The Wirecard case raises complex liability issues. No less difficult is the terrain of D&O insurance, in which the former Wirecard CEO Markus Braun has already initiated several court proceedings. Of more general interest for D&O insurers, however, is a new, detailed ruling handed down by the Higher Regional Court of Frankfurt on the claim of another Wirecard manager, namely the former head of accounting, who wanted to be reimbursed by the D&O insurer for the costs of his legal defense and for public relations consultants. The Higher Regional Court of Frankfurt dismissed the claim against the insurer because the sum insured had been exhausted, and in its ruling addresses key issues of D&O insurance coverage law, in particular, how insurance sums are to be distributed if they fall short of the total sum of damages Some of the issues dealt with often arise in practice and are neuralgic. The judgment is carefully and broadly reasoned. It is therefore outlined on our blog, even though the OLG has allowed an appeal, meaning that the last word has not yet been spoken.

Claims against managers for reimbursement of payments made to creditors after the company should have filed for insolvency are attractive from the perspective of the illiquidity administrator: Such claims can quickly accumulate into significant amounts and are usually covered by D&O insurance. From time to time, our blog therefore makes legal forays into practical aspects of this liability area. The following, third of these forays - like foray 2 - looks at the concept of illiquidity and takes up the new IDW S 11 standard of the German Institute of Auditors. There, the IDW only allows financial status to be used to calculate insolvency, increases the percentage “coverage gap” on this basis compared to the German Federal Supreme Court (BGH) and warns that a calculation based on the BGH would entail a risk of liability. In contrast, we set in our 2nd foray of 6 October 2024 that the IDW's position is not supported by the procedural context of the BGH rulings to which the IDW refers. What is more, the IDW's position also contradicts the substantive assessments underlying the fundamental rulings of the BGH from 2005 and 2017 regarding illiquidity. To follow IDW S 11 is thus not without risk.

Two new forays on our Blog are dedicated tot the concept of illiquidity. The term is of pivotal importance, and one would think that enough time has passed since 01 January1999, when the German Insolvency Act (Insolvenzordnung [InsO]) came into force, to clarify the details. Indeed, the German Federal Court of Justice (IXth Senate) issued a fundamental ruling on the notion of illiquidity in 2005. According to ruling, illiquidity is determined on the basis of a combination of the static (calculation date related) figures of a status with the dynamic figures (related to the 3 weeks following the calculation date) of a financial plan. Pursuant to recent decisions of the Federal Court of Justice, however, under certain circumstances a series of financial status is sufficient to "prove" illiquidity, a legal tomography so to speak, which is not intended to provide a picture of the financial infarction by means of a dynamic finacial plan, but by a „layer-by-layer“ representation. So does the "proof" change what is to be proven? The question is weighty, since the dynamic 3 week financial plan has substantial impact on the determination of the illiquidity, both in legal and calculatory terms.

Now the new standard IDW S 11 of the Institute of Public Auditors bases its guidance for the calculation of illiquidity on a series of financial status, by the same token increases the relative (in percent) "coverage gap" compared to the calcualtion under the formula of the Federal Court of Justice and even warns that a calculation according to the Federal Court of Justice carries a risk of liability for legal practitioners and advisors. That is not to be followed.

Legal violations in the event of delay in filing for insolvency consitute, as reagrds case numners, an important area of manager liability practive. In principle, the law makes managers liable for all payments made by the company once it has become insolvent. When asserting such claims, however, a whole series of substantive and procedural hurdles must be overcome, which are not only the subject of many court decisions, but are also included in settlement negotiations. The legislator amended the matter some time ago. At the same time, the number of insolvencies is currently on the rise again. All of this leads us to expect more disputes of this kind. For this reason, from time to time our blog will take a look at practical aspects of section 15b InsO that may be of significance in court and in settlement discussions. The following article is the first of these forays.

Manager liability cases can give rise to questions regarding D&O insurance cover (see the blog post from 26.03.2024, https://www.reutercomplianceblog.com/artikel/leitpfosten-des-lg-frankfurt-zu-brennpunkten-von-manager-haftung-bussgeldregress-und-d-o-versicherung/). Two recent decisions of the Higher Regional Court of Cologne and the Higher Regional Court of Schleswig address such questions. They mainly deal with (i) the definition of an "insured event", (ii) the consequences of an assignment of coverage claims from the insured manager to the policyholder, i.e. the injured company, (iii) the proof of exclusion of coverage in the event of a "knowing breach of duty" and (iv) the consequences of breaches of duty and seting aside by the insurer of the policy. Such issues frequently arise in D&O liability practice. They harbor legal pitfalls. This article outlines the two decisions.