BGH decides on the exclusion for knowing breaches of duty in D&O coverage litigation

On November 19, 2025, the German Federal Court of Justice (Bundesgerichtshof; BGH) announced its highly anticipated decision on the exclusion of coverage in D&O coverage litigation on grounds of a knowing breach of the payment prohibition under insolvency law pursuant to former section 64 sentence 1 of the German Limited Liability Companies Act (GmbH-Gesetz; GmbHG) (now section 15b of the German Insolvency Code (Insolvenzordnung; InsO)). For the first time, the BGH had to decide whether a breach of the obligation to file for insolvency pursuant to section 15a InsO, which is to be qualified as a cardinal obligation, can be deemed to constitute a knowing breach of the payment prohibition and whether the insurer thus benefits from advantages regarding the burden of proof when proving a knowing breach of duty. The BGH did not uphold the decision of the court of lower instance, i.e. the Higher Regional Court (Oberlandesgericht; OLG), and made it clear that a knowing breach of the payment prohibition cannot be inferred from a breach of the obligation to file for insolvency. Instead, the decisive factor is the payment directly leading to a reduction of the insolvency estate.

Context – Burden of proof implications for knowing breaches of duty in cases of cardinal obligations

In D&O insurance policies, coverage for knowing breaches of duty committed by the insured person is regularly excluded. As a matter of principle, the insurer bears the burden of substantiation and proof for the elements justifying such an exclusion of risk. However, where elementary professional duties, known as cardinal obligations, are breached, the insurer benefits from advantages regarding the burden of proof: the breach of duty is presumed to have been knowingly committed. As part of its secondary burden of proof, the insured person must show circumstances why it is not justified to conclude that a knowing breach of duty occurred.

It is undisputed that the obligation to file for insolvency pursuant to section 15a InsO is one of the cardinal obligations of a managing director. Whether a breach of the obligation to file for insolvency also indicates a knowing breach of the payment prohibition under insolvency law was previously disputed and now had to be decided by the BGH.

OLG Frankfurt (judgment of March 5, 2025, case no. 7 U 134/23): Payment prohibition as a cardinal obligation – indicative effect in the event of a breach of the obligation to file for insolvency

In the lower instance, the OLG Frankfurt had categorized the payment prohibition pursuant to former section 64 sentence 1 GmbHG (now section 15b InsO) as a cardinal obligation and used the obligation to file for insolvency pursuant to section 15a (1) sentence 1 InsO, which undisputedly qualifies as a cardinal obligation, as justification: The court argued that a breach of the payment prohibition was usually rooted in a breach of the obligation to file for insolvency, as both obligations are closely linked and each serve the uniform purpose of protecting the company and its creditors. Evidence suggesting a knowing breach of one obligation thus indicated a knowing breach of the other. Consequently, it was to be concluded based on the breach of the obligation to file for insolvency that the payment prohibition also qualified as a cardinal obligation.

BGH (judgment of November 19, 2025, case no. IV ZR 66/25): No indicative effect of the obligation to file for insolvency

The BGH has overturned the decision of the OLG Frankfurt and referred the case back for a new hearing and decision. In the opinion of the BGH, a knowing breach of the payment prohibition cannot be inferred from the breach of the obligation to file for insolvency, the more so as this breach was committed only with conditional intent. Instead, the BGH argued that the decisive factor was whether the obligation for which the insured person is being held liable is in fact the obligation that was knowingly breached. For payment claims under section 15b InsO, the payments made after factual insolvency had occurred should therefore be considered as the relevant basis. In contrast, a knowing breach of other obligations (such as the obligation to file for insolvency) is not sufficient to establish a knowing breach of the payment prohibition. The Court did not deal with the categorization of the payment prohibition as a potential cardinal obligation and any resulting advantages regarding the burden of proof in favor of the insurer.

Consequences and categorization – verification of each individual payment

The BGH's decision has thus put an end to the uncertainties regarding the requirements for substantiating the exclusion of knowing breaches of duty in the case of claims under section 15b InsO: The insurer will have to substantiate for each payment made after the occurrence of factual insolvency whether it was prohibited and whether the insured person was aware of the payment prohibition in each case. Thus, there is no blanket exclusion of coverage for payments made after factual insolvency occurred. This is in line with the approach applied by the BGH in its previous rulings, according to which claims arising from former section 64 sentence 1 GmbHG (now section 15b InsO) are generally included in the coverage under a D&O insurance policy (judgment of November 18, 2020, case no. IV ZR 217/19). It remains to be seen what impact the BGH's decision will have on practice and how it will be handled in the case of a large number of payments or a fluctuating asset situation.