1. 1. 1. Starting point
         1. Intent, knowledge and their presentation in proceedings

Section 103 of the German Insurance Contract Act (VVG) excludes intentional breaches of duty from insurance cover; intent encompasses dolus eventualis, that is, cases in which the person does not regard a breach of duty as certain but considers it possible. [i] Professional liability and D&O policies typically reshape this rule by excluding cover for “knowing breaches of duty.” The latter require dolus directus of the second degree; in other words, the insured must have known the duty they breached and must have been aware of the breach.[ii]

According to a 2014 decision of the Federal Court of Justice (BGH) [iii], the insurer bears the burden of presentation and proof for a knowing breach of duty and must establish this inner state of mind by adducing connecting facts that can be regarded as cogent indicia of a knowing breach. [iv] Only once the insurer has done so does the insured, within the scope of their secondary burden of presentation, have to demonstrate the contrary. [v] The BGH supplemented this dialectic in its 2014 judgment as follows: further presentation of additional indicia will be unnecessary where the case concerns the violation of elemental professional duties whose knowledge can, according to everyday experience, be assumed of every member of the profession — as was the case, for example, in a decision of the Cologne Higher Regional Court[vi] [duty of a lawyer to attend court hearings, to avoid a default judgment against them and to inform the client of the state of the proceedings] … . Beyond cases of violation of professional cardinal duties, in which one can infer inner processes from the external course of events and the extent of the objective breach, the BGH maintains that it is the task of the party bearing the burden of proof — the insurer — to present connecting facts that can be regarded as cogent indicia of a knowing breach of duty.

1. 1. 1. 2. The significance of “cardinal duties”

In the case at issue the BGH, however, did not consider cardinal duties to have been breached, even though the insured was accused of having failed to prepare a liquidity plan and of having assessed the liquidity position by reference to “indeterminate hopes” (proceeds from the realisation of the goods inventory). The Cologne Higher Regional Court’s approach to the knowledge exclusion in legal professional indemnity insurance, to which the BGH refers (para. 21), did not rely solely on the breach of particularly important duties. According to that judgment, “the overall circumstances of the legal mandate, the content of the duty sphere and the motivation with regard to the knowing breach of duty must be taken into account.” It is to be assumed “that the insured knows the customary rules and duties. Knowledge and the will not to observe the duties are, however, inner facts from which one can infer by way of indicia.” It may be concluded “from the external events and the fundamental nature of the breach that a knowing breach of duty has occurred.” In cases of a “violation of elementary knowledge” the insured must be required (secondary burden of presentation) to make the breach “plausible and to explain the reasons why the breach occurred.”

1. 1. 1. 3. Conclusion

Against this background, the decisions of the BGH and the Cologne Higher Regional Court do not serve as a clear guide — neither as to what constitutes a “professional cardinal duty,” nor as to how much factual presentation is required in the procedural back-and-forth when such a duty is alleged to have been breached, nor as to the ultimate consequences. The Cologne court derives knowledge from a combination of the foundational character of the breached duty and the insured’s own submissions. The BGH, by contrast, requires that “elemental professional duties” have been breached, “the knowledge of which can, according to everyday experience, be assumed of every member of the profession.”

1. 1. 2. The dispute over “cardinal duties”

There is also disagreement in the literature about how to define cardinal duties and whether — and under what conditions — they can have the effect described by the BGH within the dialectic of party pleadings in an individual case. It has been criticised, for example, that the cardinal duties identified in professional indemnity insurance (lawyer liability according to the Cologne Higher Regional Court) cannot simply be transferred to D&O insurance because there is no uniform professional profile for company directors[vii]; moreover, a “cardinal-duty breach” would, via the mechanics of the secondary burden of proof, at best permit an inference of knowledge in individual cases and with weak probative force, but not as a general type-based rule.[viii] Others, by contrast, follow the case law and, on that basis, investigate which duties of company directors should be regarded as cardinal.[ix]

1. 1. 3. The three decisions of the Frankfurt Higher Regional Court

Three decisions of the Frankfurt Higher Regional Court (OLG Frankfurt) from 2025 deepen and extend the BGH’s case law for the insolvency field:

1. 1. 1. 1. Decree of 16 January 2025 – 7 W 20/24

In decree of 16 January 2025[x] the OLG reiterated the BGH’s guidance, but added that the duties in question must be “professional cardinal duties in respect of which one can infer inner processes from the external course of events and the extent of the objective breach.” [xi] In the case at hand the OLG found the following duties to have been breached and classified them as cardinal duties:

(1) The management’s duty to file for insolvency once insolvency has arisen; this duty is emphasised by the criminal provision in Section 15a(4) InsO;

(2) The duty of management, supervisory bodies and senior executives (a) not to grant themselves or third parties advantages from company assets to which no entitlement exists, and (b) not to use company assets for purposes unrelated to the business;

(3) The duty of a managing director (including of a limited liability entrepreneurial company, UG) to satisfy themselves as to the company’s financial position and to examine the existence of insolvency “thoroughly”, as well as the duty of “continuous financial self-monitoring”.

