But when does such a wilful breach of duty actually occur?
In its judgment of 19 November 2025 (Ref. IV ZR 66/25), the Federal Court of Justice clarified the requirements for this risk exclusion, thereby strengthening the insurance cover for board members.
The case: Payments following insolvency
The insolvency administrator of an insolvent limited liability company (GmbH) made a claim under the D&O insurance policy of a former managing director.
The managing director was accused of having continued to make payments after the company had become insolvent. The insurance company refused to pay out, arguing that the managing director had knowingly breached his duties. Furthermore, he had recognised the company’s financial crisis and failed to file for insolvency in good time.
The case eventually reached the Federal Court of Justice.
The Federal Court of Justice’s ruling
The Federal Court of Justice clarified that the exclusion of risk on the grounds of a “knowing breach of duty” must be interpreted narrowly.
The decisive factor is not whether the managing director was generally aware that the company was in an economic crisis or whether other duties were breached.
Rather, the knowledge must relate specifically to the duty whose breach subsequently triggers the liability claim.
In this specific case, this means:
Anyone liable for unauthorised payments after the company has become insolvent does not lose their insurance cover simply because they may have fulfilled the obligation to file for insolvency late.
Rather, the insurer must prove that the managing director was aware of the specific breach of duty – i.e. the prohibition on the payment in question – and was conscious of acting in breach of duty.
Why the decision is important
The decision has considerable practical significance.
In corporate crises, several breaches of duty often occur simultaneously or in succession. In such cases, insurers frequently argue that mere knowledge of another breach of duty is sufficient to invalidate the insurance cover altogether.
The Federal Court of Justice has now set limits on this line of argument.
The judges in Karlsruhe require a specific link between:
- the duty giving rise to liability,
- the knowledge of the board member and
- the damage claimed.
This prevents risk exclusions from being extended beyond their actual purpose.
Implications for compliance and restructuring
This decision is of particular significance in restructuring and crisis situations.
Managing directors and board members often have to act under considerable time pressure. Not every wrong decision constitutes a deliberate breach of duty.
The Federal Court of Justice (BGH) thus confirms an important principle:
D&O insurance cover is not automatically forfeited merely due to simple errors, misjudgements or negligence.
The exclusion of liability can only apply if the board member is aware of the specific duty and deliberately breaches it.
Practical guide: What board members should bear in mind now
For managing directors and board members
- Document decisions made in crisis situations
- Seek legal advice at an early stage
- Continuously monitor the risk of insolvency
- Provide clear justifications for payment decisions
For supervisory board members
- Question crisis indicators at an early stage
- Ensure that monitoring is documented
- Regularly review D&O cover
For companies
- Analyse insurance terms and conditions
- Understand risk exclusions
- Document compliance and crisis management processes
Conclusion
With its ruling, the Federal Court of Justice strengthens the position of managing directors and board members vis-à-vis D&O insurers.
The exclusion of liability for a deliberate breach of duty only applies if the board member’s knowledge relates specifically to the breach of duty that subsequently gives rise to liability.
In practice, this means greater legal certainty – particularly in crisis and restructuring situations, where the scope of insurance cover is often disputed.
The decision also highlights the importance of careful documentation of decisions and a functioning compliance and risk management system.
Key points in brief
- The ‘knowing breach of duty’ exclusion must be interpreted narrowly.
- Knowledge of another breach of duty is not sufficient to invalidate D&O cover.
- This provides managing directors and board members with greater legal certainty in crisis situations.
