D&O Insurance for Managers operating in Germany

D&O Insurance for Managers operating in Germany: protection, costs and selection criteria

A PRACTICAL GUIDE FOR MANAGING DIRECTORS, BOARD OF DIRECTORS AND SUPERVISORY BOARDS

An investment project fails, a compliance obligation is overlooked, or payments are stopped too late during a corporate crisis. What initially appears to be a corporate problem can become a matter of personal liability for managing directors, board members, or supervisory board members. Claims can quickly reach six- or seven-figure sums – in addition to the costs of legal defense.

Directors’ and officers’ (D&O) liability insurance is designed to cover such financial loss risks. It examines liability issues, defends against unjustified claims, and indemnifies the insured person against justified, covered claims. However, whether it actually provides protection depends not on the product name, but on the policy terms and conditions.

What is D&O insurance in Germany in one sentence?
D&O insurance is a professional liability insurance for members of a company’s governing bodies and – depending on the contract – other executives who are held personally liable for damages due to a breach of duty in their insured function.

What does D&O insurance cover?

Defense against unjustified claims

The insurer first examines whether the insured person is liable at all. If the claims are unfounded, the so-called passive legal protection, within the scope of the contract, covers in particular attorney’s fees, court costs, and expert witness fees. This defensive function is practically crucial because claims for directors’ and officers’ liability are almost always contested.

Indemnification in case of justified claims

If the claim is justified and covered by the contract, the insurer will cover the financial loss up to the available sum insured. All conceivable consequences of a management decision are automatically excluded: exclusions, sublimits, deductibles, the timing of the insured event, and the remaining annual maximum benefit must be taken into account.

What D&O does not replace

Directors’ and officers’ (D&O) liability insurance is not a substitute for business, professional, cyber, or criminal legal expenses insurance. It typically protects against liability claims arising from breaches of duty by company officers. Damages to the company’s own assets, personal injury and property damage, operational errors in advice, or criminal sanctions may be covered by other insurance policies or excluded.

Who is covered by D&O insurance?

The typical insured group includes managing directors, board members, and supervisory board members. Depending on the terms and conditions, advisory board members, authorized signatories, compliance officers, senior managers, de facto board members, or representatives of subsidiaries may also be included. The precise group of insured persons must align with the company’s organizational structure.

Does D&O insurance protect the company or the manager?
The focus is on the liability of the insured individuals. In a corporate D&O policy, the company is typically the policyholder; the insured individuals are the officers and managers defined in the contract. The policy can also safeguard the company’s interests because internal liability claims become economically viable, and defense costs do not directly impact the balance sheet.

A prerequisite for taking out such a D&O insurance policy is that the company or branch is registered in Germany.

Internal and external liability: Where do the claims come from?

Liability direction	Who is making the claim?	Typical example
Internal adhesion	The company itself, shareholders’ meeting, or an insolvency administrator acting on behalf of the company.	Misinvestment, inadequate risk management, payments after insolvency
External liability	Third parties, insofar as they can make direct claims against the manager	Tax, social security or other legal external claims

Important: Whether a specific internal or external claim is insured depends solely on the agreed terms and conditions and the underlying liability law.

Why managing directors and board members can be personally liable in Germany

The standards of liability arise, among other things, from Section 43 of the German Limited Liability Companies Act (GmbHG) for managing directors of limited liability companies and Section 93 of the German Stock Corporation Act (AktG) for members of the management board. Both provisions are based on the standard of care of a prudent businessperson or a prudent and conscientious business manager, respectively. Therefore, the company’s limitation of liability does not protect members of the management board from their own breaches of duty.

Business decisions do not automatically give rise to liability. For board members, Section 93 Paragraph 1 Sentence 2 of the German Stock Corporation Act (AktG) describes the Business Judgment Rule: A business decision does not constitute a breach of duty if it could reasonably be assumed that the decision was made on the basis of adequate information and in the best interests of the company. This is precisely why sound decision-making criteria and comprehensible documentation are so important.