Similar to the Cologne Higher Regional Court in the context of legal professional indemnity, the OLG Frankfurt added that the managing director’s own submissions did not merely fail to negate the probative effect of a breach of cardinal duties for the question of knowledge; on the contrary, they made clear that the managing director “either knew the facts giving rise to insolvency or consciously shut himself off from them, for example because he wished to avoid a justified suspicion becoming certainty.” [xii] Moreover, like the OLG Cologne, the OLG Frankfurt did not confine itself to the cardinal-duty breach but evaluated further indicia to establish knowledge (substantial arrears to the tax authorities; significant cash withdrawals; absence of expected incoming payments; refusals to make payments; etc.).

1. 1. 1. 2. Judgment of 5 March 2025 - 7 U 134/23

In a judgment of 5 March 2025[xiii] the OLG reiterated the positions set out in its earlier decision. The court did not consider it exculpatory that the managing director was a craftsman.

In that decision the OLG also classified the prohibition on payments under former Section 64 sentence 1 of the GmbHG as a cardinal duty. The omission to file for insolvency enables dispositions that diminish the estate, which is why the two breaches of duty typically occur together. [xiv] Were the prohibition not to have cardinal character, the central creditor-protection rule would be “devalued and its breach left without sanction, since the calculation of the pure damage from delayed insolvency filing encounters great difficulties.” The criminal sanction in Section 15a InsO likewise “precludes a comprehensive privileging” of the insured; the duty to file and the prohibition on payments cannot be sharply separated and serve the unified purpose of protecting the company and its creditors. [xv] Any indicia of knowledge in respect of a breach of one of these duties would at the same time indicate knowledge of the breach of the other duties.[xvi]

Here too the OLG Frankfurt follows the line of the OLG Cologne, refusing to confine its assessment to the cardinal-duty breach alone and instead assessing the parties’ submissions and further indicia when determining knowledge (repeated letters and enforcement threats from the tax office due to arrears; threat of administrative proceedings by the tax office; a managing director’s admission of insolvency to the tax office; disregard of the insolvency administrator’s warnings).

1. 1. 1. 3. OLG Frankfurt, judgment of 8 May 2025 - - 3 U 113/22

In the third decision[xvii] former board members had concluded a settlement with the insolvency administrator in the liability action and had assigned their coverage claims to him. Here the Frankfurt Higher Regional Court (3rd Senate) initially followed the Cologne Higher Regional Court’s case law on direct actions and held that the evidential rule in Section 93(2) sentence 2 of the German Stock Corporation Act (AktG) was also applicable in that context in order to “avoid an inappropriate shifting of the insured risk to the advantage of the insurer, which would then initially not bear the burden of presentation and proof.” The court therefore kept the purpose and rationale of the knowledge exclusion in view. It then reiterated the positions taken in the two preceding decisions.

1. 1. 4. An unfortunate legal lateral shift

The focal point of all the decisions is the question which duties qualify as cardinal (or elemental professional) duties. [xviii] The Frankfurt Higher Regional Court seeks to derive the answer from whether a duty (1) belongs to the central, fundamental basic rules of a particular regulatory field, (2) is “particularly emphasised” by a criminal provision (such as Section 15a(4) InsO), or (3) pursues the same purpose as another duty that is itself classified as a cardinal duty under criteria (1) and (2) (for example the prohibition on payments, which pursues the same purpose as the duty to file for insolvency) [xix]. These criteria, however, relate only indirectly to the actual question posed by the OLG itself, namely whether, by the nature of the breach, “one can infer inner processes from the external course of events and the extent of the objective breach.” [xx] That — the actual — question is difficult because its answer cannot be derived from rules (absent the cardinal-duty jurisprudence) but must be worked out in each individual case on the basis of the overall circumstances.

The knowledge exclusion pursues the same purpose as Sections 81 and 103 VVG: the community of insureds must not be made to bear the consequences of deliberate misconduct (moral hazard); insurance must not become an instrument for externalising consciously accepted risks. [xxi] The three criteria set out by the OLG Frankfurt therefore have little to do with that purpose.

