Board member liability insurance: when it helps and what real cases show

Civil liability insurance for board members (in Latvian, valdes locekļu CTA apdrošināšana) – more often called D&O in the market – covers claims made against a member of the management board or the supervisory council personally over decisions taken in running the company. In Latvia this risk is not theoretical: courts have ordered former board members to pay tens of millions of euros in compensation, the State Revenue Service can claim the company's tax debt from a board member, and on 24 September 2026 the Saeima (the Latvian parliament) adopted amendments to the Krimināllikums (the Criminal Law) that provide for criminal liability for cartels in procurement. The policy helps most when ownership changes, the company becomes insolvent, an accident happens or an authority opens an inspection – but only if it was taken out before the problem arose and its cover matches precisely these scenarios.

This article complements the D&O service page, which describes how the policy is built. Here are the practical questions: where the threats come from for an owner who runs their own company; what Side A and Side B mean and why the deductible should be EUR 0; what real cases in Latvia and abroad show; and how D&O cover differs between insurers. The status of the court cases was checked on 26 September 2026.

Why an "SIA" does not protect the board

The objection I hear most often is: "We are an SIA, so our liability is limited." It is, but the limited liability of an SIA (a Latvian limited liability company) protects the shareholders – they are not liable for the company's obligations. A board member answers for how they performed their own duties, and that liability is personal.

The basis is Section 169 of the Komerclikums (the Latvian Commercial Law). It applies to SIAs and joint-stock companies alike, and to both the management board and the supervisory council:

• board and council members must perform their duties as honest and careful managers;
• they are jointly and severally liable for losses caused to the company – a claim can be brought against any one of them for the full amount;
• a board member is not liable if they prove that they acted as an honest and careful manager, or if they acted in good faith in accordance with a lawful resolution of the shareholders' meeting;
• claims become time-barred five years from the day the loss was caused – regardless of whether the board member is still in office.

The Krājbanka case shows clearly how strict this standard is. Describing the position of the Senate of the Supreme Court, the public broadcaster LSM wrote (our translation): "A board member can be released from liability only by proving that they acted as an honest and careful manager, because they are liable for any negligence, including slight negligence." Bad faith is not required for liability to arise.

A claim can be brought not only by the company itself. In certain circumstances Section 170 of the Komerclikums allows a creditor who cannot recover its claim from the company to bring a claim for the benefit of the company. In insolvency proceedings claims are brought by the administrator. In tax matters there is a separate public-law mechanism – Sections 60–62 of the law "Par nodokļiem un nodevām" (On Taxes and Fees).

If you own the company: where the threats come from when "I do everything right"

In my practice, it is owners who run their own company who most often put off D&O insurance. The logic is understandable: "The company is mine, I take the decisions and I do everything honestly – who would sue me?" Research and case law show why this feeling is misleading.

Three thinking traps

We rate our own chances higher than those of others. In a US study of 2,994 new business owners, 81% rated their own chances of success at 7 out of 10 or higher, and 33% at 10 out of 10. Only 39% expected such high chances for a similar business (Cooper, Woo, Dunkelberg, 1988).

Decisions are judged with hindsight. In an experiment, participants had to decide whether an expensive precaution against flooding was necessary. Of those who decided before the event, 24% found the precaution necessary. Of those who already knew that the flood had happened and caused losses, 57% found the person responsible negligent, and even a clear warning about this error barely changed the result – 56% (Kamin, Rachlinski, 1995). A board's decision is judged by people who already know how it all ended: the administrator, the new owner, the court.

We assume that the claimant will have to prove fault. On the question of care, the Komerclikums provides the opposite: a board member is not liable if they themselves prove that they acted as an honest and careful manager (the claimant, however, does have to prove the losses and their connection with the board's conduct). That is why in a dispute the deciding factor is not intention but documents: what information the board had, what the calculations were, how the decision was discussed and minuted. In a small company decisions are often taken orally – and it is precisely then that proving you acted with care is hardest.