Current case law: What managers should learn from it

Recourse against fines remains a sensitive issue for insurance coverage.

In its judgment of October 21, 2025 (Case No. 31 U 3/25), the Higher Regional Court of Frankfurt am Main affirmed a public limited company’s right of recourse against a former member of its management board for a fine imposed on the company and legal costs. According to published legal information, the decision was not yet legally binding. For practical purposes, this does not imply that every corporate fine is recoverable or covered by every D&O policy. Liability, insurability, and policy exclusions must be examined separately.

Knowing breach of duty must be specifically proven.

In its judgment of November 19, 2025 (Case No. IV ZR 66/25), the German Federal Court of Justice (BGH) clarified the requirements for an exclusion of coverage due to willful breach of duty. The decisive factor is the specific breach of duty on which the liability claim is based. The burden of proof for the exclusion generally lies with the insurer. While the judgment is important, it does not make willful breaches of duty insurable; rather, it limits the application of the exclusion too broadly.

Are grossly negligent management errors automatically excluded?
No. Gross negligence is not the same as intent or a knowing breach of duty. Whether insurance coverage exists depends on the wording of the policy and the specific circumstances.

Corporate D&O or personal D&O?

criterion	Corporate D&O	Personal D&O
policyholder	Usually the company	The manager himself
sum insured	Often shared by multiple insured persons and cases	It is generally available exclusively for the insured person.
control	Contract drafting and continuation are the responsibility of the company.	The insured person controls the contract and its continuation themselves.
Typical benefits	Broad protection of the organ structure	Supplementary coverage for gaps, multiple mandates, or special personal insurance needs.
Checkpoint	Allocation, late registration deadline, withdrawal, subsidiaries	Coordination with the company policy and avoidance of coverage conflicts

Personal D&O insurance should not be considered in isolation. What is crucial is how it interacts with the company policy, mandates in other companies, and existing indemnification agreements.

How much does D&O insurance cost?

How much does D&O insurance cost?
A reliable premium cannot be given without risk data. For small, financially stable companies, offers can start in the low four-figure range or even lower annually; for larger, international, regulated, restructuring-related, or claims-prone risks, premiums and deductibles increase considerably. Market prices fluctuate and are not directly comparable across different policies.

Insurers calculate premiums based primarily on the following factors:

• Revenue, balance sheet total, equity and economic development
• Industry, business model, internationality and stock market listing
• Number and function of the insured persons and subsidiaries
• desired sum insured, deductible and additional modules
• Prior damage, known circumstances, ongoing legal proceedings and restructurings
• Quality of compliance, risk management and corporate organization

Flat-rate price quotes are therefore only a rough guide. A low premium may be achieved through a low sum insured, strict exclusions, or short reporting deadlines.

How high should the D&O coverage amount be?

A reliable coverage amount is derived from a specific damage scenario, not from a general revenue formula. Potential internal claims, claims in the event of insolvency, costs of representing multiple individuals concurrently, international proceedings, and whether defense costs reduce the coverage amount must all be taken into account.

Aggregation deserves special attention: In corporate D&O insurance, the annual maximum benefit is often available for all insured persons and claims combined. An early major loss can significantly reduce the remaining coverage for other executives.

What deductible applies to board members?
If a stock corporation takes out D&O insurance for a board member, Section 93 Paragraph 2 Sentence 3 of the German Stock Corporation Act (AktG) generally requires a deductible of at least 10 percent of the damages, up to a minimum of one and a half times the fixed annual remuneration. This rule does not automatically apply in the same way to managing directors of limited liability companies (GmbHs).

Which exclusions and coverage gaps are particularly important?

Intent and knowing breach of duty

Intentional damage and knowing breaches of duty are generally excluded. However, high-quality policies often stipulate that defense costs are initially covered until intent is legally established or acknowledged. The insurer’s right to reclaim these costs must be considered.

