Directors and Officers (D&O) Liability Insurance

This insurance protects company executives and members of governing bodies against personal liability for decisions made while performing their duties. An executive’s liability is personal and is not limited by the amount of their salary or the company’s share capital.

Who is this insurance relevant for?

The insurance is intended for persons who make management decisions: managers, members of the board and supervisory board, financial directors. The risk does not depend on the size of the company — it depends on how many decisions are made and what their financial consequences are.

Relevant if you or your company

has a hired manager or a management board
is planning the sale or merger of the business or the attraction of an investor
uses borrowed capital or has significant creditors
works in a regulated area or participates in public procurement
is growing rapidly or, conversely, is experiencing financial difficulties
has several shareholders with differing interests

Who can be insured

The head of the company and their deputies
Members of the Management Board and the Supervisory Board
Chief Financial Officer and other senior executives
Former executives regarding decisions made during their term of office
Heads of subsidiaries

Some insurers extend coverage to the executive’s spouse and heirs as well, because recovery actions can affect the couple’s joint assets.

What does D&O insurance protect against?

The coverage typically consists of several components: the executive’s personal liability, reimbursement of defense costs incurred by the company, and claims related to employment relationships. Legal defense costs are covered regardless of whether the claim is ultimately found to be well-founded.

Standard protection

The manager’s personal liability for management decisions
Costs of legal defense, investigation, and representation
Institutional inspections, inquiries, and investigations
Expenses incurred by the company in defending its executives
Claims regarding employment relationships — unfair dismissal, discrimination, harassment
Claims brought by one insured person against another

Can be expanded separately.

Company’s liability regarding securities
Responsibility for organizing public procurement
Heads of subsidiaries and newly acquired companies
Activities and requirements in foreign jurisdictions
Protection against claims after contract expiry
Defense costs in tax disputes

Why is the manager personally liable?

The liability of the head of a legal entity and a member of the management board is delictual in nature—it arises not from a contract, but from unlawful acts or omissions that have caused damage (Article 6.245, Paragraph 4 of the Civil Code). This means that the principle of limited liability, which protects shareholders, does not protect the head of the entity.

Fault is presumed. Tort liability is governed by the general terms: tort, damage, causation and fault. In civil relations, guilt is presumed (Articles 6.246-6.249 of the Civil Code).

The practical consequence is that the burden of proof shifts: it is not the plaintiff who must prove that the manager acted improperly, but rather the manager who must prove that they acted with due care and prudence. Consequently, meeting minutes, the rationale behind decisions, and records of consultations become the foundation of the defense—and the process of gathering and evaluating them entails costs even before the case is heard.

Liability is not limited to the amount of remuneration, share capital, or company assets. If a claim is upheld, recovery is sought from the manager’s personal assets.

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Who makes the claim?	What is it regarding?	When is it most often made?
The company itself	losses due to management decisions	change of ownership or management
Creditors and the insolvency administrator	Late filing for insolvency, unlawful transactions;	In insolvency and bankruptcy proceedings
Shareholders	Diminished value, conflict of interest	Disputes between shareholders
State institutions	Violations of legal acts, personal fines	During inspections and investigations
Employees	Unlawful dismissal, discrimination	Labor disputes

The second approach is the most common in Lithuanian practice: the duties of a manager in the event of insolvency are governed by the Law on the Insolvency of Legal Entities, and failure to fulfill them entails personal liability for the damage suffered by creditors.

What does this insurance not cover?

D&O insurance covers errors and negligence in company management. It does not cover intentional acts or the pursuit of personal gain—and it is precisely these exclusions that vary the most among insurers offering this product.

Not included in the coverage

Intentional unlawful acts and fraud
Obtaining personal gain through unlawful means
Intentional violation of legal acts
Known claims and circumstances prior to the conclusion of the contract
Physical damage to a person or property
The Company’s contractual obligations and debts

Covered by separate products

Errors in providing services to a client → professional civil liability
Bodily injury to third parties → general civil liability
Harm to employee’s health → employer’s civil liability
Cyber incidents → cyber risk insurance

An important nuance: the exclusion for willful misconduct and fraud usually applies only after a final court judgment. Until then, defense costs are typically covered, though they may be reclaimed later if willful misconduct is proven. It is worth checking the specific wording in each individual offer.

What determines the cost of D&O insurance?

The price is determined by the company’s financial condition, field of activity, management structure, and the selected limit. Unlike many other types of insurance, the focus here is not on assets or the number of employees, but on decision-making risk.