Where the threats arise in practice

A claim against a board member can arise even if nobody has acted dishonestly. An event the board does not control is enough: a major client's bankruptcy, a price shock, an accident or a new owner with a different view. Typical beliefs and the reality:

• "The company is mine – nobody will sue me." In insolvency the company is taken over by an administrator, on whom the law imposes a duty to bring claims for losses caused to the company, including against the board. In Latvia 283 insolvency proceedings of legal persons were declared in 2024, and 269 in 2025. A claim can also be brought by a creditor, the other shareholder or – after a sale – the company under its new owner, while the State Revenue Service (VID) can claim a tax debt in its own administrative proceedings. D&O: covers the defence and losses within the limit if the policy has no insolvency exclusion; in insolvency, it is specifically the Side A part of the policy that pays the board member (see below).
• "Our bookkeeping is done by an outsourced accountant." If the accounting records are not handed over to the administrator, or do not give a clear picture of the transactions of the last three years and of the state of the assets, the board members are jointly and severally liable, under Section 72.¹ of the Maksātnespējas likums (the Insolvency Law), for the admitted creditors' claims that cannot be satisfied. It is the board that is liable, not the accountant. D&O: covers the defence and usually also the amount recovered – if the policy has no insolvency exclusion.
• "We pay our taxes." One hard year can change the picture. If overdue taxes exceed 50 minimum monthly wages (EUR 39,000 in 2026) and the other criteria laid down in the law are met, VID can claim the debt from the board member personally – including from a former one. D&O: the defence in the VID proceedings and, if the policy has a tax extension, the debt within the sub-limit; it does not cover late payment charges and fines.
• "We will get through the difficulties – it is still too early to file for insolvency." The Maksātnespējas likums requires the application to be filed without delay as soon as the signs laid down in the law are present. Not filing the application is one of the criteria for VID to hold a board member liable for taxes, and failure to meet this duty also carries an administrative penalty. D&O: covers the defence and claims for damages; it does not cover the penalty itself.
• "I will sell the company, and it will no longer be my problem." The new owner reviews the transactions, and the company can bring a claim against the former board member within five years from the day the loss was caused. After a sale the policy usually goes into run-off (covering only what happened before the sale) or ends. D&O: covers this if a sufficiently long reporting period remains after the sale.
• "An accident involving an employee is a matter for the insurer and the inspectorate." After a serious or fatal accident, criminal proceedings may be brought against the head of the company. In April 2025 the Zemgale District Court, at first instance, sentenced the owner and board member of a brewery to probation supervision for one year and three months: in the summer of 2021 an employee who was working without an employment contract suffered burns to about 60% of the body while brewing and died in hospital. According to the Prosecution Office, the employer had not provided protective equipment, supervision or instruction. D&O: covers the manager's defence if the bodily injury exclusion has a carve-back for defence costs; the harm to the victim is covered by the company's civil liability insurance and employer's liability insurance.
• "My partner handles the finances – I am only the second board member." Board members are jointly and severally liable: the claimant can demand the full amount from any one of them, and each of them has to prove that they themselves acted with care. D&O: usually insures all board and council members by position, including former ones.

An analysis by GDV, the German Insurance Association, of 368 D&O cases after insolvency shows how large the gap between the claim and the final outcome can be: on average administrators claimed almost EUR 7 million, but in the end the managers' liability averaged about EUR 140,000 – roughly 2% of the amount claimed – and in a third of cases no liability was established at all. Legal costs exceeded EUR 30,000 on average, and the proceedings lasted more than two years. That is why much of the value of D&O lies in the defence: money for lawyers is needed even before it is known whether there is any fault at all.

Side A, Side B and Side C: who gets the money

A D&O policy has several parts of cover, which the market calls by their English names – Side A, Side B and Side C. There are no established Latvian terms for them, so they are easier to understand by who gets the money and when.

All the parts usually share one limit, which all the insureds use together. That is why the order of payments matters: in the best wordings, the losses of individuals that the company does not indemnify are paid first, and only then the company's claims. If the limit is small and there are many defendants, it can run out before the money reaches you. The Wirecard case shows this well.