Known circumstances and pre-contractual status

Previously known breaches of duty, claims, or specific circumstances giving rise to claims may be excluded from coverage. Application questions must be answered completely and precisely. Retrospective coverage only protects to the agreed extent and typically not in cases of actual knowledge.

Own damage and participation clauses

Specific exclusions may apply to claims by shareholders or insured persons. The thresholds and exceptions vary considerably. This review is particularly important in owner-managed companies.

Fines, monetary penalties and criminal proceedings

Fines and many penalties are not insurable or are excluded for legal or contractual reasons. Defense costs in administrative or criminal proceedings are also not automatically included in every D&O policy. Special criminal defense or investigation coverage modules may be required for this.

Operational activities and professional services

Not every mistake made by a manager constitutes a breach of their official duties. If an executive provides consulting, planning, IT, or other professional services, professional liability or financial loss insurance may be necessary. This distinction must be explicitly addressed in the insurance policy.

Claims-made principle: Why the timing of the claim matters

Directors’ and officers’ (D&O) liability insurance policies typically operate on a claims-making principle. Put simply, what matters is when the claim is first made against the insured person – not solely when the underlying breach of duty occurred. Therefore, retroactive coverage, extended reporting periods, and the notification of risk-relevant circumstances are among the most important policy features.

What is the difference between retroactive coverage and the extended reporting period?
Retroactive coverage applies to breaches of duty before the start of the contract, provided the contractual requirements are met and the circumstances were unknown. The extended reporting period applies to claims that are only raised after the contract has ended, but which are based on insured breaches of duty during the relevant prior period.

Seven checkpoints before graduation

• Insured persons: Are all organ functions, subsidiaries, de facto organs and relevant mandates correctly recorded?
• Sum insured and maximum payout: Is the annual maximum payout sufficient for multiple people, legal proceedings, and defense costs?
• Time coverage: Are retrospective coverage, the deadline for subsequent notifications, and the notification of circumstances clearly and sufficiently regulated?
• Insolvency protection: Does the policy cover claims for payments made after insolvency under Section 15b of the German Insolvency Code (InsO), and does the defense against allegations of intent remain in place?
• Exclusions: How do exclusions relating to knowledge, own damage, participation, services, sanctions and pre-contractual obligations work?
• Continuity upon leaving the company: What rights exist in the event of termination, change of control, retirement or change of employer?
• Interaction of policies: Are D&O, personal D&O, criminal defense, cyber, professional and business liability insurance coordinated without contradictions?

 

Practical question-and-answer scenarios

 

Scenario 1: The failed expansion

Question: A managing director approves an expansion. The project results in a loss of €900,000. Will the D&O insurance cover this?
Answer: Not automatically. First, it must be determined whether there was a breach of duty giving rise to liability or whether a justifiable business decision was made based on adequate information. If a covered claim exists, the policy will handle the defense and, if necessary, indemnify the insured up to the available coverage limit.

Scenario 2: Payments during a corporate crisis

Question: After the company became insolvent, suppliers continued to be paid. Is the managing director insured?
Answer: Claims under Section 15b of the German Insolvency Code (InsO) may be covered, depending on the policy terms. Insolvency and intent exclusions, the specific knowledge of the company, and the amount of remaining insurance coverage are critical factors. This point should be explicitly examined and not merely reviewed via a general directors’ liability clause.

Scenario 3: Several managers are sued simultaneously

Question: The management board and supervisory board each need their own lawyers. Is a joint corporate D&O policy sufficient?
Answer: That depends on the sum insured, cost allocation, sublimits, and allocation rules. Multiple lawyers can quickly exhaust the coverage. For high-profile individuals, additional personal D&O insurance or a separate excess coverage solution may be advisable.

Scenario 4: Changing to a new employer

Question: Is a former managing director protected for past decisions?
Answer: Only if the coverage period is sufficient. The following must be examined: the grace period for reporting claims, the run-off arrangement, change of control clauses, and whether the existing contract continues. A mere verbal promise from the former employer does not replace contractually secured coverage.

