What is D&O insurance and how does it protect company managers?
- Guntis Zoldners
- Sep 11
- 3 min read
Updated: Oct 14
D&O (Directors & Officers) civil liability insurance protects company managers’ personal assets from losses arising from mistaken decisions or actions while performing their duties.
It can be considered a “safety cushion” for everyone who makes important decisions in a company – from board members to function heads.
Who will cover your liability if something goes wrong?
Every company leader knows that decision-making always involves risk. Sometimes these risks turn into personal liability with potentially financially devastating consequences. Even with honest conduct.
A board member, supervisory board member or director can be sued not only by shareholders, but also by employees, suppliers, clients or even state authorities.
In Latvia this is also set by law
According to Section 169 of the Commercial Law:
"Members of the board and council must fulfill their duties as a good and careful manager."
If these duties are not fulfilled, liability is joint and several. This means that mistakes made by the team can become a personal financial burden as well.
Who is a D&O insurance policy intended for?
Insured persons may include:
Members of the management and supervisory boards
CFO, COO, production managers, etc., level 1–2 managers
Members of audit or procurement committees
Persons performing oversight functions
Also the spouses or partners of officers (in case of claims against joint property)
What risks are covered?
The policy covers losses arising from claims against an officer who has made an incorrect decision or taken improper action, for example:
carelessness or negligence;
inaccurate financial data;
incomplete documentation;
an erroneous decision in company representation;
inaction in a critical situation.
Compensated losses may include:
Defense costs
Damages paid to claimants
Reputation restoration costs
Loss mitigation costs
Tax liabilities in case of company insolvency
Claims related to cyber risks (if directed against the officer)
What does a D&O policy not cover?
Fraud or criminal conduct
Bodily injury or property damage
Professional liability (for example, in the work of doctors, lawyers)
Intentional sanctions violations
Existing litigation
Claims for tax assessments (except in insolvency)
Answers to frequently asked questions
Do I as a board member really face personal risks?
Yes. Any mistake, even unintentional, can be turned into litigation against a natural person. In Latvian court practice, claims are increasingly brought against specific officers, not only companies.
Is it enough that the company protects me?
Even if the company reimburses legal costs, there are limits. If the company is insolvent, or if the officer acted without authorization or against interests, personal liability remains.
How much does such insurance cost?
The price depends on several factors:
the company’s turnover;
the industry (for example, construction, IT, finance);
the coverage limit (for example, EUR 100,000 or EUR 1 million);
prior experience (for example, claims history).
For example, standard coverage for a small company can start from ~EUR 1,000 per year.
Who is the policy buyer – the company or the officer privately?
The company.
Can a small company also purchase this policy?
Yes. Often small and medium-sized companies face greater risks, because they rely on a few decision-makers. Moreover, litigation costs can exceed the company’s resources within a few weeks.
Our experience shows –
Most often D&O insurance becomes relevant when a conflict or mistake has already happened. But its true value is preventive – it allows the company’s leadership to feel safer when representing the company in complex matters.
If you are a company manager or a board member, carefully assess your personal liability risks. Even the best intentions do not guarantee immunity from claims or mistakes. D&O insurance is a tool that lets you make decisions with a clear mind – knowing that you are protected.
Have questions about D&O insurance? Contact us here or schedule a free, no obligation consultation today.
+371 26 668 558