Why the deductible should be EUR 0 for both Side A and Side B

The deductible is the amount the insured bears themselves in each claim. In a D&O policy its effect is greater than it appears from the quote:

• The Side A deductible has to be paid out of personal money. Side A exists precisely for the case where the company does not pay, so a deductible here means the board member's own expense. In the four wordings used in Europe that were checked, no deductible applies to this part, but this has to be checked word for word in the quote.
• In an owner's company, the Side B deductible is the owner's money. If the company belongs to the board member, the deductible is an expense out of their own pocket – just via the company's account.
• The first bills are small. A request for explanations from VID, a letter from the administrator or an inspection by an authority at first generates lawyer's bills that often do not exceed the deductible. With a deductible, the policy often pays out nothing at the early stage.
• The deductible can apply more than once. One event can give rise to several claims and proceedings – from the administrator, a creditor and VID. Depending on the wording, the deductible may be applied to each of them.
• In a conflict with the company, the deductible becomes a point of dispute. If the company is permitted to pay for the board member's defence but refuses to – for example after a change of owners – in the four wordings used in Europe that were checked, the insurer pays the board member and later recovers the deductible from the company. In other wordings the board member may have to bear the deductible themselves, so this clause needs to be read.

On the Latvian market in 2026 it proved possible to agree a deductible of EUR 0 for both Side A and Side B. What this costs can be seen in the specific quote; before giving it up, it is worth comparing that price with the situations described above.

Real cases in Latvia

Below are publicly reported cases with a known outcome or a current stage verified on 26 September 2026. I do not use the court cases to judge anyone's guilt, and it is not publicly known whether any of those involved had a D&O policy. They show the mechanics: who brings the claim, how long it takes and what sums are at stake.

Krājbanka: EUR 15.4 million from seven former board members

The operations of "Latvijas Krājbanka" were suspended in November 2011, and on 23 December of the same year the bank was declared insolvent. The administrator brought claims against the former officers. In the first case the court ordered EUR 15,366,981 to be recovered jointly and severally from seven former board members for loans to persons connected with the bank's owner, granted without assessing the borrowers' creditworthiness and without commercial justification. In April 2020 the Senate refused to open cassation proceedings, and the judgment became final – more than eight years after the bank's insolvency.

In the second case – concerning pledge agreements and transfers of funds – the court of first instance dismissed the claim in 2024, but on 4 February 2026 the Riga Regional Court ordered about EUR 43 million to be recovered jointly and severally from nine persons, including former council and board members. Whether this judgment has been appealed to the Senate has not been publicly reported (checked on 26 September 2026).

Lessons. First, time: the decisions were taken up to 2011, but in the second case the appeal judgment was delivered only in February 2026, and over such a long period defence costs alone can reach large sums. Second, the outcome can change from one instance to the next. Third, joint and several liability means that each defendant may have to answer for the full amount. An insolvent company does not indemnify its officers for anything, so in this scenario only Side A works – and it is exactly this scenario that some policies exclude with an insolvency exclusion.

"Parex banka": EUR 81 million from two former board members

SIA "Reap" brought a claim against both former owners of "Parex banka", who were also members of the bank's management board. The dispute concerned 14 deposit and loan agreements concluded with them and related persons between 1995 and 2008 on terms that were not in line with the market. On 17 August 2022 the Riga Regional Court found that, as board members, they had breached the duty of an honest and careful manager, and ordered EUR 81,180,583 to be recovered from them jointly and severally. No appeal in cassation was filed, and the judgment became final in December 2022.

Lessons. Related-party transactions are a typical basis for a claim, and they are the first to be checked when the owner or management changes. In a small company they can be routine: renting premises from a board member's family, a loan to a shareholder or services from a relative's company. If the terms are not at market level and there is no documented justification, this can be a loss to the company for which the board is liable.

"Pasažieru vilciens": criminal proceedings over amendments to a procurement contract

Four former board members of AS "Pasažieru vilciens" were charged with abuse of official position because the contract concluded with the train supplier in 2012 differed from the tender documents – the contractual penalty and liability terms had been amended in the supplier's favour. On 4 November 2021 the Supreme Court upheld the regional court's judgment: each was fined between EUR 17,200 and EUR 19,350, they have to pay the state about EUR 1.48 million in compensation jointly and severally, and for three years they may not hold elected positions in state-owned and municipal companies.