Financial position. Profitability, debt level, liquidity. Financial difficulties increase the likelihood of insolvency claims.
Annual turnover and asset value.
Area of activity. Regulated sectors—construction, finance, and public procurement—are subject to stricter scrutiny.
Management structure. Number of executives and board members, subsidiaries, shareholder composition.
Geography. The operation or parent company outside the EU changes the assessment due to a different legal practice.
Planned transactions. A sale, merger, or capital raising are circumstances evaluated separately.
History of claims.
Limit, aggregate, and deductible. A deductible is often not applied to the manager’s personal liability.

What to decide before taking out insurance

D&O insurance, like professional liability insurance, operates on a “claims-made” basis: it is the date the claim is made that matters, not the date of the judgment. Therefore, the most important parameters are not the price, but continuity and the notification procedure.

Retroactive date. From what point in time are previous decisions covered? When changing insurers, this date must not shift forward.
Aggregate limit and separate sub-limits. A manager’s personal liability, company defense costs, and employment claims often have separate limits.
What constitutes a requirement. Does an official letter, inquiry, or initiated investigation from an institution already constitute a reportable event?
Reporting deadline and channels.
Former and future leaders. Does the protection extend to decisions from previous terms and to newly appointed individuals?
Subsidiaries.
Protection after contract termination. Period for submitting claims following the cessation of operations or the sale of the company.
How the exceptions regarding intent and personal gain are formulated.

Why reporting discipline is critical. A reportable event may be considered to be not only a lawsuit but also a letter received from an authority or notification of an investigation being initiated. A notification that is late or submitted via the wrong channel is one of the most common reasons for losing the right to a payout—even when the risk itself was insured.

What you will need to fill out the questionnaire

We will retrieve the company name, address, and NACE code from the Centre of Registers—you simply need to enter the company code. It is useful to have the following ready in advance:

Financial statements for the last year — turnover, profit, assets, and liabilities.
The management structure — the number of executives and board members
Shareholder structure and subsidiaries
The desired sum insured per event and in total per year
Information on planned transactions, if any
Claims and known circumstances over the past five years
Details of the existing policy — insurer, limit, retroactive date

The questionnaire takes about 6–8 minutes to complete. Financial data is the most important part—both the price and the terms depend heavily on it.

Frequently Asked Questions

Is the manager really liable with their personal assets?

Yes. The liability of a legal entity’s head and board member is delictual (Article 6.245, Paragraph 4 of the Civil Code) and arises personally. It is not limited by the amount of remuneration or share capital—a successful claim is satisfied from the head’s personal assets.

Why is it said that guilt is presumed?

In civil law, fault is presumed (Articles 6.246–6.249 of the Civil Code). In practice, this means that the burden of proof lies not with the plaintiff to prove the manager’s fault, but with the manager to prove that they acted with due care and prudence. Therefore, the manner in which decisions are documented is important.

Who most often makes a demand of the manager?

Most often, it is the company itself—following a change in ownership or management—as well as creditors and the insolvency administrator during bankruptcy proceedings. Less frequently, it is shareholders, state institutions, and employees.

Does liability end upon leaving the position of manager?

No. A claim can be brought even years after you have left office—regarding decisions made while holding that position. Therefore, as your term comes to an end, it is worth securing protection for the period during which claims may be filed.

Does D&O cover fines?

Partially and not in all cases. Costs associated with legal defense, investigations, and representation are broadly covered, whereas personal administrative fines are covered only to the extent permitted by law. In cases involving criminal liability, coverage is generally limited to defense costs.

How does it differ from professional civil liability insurance?

Professional liability covers errors made while providing services to a client. D&O insurance covers the consequences of management decisions—specifically, claims brought against an executive by the company itself, its shareholders, creditors, or regulatory authorities.

Does a small company whose manager is also the owner need D&O insurance?

The risk is lower, but it does not disappear. Claims may be brought by creditors and the insolvency administrator, or—in the event of a business sale—by new owners regarding decisions made during the prior period. It is precisely at the time of the transaction that D&O insurance often becomes a requirement.

How does the claim notification procedure work?

Insurance operates on a claims-based principle; therefore, it is essential to notify the insurer immediately—and in the manner specified in the policy—upon receiving a demand or even a formal letter from an authority. Late notification is one of the most common reasons for losing the right to a payout.

Related insurance products

D&O covers the consequences of management decisions. These products cover related areas of liability.

Professional civil liability

Financial losses incurred by the client due to errors in service provision

General civil liability

Physical injury to third parties arising from operations, premises, or products.

Employer's civil liability

Damage to an employee’s health in the event of an accident at work

Protect yourself and your decisions.

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