I. Basis: Insurance coverage of D&O insurances

D&O insurance (Directors and Officers liability insurance) serve to protect directors and officers (and other governing bodies and, where applicable, senior employees) from losses incurred by the company as a result of their business activities.
This covers financial losses. When commissioning the insurance, the quite different General Conditions of Insurance (“GCI”) must be carefully examined, as exceptions to the insurance coverage are often listed which prohibit effective protection.
The “insured person” in a D&O insurance policy is the managing director (and, if applicable, other bodies and/or senior employees), while the company is the policyholder. The company must first assert a liability claim against the managing director in a liability lawsuit and cannot institute legal proceedings directly against the insurance company. The managing director then files a coverage claim against the D&O insurance. The factual elements established by the court of the liability lawsuit on which his decision is based are binding and decisive for the coverage lawsuit (in the concrete case also proven by the fact that the insurance company had joined as intervener); often it is also achieved via a third party notice that certain judgments of the liability lawsuit have an effect against the D&O insurance.
In practice, the sum insured under the D&O insurance is the relevant liability amount for the company (the policyholder), especially in the case of major losses, since the property of the managing director is often insufficient to compensate for the loss. At the same time, it protects the managing director from private insolvency.
According to surveys of the potentially affected managing directors and board members, the claim by an insolvency administrator represents the greatest threat to them. However, the OLG decided, that claims based on section 64 GmbHG, which is a particularly liability-relevant provision, are not covered by the customary D&O insurance policies.

II. Judgment of the OLG of 20 July 2018 – file reference I-4 U 93/16

The subject of the proceedings on which the OLG judgment was based, was the claim of a managing director against the D&O insurance company for coverage of a payment she had made to the GmbH, which was based on liability pursuant to section 64 GmbHG and to which she had been sentenced in liability proceedings (conducted by the insolvency administrator of the insolvent GmbH [limited liability company]).
According to section 64 sentence 1 GmbHG, the managing director must pay compensation for payments from the company assets which he initiates after the insolvency maturity has occurred. This liability does not require any fault on the part of the company, but is based on the objective occurrence of insolvency maturity, which is why the creditors of the company were disadvantaged accordingly by payments initiated by the managing director.
The Regional Court of Mönchengladbach (lower instance) had rejected the claim of the managing director against the D&O insurance because it assumed a so-called deliberate breach of duty and this led to the exclusion of the insurance cover according to the insurance conditions. The intention arises from the fact that the applicant was aware of the economic situation and did not comply with his monitoring obligations. If an application for insolvency had been filed in good time, the payments at issue could have been avoided to the detriment of the company’s creditors.
The OLG did not consider a deliberate breach of duty to be proven and instead decided that claims based on section 64 sentence 1 GmbHG are not covered by the D&O insurance coverage if the policy only expressly mentions “claims for damages”. According to A 1.1 of the GTI at issue in this dispute, insurance cover should be granted “in the event that an insured person […] is sued for damages by the policyholder or a third party (including the insolvency administrator) for pecuniary loss due to a […] breach of duty […]”.
According to the jurisdiction of the Federal Court of Justice [BGH], the claim for damages resulting from section 64 GmbHG represents a claim of its own kind, which is not to be equated with a claim for damages in the sense of the insurance conditions. Since the insurance conditions do not also expressly cover the claim of the managing director from section 64 sentence 1 GmbHG, no insurance cover can be demanded.
According to the case-law of the BGH, the objective interpretation of the insurance contract is decisive for the assessment of coverage by the insurance company. It depends on how an average policyholder can understand this with “reasonable appreciation, attentive review and consideration of the recognisable context”. In this respect, the OLG came to the conclusion that claims under section 64 sentence 1 GmbHG were not covered by the insurance coverage from the point of view of the policyholder and the insured person, as these were commercially active and qualified. This seems doubtful in any case, because the assessment of the wording of the insurance conditions is to be based on the average policyholder and not on the person who is familiar with the special case-law of the BGH on the legal qualification of section 64 GmbHG.

III. Outlook

The OLG did not allow the appeal before the BGH, so that initially only the so-called non-admission appeal is permissible against the judgment (filed BGH file reference IV ZR 186/18), which is why the decision of the OLG is not yet final.
Finally, it should be noted that the decision should also be applicable to stock corporations (section 93 para. 3 no. 6 and section 92 para. 2 of the German Stock Corporation Act [AktG]).
In practice, it is advisable to agree at short notice with the D&O insurer on additional insurance conditions so that liability in accordance with section 64 GmbHG is also covered. This is in the interest of both the company and the managing director. In an effort to ensure that D&O insurances remain attractive, some insurers have already changed their conditions and expressly stipulated that claims under section 64 GmbHG are also covered. If such a confirmation is refused, the agent should be able to obtain other cover.