Lessons. A commercial decision to amend a contract became a criminal case that lasted for years. In such proceedings D&O can cover the defence up to a final ruling, but not the fine, and after a conviction for an intentional crime the insurer can usually claim back the defence costs already paid.

PNB banka: a EUR 32 million claim against nine board and council members

In 2020 the insolvency administrator of PNB banka brought a claim for EUR 32 million in losses against nine former board and council members, including a former NATO Secretary General and a former head of the German foreign intelligence service, who sat on the bank's council. The claim relates to the assignment of the bank's claims to a group of investors without security. In June 2026 the case was still at first instance in the Riga City Court, and measures securing the claim had been applied to the property of several defendants.

Lessons. Six years after the claim was brought there is still no final outcome, but the property of several defendants has already been seized and the lawyers have to be paid. Council members, who do not take day-to-day decisions, are liable for supervision under the same Section 169 of the Komerclikums. A bankrupt company will not pay for the defence, so in this situation Side A cover and a sufficient limit are decisive.

VID and a board member's liability for taxes

Since 2015, Chapter XI of the law "Par nodokļiem un nodevām" has allowed VID to claim from a board member the company's overdue tax payments that arose while they were in office. This is not automatic – all five criteria must be met at the same time:

1. the amount of overdue taxes exceeds the total of 50 minimum monthly wages (EUR 39,000 in 2026);
2. the decision on recovery has been notified to the company;
3. after a decision to carry out a tax audit or after a tax inspection has started, and after the debt arose, the company has disposed of its assets, and because of the board member's action or inaction the taxes have not been paid in full within the time limits laid down by law;
4. a report on the impossibility of recovery has been drawn up;
5. the company has not fulfilled the duty to file an insolvency application.

Several board members are jointly and severally liable. On 15 November 2016 the Satversmes tiesa (the Constitutional Court) found these rules compatible with the Constitution (case No. 2015-25-01), stressing that a board member has the opportunity to prove that they acted as an honest and careful manager. Disputes go as far as the Senate: for example, in case No. SKA-82/2025 the Senate held that once the company had been struck off the register, its tax debt (EUR 99,117) was written off and could no longer be claimed from the former board member.

Lessons. VID proceedings are a matter of public law, not a civil claim, so check whether the policy's definition of "claim" also covers them. Defence costs are often covered, but the extension for personal liability for the company's taxes usually has a separate sub-limit, and it often works only in insolvency. Late payment charges and fines are not covered by civil liability insurance – this is laid down in Section 52(3) of the Apdrošināšanas līguma likums (the Insurance Contract Law).

Cartels in procurement: from a company fine to personal liability

Until now, only companies have been punished for prohibited agreements in procurement. In the so-called builders' cartel case, in 2021 the Konkurences padome (the Competition Council) imposed fines totalling EUR 16.65 million on ten construction companies. The Administrative Regional Court upheld the fines in 2024, but in December 2025 the Senate set aside that judgment and referred the case for re-examination, because recordings of conversations obtained covertly by the Corruption Prevention and Combating Bureau (KNAB) could not be used as evidence in the competition case. KNAB had already closed the related criminal proceedings against eight persons over possible corruption in 2021.

On 24 September 2026 the Saeima adopted in the final reading amendments to the Krimināllikums (the Criminal Law) on criminal liability for persons who in practice organise or carry out a prohibited agreement in procurement. The amendments provide for imprisonment of up to three years, and in public procurement up to five years, as well as a temporary ban on holding certain positions or carrying on certain types of business. Liability applies to large-scale cartels – where the procurement contract price excluding VAT is not less than EUR 750,000, and for construction works contracts not less than EUR 1,000,000. The first person who voluntarily reports and actively assists the investigation may be released from criminal liability. By 26 September 2026 the President had not yet promulgated the amendments. In parallel, the Saeima is considering amendments to the Konkurences likums (the Competition Law) that would allow the Konkurences padome to ban officers who were directly involved in the infringement or knew about it from holding management positions for one to three years; in June 2026 they were approved in the second reading.

