manager.

The insurer claims that I committed a "knowing breach of duty" (“wissentliche Pflichtverletzung”). What does that mean?: A so-called knowing breach of duty means that the insured person knew a duty and consciously violated it without the intention to harm the company. Such a situation can for example occur in times of crisis when a member of the executive board takes urgent unauthorized measures to rescue the company without seeking approval from the supervisory board.

“Knowing breach of duty” is stipulated in most D&O-insurance policies as an exclusion. If the insurer is able to prove that the insured person knowingly violated a duty, the insurer is released from payment.

Already in the liability proceeding, it must therefore be taken care not to provide the insurer with any arguments for a later refusal of cover on the grounds of a knowing breach of duty.

With what other arguments may the insurer refuse coverage?: In addition to the objection of a knowing breach of duty (see above), the D&O-insurer can justify its full or partial release from liability with a number of other arguments - for example, by arguing that the policyholding company or the insured manager breached a contractual obligation.

In some cases, insurers also argue that a breach of duty causing a loss was already known to the company at the time the insurance contract was concluded and was not communicated to the insurer. In such case, all insured persons might lose insurance cover, independent of their own involvement in the deceit.

According to the insurer the defense costs are too high. Do I have to pay my lawyers by myself now?: The insurer is obligated to pay at least the attorney fees in the contractually agreed amount. However, many D&O-insurance terms remain ambiguous on this point (for example with the phrase "in an appropriate amount"). The appropriateness of attorney fees in liability insurance has therefore been repeatedly the subject of controversial disputes before German courts.

Lawyers' hourly rates of more than 400 euros are more a rule than an exception in D&O liability cases, and the scope of the legal services can usually be justified in the view of complex cases.

We examine what the regulations of your insurance policy stipulates on this issue right at the beginning of the liability defense and clarify any issues with your insurer at an early stage.

You have further questions regarding manager liability and insurance in Germany?

Contact us without obligations.

In good hands.

A D&O-insurer that refuses to pay can ruin livelihoods. That is why you should entrust your cover claims to experienced insurance lawyers.

D&O liability and insurance are our daily business for more than ten years now. Being involved in most manager liability cases covered by the German media in recent years we achieved important decisions before the Federal Court of Justice for insured managers and companies.