Your employer has brought claims Against you?

We defend you before German courts against claims for compensation following wrong decisions or a breach of duty in your function as director or board member.

Beyond defense we ensure that your D&O insurer covers attorneys’ fees and indemnifies you from all legitimate claims.


What you should know

Regarding the procedure and costs.

What is happening during a typical manager liability case?
A typical manager liability case in Germany usually begins with the company discovering a loss that was allegedly caused by a board member through a breach of duty. By internal investigations, the company first tries to clarify the reason for and extent of the loss incurred. It then requests the decision-maker in writing to compensate for the loss (the so-called claim). Such claim at the same time triggers the insured event under the D&O-insurance.

The decision-maker is then obliged to notify the insured event to his/her D&O-insurer. After an initial assessment of the case, the D&O-insurer either decides to defend the manager or to compensate the company’s loss (the so-called indemnification of the board member).

In the majority of cases in Germany, the D&O-insurer decides to defend. Unless the parties find a settlement out of court, a liability proceeding follows. Years may pass until a claim is finally settled.
Is there a possibility to resolve the matter quickly and silently?
In order to avoid a long lasting and possibly reputation-damaging public proceeding, it is advisable to reach an early out-of-court settlement involving all parties (aggrieved company, board member and D&O-insurer).

If an early settlement is not possible, it may under certain circumstances be advisable for the manager to assign his/her claim for indemnification (cover claim) to the aggrieved company in order to speed up proceedings. Arbitration, too, usually shortens claims settlement. We are happy to discuss the possibilities.
Who pays incurring defense costs in the liability proceeding?
As in other liability insurance, the D&O-insurer is obliged to reimburse the costs for defense, in particular the attorneys’ fees.

However, some insurers try to evade their obligation to take over the entire costs by arguing that the lawyers’ hourly rates or the scope of legal advice are not adequate. We therefore recommend to correspond with the insurer regarding takeover of costs at an early stage.
Are additional costs covered by the insurance, e.g. costs for PR consultants?
Whether additional costs are covered by your insurance depends on the content of the individual policy. Modern policies contain a sublimated reimbursement of costs for the defense against reputational damage.

regarding your rights and duties.

What am I to do if I receive a letter from my (ex) employer requesting me to pay damages for a breach of duty?
When such claim is made, the insured event under the manager liability insurance is triggered. You have to notify your D&O-insurer immediately so as not to jeopardize your insurance claims.

Unjustified claims for damages should be rejected with legal assistance as soon as possible. You do not have to wait for your insurer to provide for legal defense, you can consult lawyers you trust directly. An early defense strategy - from receipt of the letter of claim - is crucial for success.
The aggrieved company has submitted a termination agreement to me. Do I have to sign this?
Without a specialist lawyer's advice, you should not sign any agreement with your employer. D&O-insurance policies often offer a partial reimbursement of costs for such early legal advice.

In many termination agreements there are - often unintended by the company - imminent pitfalls that can have negative consequences for the liability proceeding or provide a starting point for the D&O- insurer to deny coverage.
Do I have to disclose an ongoing liability proceeding against me to a new employer?
No, unless you are specifically asked about it during the recruitment, you principally do not have to inform your new employer.
Do I have to provide the insurer with all documents and information requested?
Under German Insurance Law, the insured person has to provide the insurer with all requested and available records and documents - usually even if such documents are confidential. If you do not comply with your obligation to provide information, the insurer may be wholly or partially released from its obligation to perform (i.e. payment).

That means, you could jeopardize your insurance coverage if you refuse to provide requested information. It is urgently recommended to consult your legal advisors if you fear that you are not allowed to submit specific confidential information.
My D&O-insurer instructs a lawyer with liability defense who is not known to me. Do I have to agree?
In German D&O-insurance there is principally the free choice of lawyer. Unless otherwise stipulated in your insurance contract, however, the insurer's consent is required for coverage of costs when selecting defense lawyers (in particular if the defense lawyer works on a fee basis).

We therefore recommend that you approach the insurer at an early stage in order to propose a solution that is good for both sides concerning the choice of lawyer. The insurer has an interest in your best possible defense as well. We are happy to assist you in communicating with the insurer.

regarding german d&o liability in general.

I am not personally responsible for the loss. May I still be held liable for it?
Yes, because the principle of overall responsibility under German law means that each member of the executive board is responsible for the concerns of the company. From such principle of overall responsibility derives a comprehensive liability of the individual members of the executive board.

Delegating individual duties and dividing up competencies will not lead to an entire discharge from liability. A personal liability for not monitoring other departments will always remain despite delegating the obligation to act.

Due to such joint and several liability, a third-party notice to other members of the executive board may be part of a successful defense strategy. Often, also members of the supervisory board were aware of critical decisions and acts of the executive board and might therefore be liable for losses as well.
When do possible claims against me become time-barred under German law?
Claims for compensation against the managing director of a limited liability company (GmbH) regularly expire after five years. For members of the executive board of listed stock corporations (AG) an extended limitation period of ten years applies (for other stock companies five years). The limitation begins at the earliest with the occurrence of the loss.
Isn't it the company that has to prove that I breached a duty?
According to German liability law, an aggrieved company bears the burden of proof regarding the loss and its causation by breach of duty. The manager then has to substantiate and prove that he complied with his duties of due care.

Providing such evidence is usually challenging. Even simple negligence leads to unlimited liability of the manager (which makes German D&O liability one of the strictest in the world).
Does a claim for damages contradict a continued employment with the aggrieved company?
No. Although various insurance companies regard continued employment as an indication of a "friendly" claim (i.e. as a possibly fictitious insurance claim), nothing is opposed to continuing employment – neither from a liability nor insurance related point of view – as the German Federal Court of Justice clarified at our instigation.

On the contrary, liability insurance has the purpose of maintaining the relationship between the aggrieved party and the tortfeasor despite the insured event. The aggrieved company does not necessarily have to fire a good manager only because of one breach of duty.

You have a further question regarding manager liability and insurance in Germany?

Contact us without obligations.


in good hands.

Claims against you might ruin your career and livelihood. So entrust your case to people who know how to handle it.

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.

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WILHELM Rechtsanwälte

Tel. +49 211 6877460

info@wilhelm-rae.de

DÜSSELDORF. BERLIN.