Lessons. For companies that take part in procurement procedures, a board member's risk is no longer just a company fine. D&O can cover the defence in an investigation and in criminal proceedings up to a final ruling – if the policy has no competition law exclusion. Comparing quotes in 2026, I saw wordings that excluded competition law and bribery claims altogether.

Cases abroad: when the policy pays and when it does not

In Latvia it rarely becomes known whether a D&O policy paid out and how much. In major foreign cases this is public, and they show well both the value of the policy and its limits.

• Volkswagen (2021). Over the losses from the diesel scandal, the company reached a settlement with its former managers and their D&O insurers: the insurers undertook to pay about EUR 270 million, and four former managers a total of almost EUR 18 million out of their own funds, including EUR 11.2 million from the former chairman of the management board. In 2025 the German Federal Court of Justice declared the shareholders' approval of the settlement void on formal grounds; in June 2026 the shareholders approved it again, but this decision has also been challenged in court. Lesson: even a very large policy does not mean that a manager will not have to pay anything themselves.
• Siemens (2009). In the corruption scandal case, the D&O insurers undertook to pay up to EUR 100 million, including defence costs, and the former chairman of the management board agreed to pay EUR 5 million personally. The insurers had pointed to previously known circumstances and wilful breaches of duty, so the payment was achieved through a settlement, not automatically.
• Wirecard (2020–2024). The former managers' D&O programme had cover of EUR 125 million for 2019 and EUR 150 million for 2020, but by September 2024 only the primary insurer had paid out – EUR 15 million to the former chairman of the management board after losing a court case to him. In November 2024 the Higher Regional Court of Frankfurt am Main held that the former chief accountant would receive nothing: the primary insurer's 2020 limit (EUR 15 million) had already been used up, the insurer was entitled to pay in the order in which requests were received, and the circumstances had not been properly notified in 2019. Lesson: the limit is shared by everyone, and timely notification decides whether there is cover.
• Greensill Bank (2026). In February 2026 the Higher Regional Court of Cologne declared the bank's excess D&O policy void from the outset on the grounds of fraudulent misrepresentation: in a declaration signed for the insurer, three board members stated that they were not aware of any circumstances that could give rise to claims, although the bank had already been warned about an unacceptable concentration risk. The court also held the market-standard severability clause to be invalid, so the innocent managers lost their cover as well. An appeal on points of law has been allowed, and as at 26 September 2026 there is no decision of the German Federal Court of Justice yet. Lesson: the proposal must be filled in carefully, and this applies to everyone.

Eight situations in which the policy works

Generalised scenarios from reviewing D&O quotes and boards' questions – not specific client cases. For each: what happens, what the policy does and what to check.

