D & O and the “dark machinations” of the Big Five

The SPIEGEL wants to have uncovered dark machinations of the great German car managers. If the revelations prove true, Daimler, BMW, Audi, Porsche and Volkswagen may face severe fines amounting to billions.

Up to ten percent of annual turnover can be fined in cartel proceedings. And these are not peanuts in the German “Big Five”. High time, therefore, to take a closer look at D&O insurances and current judgements. The expert editors asked the lawyer Dr. Johannes Fiala.


Keyword D&O, Dr. Fiala: Per se, a manager’s insurance does not apply if it is an intentional act. How will insurers react to the speculation, should it prove to be true? What difficulties do those responsible have to reckon with?

As an insurer I would wait in peace for the time being. There are numerous gaps in coverage in the usual market policies for manager insurance – and especially in insurance cartel law. When managers recognize these, they are usually left speechless. In addition to the uninsurable intentional acts, there is also, for example, the so-called deliberate breach of duty…

The “better” policies at least offer full coverage of the so-called defence costs, i.e. without quoting according to § 109 VVG. If an insurer were to pay the fines on behalf of the group, the insurance contract would probably be immoral. But there could be or have been quite different damages, which the D&O policy would then cover at best.

In the technical literature, there is talk of up to 10,000 claims annually by managers, directors, board members and managing directors. The psychological problem with the common D&O coverage gaps, as well as numerous “legal problems with so far sparse upper court jurisdiction” is that even as a manager one is reluctant to deal with the risk of liability. Just as someone recently signed a statement to his broker that he would refrain from giving advice – in the event of a claim, only a fraction was reimbursed due to underinsurance.

Incidentally, when it comes to recourse against management and employees, the question ultimately arises as to whether the economic advantage for the company was not still positive on balance (after deduction of the fine): if so, there is no damage and thus no recourse.


Even if the D&O were to take effect – in an actual antitrust case, the amounts covered would probably be far from sufficient…

In its decision of 20 January 2015, the Düsseldorf Higher Labor Court (LAG) ruled that cartel fines are not to be reimbursed by management as recourse. This topic is legally “hot” and very controversial. Quite apart from the nervous strain on managers – and perhaps also on the supervisory board – that I mentioned earlier.

Presumably, a large part of the damage would probably remain with the companies: But these are only assumptions, because it could take decades before the corresponding legal disputes are settled. Today, it is only relevant under insurance law to comply with the obligation to notify the insurer immediately of an impending loss.


In connection with the D&O insurance as well as the pecuniary damage liability there is a current judgement of the BGH (Az.: VI ZR 266/16): It concerns the personal certificate of the lawyer for initiators, tax advisors and managers. What significance could this judgement have with regard to the gaps in cover for liability for financial loss?


In case of intentional violation of protective and penal laws, no insurance will pay. However, there is the way out via the so-called prohibition error according to § 17 of the German Criminal Code (StGB), which leads to the perpetrator’s innocence. Thus, one is not liable for unauthorized actions for damages and criminally, the proceedings end with a suspension of the investigation or an acquittal. In the absence of a wilful act, the insurance coverage is not lost in this respect.

In good liability policies, civil and criminal defence is insured, as well as the provision of bail and the often useful involvement of private experts in the event of damage. Expert witnesses are needed more often in order to meet their “burden of proof and demonstration”.

As a person affected, one must not have reckoned with the possibility of doing wrong when committing the crime. There must not have been an awareness of the – even if only unclear in detail – violation of the law. The BGH considers this to be a rare exception in business life because everyone must be familiar with the protective laws in his or her field of work.

Those ice-cream parlour operators from Tübingen, however, who increased the price per scoop to 1.50 euros, probably had no idea of the antitrust law before contacting the state antitrust authorities.

In case of doubt, there is a duty to enquire – and this is where the lawyer experienced in his field comes into play: the person providing the information and the information itself must be reliable. The prerequisite is an objective, careful and responsible examination of the factual and legal situation. Persil certificates, i.e. courtesy reports with a fig-leaf function, would not be accepted by courts if they are recognizable as such “with even a moderate strain on the mind and conscience” (BGH, loc. cit.). Information on individual questions is not sufficient if the facts of the case are complex or the legal issues are difficult. Then you need a written assessment. In addition to this BGH ruling, there are about three dozen other rulings to consider if you want to avoid an often expensive and in the end perhaps useless Persilschein.


by Dr. Johannes Fiala


by courtesy of

www.experten.de (published on 25.07.2017)


Link: https://www.experten.de/2017/07/25/do-und-die-dunklen-machenschaften-der-big-five/

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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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