This is particularly fundamental in the context of D&O insurance: economically it serves both to protect the company and, in the event of insolvency, to protect creditors, and it is usually arranged and paid for by the company. It is paradoxical if the OLG Frankfurt treats the duties in question as cardinal precisely because of their creditor‑protection purpose in the run‑up to insolvency, thereby making coverage more difficult. One cannot here avoid asking whether this does not reveal a design flaw in D&O insurance that fidelity‑loss (fidelity) insurance only inadequately compensates, and whether the “knowledge exclusion”, which targets company officers, is suited to achieving the instrument’s objectives. [xxii] For the purposes of this article, however, the OLG Frankfurt decisions show precisely that the forest is obscured by ever more trees the more the focus narrows on whether a “cardinal duty” was in fact breached. [xxiii]

Secondly: even on the basis of common D&O policies, the stated purpose of Sections 81 and 103 VVG and of the knowledge exclusion makes clear that the search for cardinal duties is not an end in itself; it is only intended to assist in answering whether the breached duty was so manifestly clear that a breach must have been “knowing”. Against that background the OLG’s criteria are by no means cogent; [xxiv] they are merely indicia among others.

1. 1. 5. “Bad law” and the consequences for the insolvency administrator
         1. Bad law?

Are the OLG Frankfurt decisions “hard cases” that result in “bad law”? According to the court’s findings, the facts in all three cases plainly pointed to insolvency and delayed filing — in other words, they were “hard cases.” It was therefore understandable that the OLG would not only invoke the cardinal‑duty jurisprudence but also extend and consolidate it. The decisions thus increase the very risk identified above: that courts will increasingly orbit around cardinal duties and thereby lose sight of the central question whether knowledge and an impermissible externalisation of risks were present — the very evils the knowledge exclusion is intended to combat.

Three points must be borne in mind. First, even according to the OLG Frankfurt the rule is not a rule of evidence that cardinal‑duty breaches always establish knowledge. Rather, the insured and the insurer are merely required to meet heightened burdens of presentation, which they can usually satisfy because the insured typically knows the facts better than any other party, insured and insurer on the liability side usually cooperate, and both the insured and the insurer have rights to information. [xxv] Second, the three decisions are not based solely on the cardinal‑duty breach but on additional indicia. Third and above all: such disputes are typically characterised to a large extent by the “battle over the facts.” [xxvi] If directors or insurers conduct that battle carefully and skilfully, the allocation of the burden of presentation regularly becomes irrelevant.

1. 1. 1. 2. The insolvency administrator’s dilemma

In insolvency cases a peculiar constellation often arises because the suing insolvency administrator must plead the directors’ breach of duty and thereby may provide the insurer with a foundation for a knowledge defence. Thus, in the third OLG Frankfurt case[xxvii] the insurer adopted the plaintiff’s pleadings and, in the court’s view, thereby advanced sufficient indicia of knowledge in the dispute. This gives rise to difficult questions for the insolvency administrator about whether and how to conduct the litigation. [xxviii] Similar questions arise in any action for director liability and D&O coverage, but the cardinal‑duty jurisprudence makes the plaintiff’s task more difficult.

1. 1. 6. Summary

(1) According to a 2014 BGH judgment, a D&O insurer in a coverage action need not adduce additional indicia when proving the knowledge exclusion “where the case concerns the violation of elemental professional duties whose knowledge can, according to everyday experience, be assumed of every member of the profession” (so‑called cardinal duties).

(2) According to three decisions of the Frankfurt Higher Regional Court, the duty to file for insolvency and the prohibition on payments under former Section 64 sentence 2 GmbHG are such cardinal duties. The decisions increase the risk that courts will lose sight of the central question whether knowledge and an impermissible externalisation of risks were present, which the knowledge exclusion is intended to counter.

(3) In the coverage process the insured and the insurer are, however, only required to meet heightened burdens of presentation, which they can usually satisfy because the insured knows the facts better than other parties, insured and insurer on the liability side typically cooperate, and both have rights to information.

(4) Moreover, the OLG Frankfurt decisions are not based solely on the cardinal‑duty breach but on additional indicia. Such disputes are usually dominated by the “battle over the facts.” If directors or insurers conduct that battle carefully and skilfully, the allocation of the burden of presentation generally becomes immaterial.

(5) If the suing insolvency administrator pleads the directors’ breach of duty, he may thereby provide the insurer with a foundation for a knowledge defence. This raises difficult questions for the insolvency administrator about whether and how to conduct the litigation.

[i] BGH, 17.12.1986 - IV a ZR 166/85, VersR 1987, 174, 175; OLG Hamm, 07.03.2007 – 20 U 132/06, VersR 2007, 1550 f.; Korch/Lüttringhaus, Kardinalpflichten und D&O-Versicherung: Ein kardinales Mißverständnis, VersR 2024, 537, 538.

[ii] BGH, 09.11.2005 - IV ZR 146/04, VersR 2006, 106; BGH, 26.09.1990 - IV ZR 147/89, std. Rspr.; OLG Frankfurt, 16.01.2025 -7 W 20/24, NZG 2025, 803; OLG Frankfurt, 05.03.2025 – 7 U 134/23, NZG 2025, 851; OLG Köln, Urteil vom 29.11.2011 - 9 U 75/11, para. 46, VersR 2012, 560, 561.