1. A sale or a change of management. The new management finds a transaction it considers unfavourable – a contract with a related party, a large discount to a client or an investment that did not pay off – and the company brings a claim against the former board member. Policy: defence and losses within the limit; Side A works. Check: whether the insured vs insured exclusion (claims brought by the company itself) applies only to US claims and whether a change of control switches the policy into run-off without a sufficient reporting period.
2. Insolvency. The administrator brings a claim for losses caused to the company or for accounting records not handed over; the amount is usually closer to the company's liabilities than to its share capital. Policy: Side A is designed for exactly this situation. Check: the insolvency exclusion. In 2026 one insurer refused in writing to remove it, while another was prepared to consider removing it if a business plan, financial projections or the latest management accounts were provided.
3. VID claims the company's taxes from a board member. Policy: defence and, if the policy has a tax extension, the debt up to the sub-limit. Check: whether the VID proceedings fall within the policy's definition of "claim", how large the sub-limit is and whether the extension works only in insolvency.
4. An accident at work or on company premises. A serious or fatal accident is investigated by the Valsts darba inspekcija (the State Labour Inspectorate), and Section 146 of the Krimināllikums, on breaches of occupational safety rules, applies to the head of the company or another person responsible for compliance with those rules. Policy: the manager's defence; the harm to the victim is covered by the company's civil liability insurance. Check: whether the bodily injury exclusion has a carve-back for defence costs – in one wording used on the Latvian market they were excluded.
5. An inspection or investigation by an authority. The Konkurences padome, VID, the Datu valsts inspekcija (the Data State Inspectorate), the Nacionālais kiberdrošības centrs (the National Cyber Security Centre) or the police ask a board member for explanations. There is no formal claim yet, but a lawyer is needed now. Policy: some policies cover investigation costs from the first written request. Check: how "claim" and "investigation" are defined and what the sub-limit is.
6. A cyber incident or data leak. Shareholders, the company itself or a regulator allege that management did not ensure adequate cybersecurity. The Nacionālās kiberdrošības likums (the National Cybersecurity Law), which came into force on 1 September 2024, lays down for the entities it covers: "The head of the entity ensures, and is responsible for, the entity's cybersecurity management" (Section 25(1), our translation). Policy: the claim against the manager and usually a small crisis budget, but not the company's own losses – restoring systems and downtime. Check: that there is no data protection or cyber incident exclusion, and whether the company has a separate cyber policy.
7. A subsidiary in an international group. The budget, projects and strategy are often set by the parent company, yet personal liability under Latvian law stays with the local board. Policy: covers the local board members like any other insured person. Check: whether the group policy really extends to the board of the Latvian company, whether its limit gets used up elsewhere in the group and whether a claim by the parent company against the subsidiary's board is excluded.
8. An investor or lender alleges that it received misleading information. Financing or an investment was granted on the basis of data provided by the board, and when the results fall short of what was promised, the claim is directed at the managers personally as well. Policy: defence and losses if the claim is based on a management error. Check: whether the claim rests on a personal guarantee – D&O usually does not cover that.

How D&O cover differs and why to look at the cover, not the price

Two quotes with the same limit and a similar premium can be completely different products. The differences lie in the definitions, exclusions and sub-limits, and it is precisely these that decide whether the policy will work in your real scenario. Managers often do not know their own cover: in the 2024 WTW and Clyde & Co survey, 22–29% of respondents did not even know how much D&O insurance had been bought for their company.

Below is what I saw when comparing quotes on the Latvian market in 2026, and how the publicly available wordings of international insurers differ:

• Availability. Several insurers operating in Latvia do not offer D&O at all, some do not offer it to companies younger than two or three years, and insurers agree some quotes with reinsurers. Why it matters: the process can take several weeks.
• Insolvency exclusion. In one quote a special condition excluded insolvency risks entirely, and the insurer refused in writing to remove it; another quote had no such condition. The four international wordings I checked have no such exclusion. Why it matters: it is in insolvency that a board member needs the policy most.
• A claim brought by the company itself (insured vs insured). In some wordings it is excluded only if the claim is brought in the US; in others, including ones used in Europe, it is excluded worldwide, leaving only defence costs and certain exceptions covered. Why it matters: in Latvia a typical claimant against a former board member is the company itself after a change of management or owners.
• The definition of "claim" and investigations. In some wordings a claim is any written demand; in others, only a written demand for compensation, and investigation costs are covered only from the moment a person is identified in writing as a potential defendant. In two 2026 quotes with the same limit, one provided the full limit for investigation costs from the first written request, the other a sub-limit ten times smaller. Why it matters: the first lawyer's bills arrive before anyone brings a claim in court.
• Deductible. From EUR 0 to a set amount for each claim. Why it matters: see the section on the deductible.
• Tax extension. The sub-limit in the quotes compared differed by a factor of two and a half, and in some it works only in insolvency. Why it matters: in an owner-managed company, VID proceedings are a real scenario if the company runs into difficulties.
• Competition law, bribery and cyber incidents. Excluded entirely in some wordings. Why it matters: in competition law and cybersecurity, managers' personal liability has been tightened in recent years.
• Bodily injury. In one wording the defence in bodily injury cases is excluded; in others the exclusion has a carve-back that also covers the defence in cases of causing death by negligence and breaches of occupational safety. Why it matters: in construction, manufacturing and logistics this is a real risk of criminal proceedings for the manager.
• The period after the policy ends. By default, from 30 to 60 days. An extension can be bought: in Latvian quotes up to 36 months and only when the policy ends, in international wordings up to six or even ten years, and in some wordings cover for managers who have left office has no time limit. Why it matters: the limitation period under the Komerclikums is five years.
• Separate assessment (severability). In the best wordings, one board member's knowledge or untrue answers are not attributed to the others. Why it matters: the Greensill case shows that even such a clause may not be enough if the proposal is untrue.
• Order of payments. In the best wordings, the losses of individuals are paid first, and only then the company's claims. Why it matters: between the managers themselves this clause does not help – in the Wirecard case a German court allowed payment in the order in which requests were received, and the limit ran out before everyone had received money. That is why a sufficient limit also matters.
• Territory. In the 2026 quotes – worldwide excluding the US and Canada, or only the countries of registration. Why it matters: if there are subsidiaries, clients or assets abroad.