FAQ about D&O insurance

Is D&O insurance mandatory for managing directors of limited liability companies (GmbHs)?

There is no general legal obligation for managing directors of limited liability companies (GmbHs) to take out such a policy. However, given the personal liability risks, it can be a key component of both corporate and personal risk management.

Does D&O insurance cover wrongful decisions?

It does not cover economic failure as such. Insurance coverage comes into play when an insured claim for financial loss is made due to an alleged or established breach of duty.

Are claims of one’s own company also insured?

Yes, internal liability claims are typically a core aspect of D&O insurance. The specific scope depends in particular on clauses relating to own damage, participation, and insured vs. insured parties.

Does D&O insurance pay out in the event of insolvency?

Insolvency does not automatically terminate coverage. The decisive factors are the policy terms and conditions, the insured event, the coverage period, any exclusions, and whether the premium and contract remain valid.

Is personal D&O insurance worthwhile in addition to a company policy?

It can be useful if the combined sum insured is limited, there are multiple mandates, the employer controls the policy, or important personal coverage interests are not adequately considered.

Are legal fees included in the insurance sum?

Defense costs are often deducted from the sum insured. However, there are different models, additional limits, or cost regulations. The wording of the contract is crucial.

How long should the late registration period be?

The retention period must be long enough to realistically capture claims arising from previous breaches of duty that are raised late. Flat-rate minimum values are insufficient; factors such as corporate position, statute of limitations risks, departures, and changes of control must be taken into account.

Can the company deduct the bonus as a business expense?

In the case of a company-sponsored D&O insurance policy, a deduction for business expenses is generally possible. Whether the insured person derives a taxable benefit should be examined for tax purposes within the specific context of the compensation and contract model.

Conclusion: A D&O policy is only as robust as its clauses.

Directors’ and officers’ (D&O) liability is not an abstract risk for large corporations. Even in medium-sized limited liability companies (GmbHs), bad investments, compliance violations, insolvency issues, or organizational deficiencies can trigger personal claims. D&O insurance can protect personal assets and finance professional defense against such claims. However, an appropriate sum insured, reliable time limits, and clearly defined exclusions are crucial.

For executives, therefore, the question of whether D&O insurance exists is not the only important one. Crucially, it is about who actually has access to the coverage, how long it remains in effect, and whether it provides support, especially during a corporate crisis.

CTA: Your signature moves millions – your protection should keep pace

A management decision is made in minutes. Its liability consequences can surface years later. Therefore, don’t just check whether you have D&O insurance, but also whether it truly protects your specific role, your mandates, and your personal assets. Leeb Insurance Brokers Munich analyzes existing contracts, compares suitable coverage options, and clearly demonstrates where action is needed. Schedule a personal consultation – in Munich, by phone, or online: www.versicherungsmakler-muenchen.info

Sources and further information

Laws on the Internet: Section 43 GmbHG – Liability of Managing Directors, https://www.gesetze-im-internet.de/gmbhg/__43.html

Laws on the Internet: Section 93 of the German Stock Corporation Act (AktG) – Duty of care and responsibility of the board members, https://www.gesetze-im-internet.de/aktg/__93.html

Laws on the Internet: Section 15b of the German Insolvency Code (InsO) – Payments in case of insolvency and over-indebtedness, https://www.gesetze-im-internet.de/inso/__15b.html

German Insurance Association (GDV): What does D&O insurance cover?, https://www.gdv.de/gdv/themen/schaden-unfall/do-versicherung-managerhaftpflicht-60434

Federal Court of Justice: Judgment of November 19, 2025, Case No. IV ZR 66/25 – knowing breach of duty in D&O insurance (decision evidence via the case law database of the Federal Court of Justice)

Frankfurt Higher Regional Court: Judgment of October 21, 2025, Case No. 31 U 3/25 – Liability of company officers for fines and legal costs; for context, see the published case law references at dejure.org

Editorial note: This article provides general technical guidance and does not replace legal or tax advice. The specific circumstances of the case and the individually agreed insurance terms are decisive.