[iii] BGH, 17.12.2014 – IV ZR 90/13, VersR 2015, 181, para. 20.

[iv] Wording of OLG Frankfurt, 16.01.2025 -7 W 20/24, NZG 2025, 803.

[v] BGH, 17.12.2014 – IV ZR 90/13, VersR 2015, 181.

[vi] OLG Köln, 29.11.2011 - 9 U 75/11, Rn. 52 ff., VersR 2012, 560, 561.

[vii] See Gruppe, Indizien für eine wissentliche Verletzung der Insolvenzantragspflicht, r+s 2025, 97, 99.

[viii] Korch/Lüttringhaus, Kardinalpflichten und D&O-Versicherung: Ein kardinales Mißverständnis, VersR 2024, 537, 544 ff.; Schmidt-Husson, Was, um Himmels willen, ist eine „Kardinalpflicht“?, Festschrift für Thümmel, 2020, S. 811, 821; Isenbart, unveröffentlichter Vortrag vor der DGVH am 07.11.2024, p. 16.

[ix] Lange, D&O-Versicherung und Mangerhaftung. 2. Aufl. 2022, § 11, paras. 58 et seq.; Lange, VersR 2020, 588, 593 ff.

[x] OLG Frankfurt, 16.01.2025 – 7 W 20/24, NZG 2025, 803 ff.

[xi] On the notion „cardinal“ see Korch/Lüttringhaus,Kardinalprlchten und D&O-Versicherung: Ein kardinales Mißverständnis, VersR 2024, 537 f., setting out that the word stems from the latin word cardio ffor door hinge. Also on the development of the professional duty case law, p. 539 et seq. and critical as regards the extension to D&O insurance, p. 544 et seq.

[xii] OLG Frankfurt, 16.01.2025 – 7 W 20/24, NZG 2025, 803, 804.

[xiii] OLG Frankfurt, 05.03.2025 - 7 U 134/23, NZG 2025, 851, 852.

[xiv] See. Gruppe, Indizien für eine wissentliche Verletzung der Insolvenzantragspflicht, r+s 2025, 97 98.

[xv] Here, the court follows Gruppe, Indizien für eine wissentliche Verletzung der Insolvenzantragspflicht, r+s 2025, 97, 99.

[xvi] Here as well referring to Gruppe, r+s 2025, 97, 99.

[xvii] OLG Frankfurt, 08.05.2025 - 3 U 113/22.

[xviii] See. Gruppe, Indizien für eine wissentliche Verletzung der Insolvenzantragspflicht, r+s 2025, 97, 99; Lange D&O - Versicherung und Managerhaftung, 2. Aufl. 2022, § 11, para. 53.

[xix] Cf Jüngel, NZI 2015, 272, 273. What remains decisive, of course, is that the very breach of duty in question must have caused the damage claimed, as the Düsseldorf Higher Regional Court (OLG Düsseldorf) likewise held, 08.11.2019 – I-4 U 182/17, VersR 2020, 968, 973, 975; Korch/Lüttringhaus,Kardinalprlchten und D&O-Versicherung: Ein kardinales Mißverständnis, VersR 2024, 537, 549; Reichel/Stößer, Anm. zu OLG Frankfurt vom 05.03.2025, NZG 2025, 854, 854. But see also Gruppe, Indizien für eine wissentliche Verletzung der Insolvenzantragspflicht, r+s 2025, 97, 100, in case of multiple and multicausal breaches.

[xx] OLG Frankfurt, 16.01.2025 – 7 W 20/24, NZG 2025, 803, 804.

[xxi] See. Armbrüster in Prölss/Martin, VVG, 32.Aufl. 2024, § 81 Rn. 1 f.; Looschelders in Münchener Kommentar, VVG, 3. Aufl. 2022, § 81, Rn. 1.

[xxii] See 4 b) infra on the common situation in which the claimant’s pleadings provide the insurer with the basis for a knowledge defence in insolvency cases..

[xxiii] Detailed and systematic overview to be found at Gruppe, Indizien für eine wissentliche Verletzung der Insolvenzantragspflicht, r+s 2025, 97, 98 et seq.

[xxiv] Reichel/Stößer, Anm. zu OLG Frankfurt vom 05.03.2025, NZG 2025, 854, 854.

[xxv] Vgl. OLG Frankfurt, 05.03.2025 - 7 U 134/23, NZG 2025, 851, 853.

[xxvi] Gruppe, Indizien für eine wissentliche Verletzung der Insolvenzantragspflicht, r+s 2025, 97, 101 ff.

[xxvii] OLG Frankfurt, 08.05.2025 - 3 U 113/22.

[xxviii] Same position taken by Gruppe, Indizien für eine wissentliche Verletzung der Insolvenzantragspflicht, r+s 2025, 97, 104 f..