That is why the cheapest quote is not always the best value. If a young company's policy has an insolvency exclusion, it may not work in exactly the scenario for which it is bought. When comparing quotes, I first assess the cover, exclusions and sub-limits – and only then the price.

When the policy will not help

• The problem is already known. Circumstances the board member knew about before the policy was taken out are excluded, and this has to be confirmed by signature in the proposal form. A policy taken out after a claim has arrived will not cover that claim.
• Untrue answers in the proposal. If one of the board members knowingly withholds or distorts material information in the proposal, the insurer may try to challenge the whole policy. In the Greensill case a German court accepted this even in respect of the innocent board members, although the policy had a severability clause.
• Deliberate fraud or wilful breach. In the best wordings the exclusion applies only after a final ruling; until then the defence is covered, but afterwards the insurer can claim it back.
• Fines, late payment charges and other sanctions. Section 52(3) of the Apdrošināšanas līguma likums does not permit this in civil liability insurance. Defence costs – yes; the fine itself – no.
• The company's own losses. If nobody brings a claim against an officer, the policy pays nothing.
• A personal guarantee to a bank or a leasing company. This is a contractual obligation the board member took on personally, not a management error, and D&O usually does not cover it.
• An error in the service provided. Design, consulting and other professional errors are covered by professional indemnity insurance, not by D&O.

What to do when a claim arrives

1. Notify the insurer in writing and without delay – even if it is only a letter, an inspection request or a shareholder's accusations rather than a lawsuit. Circumstances notified during the policy period attach a later claim to that policy.
2. Do not admit liability or agree a settlement without the insurer's written consent, or the cover may be lost.
3. Agree the choice of lawyer. D&O is usually not a policy under which the insurer runs the defence: the insured chooses the lawyer, but costs and rates must be agreed in advance.
4. Gather the documents: board and shareholders' meeting resolutions, correspondence and the calculations on which the decision was based. Acting as an honest and careful manager has to be proved, and it is proved with documents.
5. Involve your broker. I help to prepare the notification and make sure the insurer's answers on cover are given in writing.

Who should review this now

D&O is not compulsory, and it is not every company's first priority. In state-owned companies it is common practice: data published in 2025 showed that together they spend more than a million euros a year on D&O insurance, and limits reach EUR 30 million. In a private company, the signs that the question needs to be dealt with now rather than "some day" are:

• the company's liabilities are large compared with its equity, or its shares are pledged;
• there are outside investors, lenders or a parent company abroad;
• a sale, fundraising or a change of management is planned;
• the company takes part in public procurement;
• the company is within the scope of the Nacionālās kiberdrošības likums or operates in a regulated sector;
• employees or clients face physical risks – in construction, manufacturing, logistics or sport;
• the board includes people who are not owners – salaried managers or independent council members.

Timing matters. Some insurers do not offer D&O to companies younger than two or three years, and the process can take several weeks. The policy covers only what is not known when it is taken out – so the best time to arrange it is when everything is calm.

Frequently asked questions

How to choose the limit, the deductible and the reporting period is covered in more detail on the D&O page.

Kristaps Račko

Insurance broker, partner at SIA EURORISK. 18+ years in insurance. About me →

This article provides general information and is not individual insurance advice. The actual cover depends on the chosen insurer's wording and the special conditions of the policy.

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