Questionable damage – highly questionable fraud?

How FIFA, Microsoft, WPs, BP and the Mafia are sued under the same law and pilloried through American glasses, Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm explain in a multi-part article.

The first part was about the „Racketeer Influenced and Corrupt Organizations Act“, a US federal law that makes this kind of jurisdiction possible. In the second part, the Directors and Officers insurance is examined in detail:


Manager insurance as a way out?

A manager insurance (D&O) does not apply anyway, if it is an intentional act. Occasionally, however, it makes a war chest available as defensive cover until the conviction – with the reservation of recovery. There is also the opportunity for misjudgement in this field, if you work with the German legal culture in the USA; for example, if the manager’s insurer is located in England or the USA.

If one reads in the trade press that the management has insured a sum insured of around 500 million EURO and that this is offset by losses in the double-digit billion range, it seems that there is a huge gap in coverage. The question of documentation concerning risk assessment and object inspection by insurance brokers and insurers will therefore be an exciting one. Even too low a level of cover that a company cannot afford with liquid capital indicates liability on the part of those responsible in the company – including quasi-reinsurance at the expense of, for example, industrial insurance brokers, agents, and insurers, §§ 6, 60, 61 of the German Insurance Contract Act (VVG). If, as in about 85 percent of the cases, the documentation is missing, the burden of proof is regularly reversed. If such a document exists, a consulting deficit can often be proven in black and white.


Questionable damage – highly questionable fraud?

If eleven million vehicles, each with a net sales price of only 20,000 euros, are affected, this makes 220 billion euros in revenue, which has also been generated by advertising with environmental friendliness.

In addition, it has enabled a market launch to be achieved and a dealer network and production capacity to be built up, worldwide, which will secure the future situation. Experience shows that crises of this kind are overcome quickly – then the advantages gained during this time come to light.

From a purely economic point of view, it might therefore have made sense to even consciously take these risks instead of working with the truth. If the management credibly reckoned with a certain profit, it will hardly be possible to reach a conviction for malice aforethought.

Thus, if necessary, no damage has occurred, but the benefit outweighs the damage. Without the measures taken at that time, VW might have had fewer assets today and would be in a worse position worldwide for the future. With then the question of where the basis should be to demand compensation from someone if a comparatively even more favourable price must now be paid for the advantages gained. A D&O could also argue like this. For a contingent price, which one was consciously prepared to pay for advantages gained, but would have liked to save money, no insurance company pays. Although their payment can of course be part of the calculation. Just as Winterkorn’s salary compensated for the risk he had taken.

The Federal Constitutional Court (BVerfG, ref. 2 BvR 1235/11, decision of 01.11.2012) decided that due to a breach of duty it is not permissible to conclude that the court has quantified the economic damage in terms of the amount (prohibition of disfigurement). In future, if an expert determines that on balance there is no damage, breaches of duty would not be uninsured on the one hand and would not be punishable as a property offence such as fraud on the other.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm

by courtesy of (published on 28.06.2017)



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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala ist seit mehr als 25 Jahren als Jurist und Rechts­anwalt mit eigener Kanzlei in München tätig. Er beschäftigt sich unter anderem intensiv mit den Themen Immobilien­wirtschaft, Finanz­recht sowie Steuer- und Versicherungs­recht. Die zahl­reichen Stationen seines beruf­lichen Werde­gangs ermöglichen es ihm, für seine Mandanten ganz­heitlich beratend und im Streit­fall juristisch tätig zu werden.
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