Doing Business in Brazil

32.5. Civil


32.5.1. Main Legal Provisions on the Liability of Managers

For purposes of understanding this article, we will call “Managers” all individuals who have management and decision-making powers in a company to which they are linked by its organization documents or by employment relationship. And, for example, but not exhaustively, we can mention members, officers, managers, etc.

Therefore, to begin addressing this issue, we will make objective and general demonstrations of the liability of these managers in the performance of their duties within the business scope.

Therefore, the rules on the liability of managers and, in general, of representatives and members of corporate legal entities is defined by law, especially in the provisions of the Civil Code – Law 10.406/02 and by the Corporation Law– Law 6.404/1976.

Several provisions can be exemplified here, with regard to the legal environment in which managers are inserted, and the most relevant thing for purposes of understanding this article is that, as a rule, legal entities are not to be confused with the person of their members, associates, founders, or managers1.

In addition, the law establishes that persons convicted of crimes of bankruptcy, malfeasance, bribery, concussion, embezzlement; or who have committed crimes against the public interest, the national financial system, antitrust rules, consumer relations, public faith, or property cannot be managers. The prohibition to hold office as manager lasts for the duration of the effects of the conviction2.

In addition, the laws that determine and establish the liabilities of managers jointly provide that the different legal provisions regarding corporate and business rules may be valid for complementary purposes, filling gaps in other types of business companies that do not have specific rules3.

These laws and regulations guide various regulations issued by regulatory and corporate supervision bodies, such as, for example, the Securities Commission, the Central Bank of Brazil, the Private Insurance Superintendence, among others, which dictate the duties and responsibilities of managers and their representatives in the exercise of their business management activities, in each specific area.

Another instrument for regulating performance and imposing limits on the scope of the liability of managers is the articles of organization of companies, represented by Bylaws or articles of association, which shall be observed during engagement in the corporate activities.

In short, this conglomeration of rules and regulations establishes the limit of action of managers of corporate legal entities, setting the guidelines for their actions while in office.

Having demonstrated the legal environment in which managers are inserted, we highlight below the main duties related to corporate management acts and which portray the characteristics concerning related activities.

1Arts. 47 and 49-A of the Civil Code.

2Art. 1011, paragraph 1 of the Civil Code.

3Such as, for example, the rule set forth in art. 1011, paragraph 2, which provides that the provisions concerning the term of office, as well as that of art. 1053, head provision, which provides that limited-liability companies are governed, whenever the law is silent, by the rules of general partnerships. We also mention the rule provided in arts. 1053, sole paragraph (limited-liability companies) and 1089 (joint-stock companies).


32.5.2. The Main Duties of Managers

Among the various duties and obligations of managers within the scope of business management, we can highlight those provided in art. 1011 of the Civil Code – duties of care and diligence, which provision basically observes the literality of art. 153 of the Corporation Law, as well as arts. 155 and 157 of the same law, which portray the duties of loyalty and reporting.

From the main duties listed above, it is possible to infer that the law points to the need for managers to act in the most transparent and careful way possible, always in favor of the company and in accordance with the corporate purpose.

In this line, managers shall play the best and most appropriate role they have proposed to play, in accordance with the provisions of the basic contractual principles, established in light of what is currently called “new Civil-Constitutional Law”, i.e.: probity, good-faith, and social function4.

In this sense, and for that reason, the law itself was concerned with providing, in the literal sense of arts. 153 of Law 6404/1976 and 1011 of the Civil Code, that managers shall exercise the care and diligence “that every active and honest person usually uses in the management of their own affairs”.

Therefore, the regularly exercised management, and here we can consider a management that observes the legal and normative parameters already explained in the paragraphs above, exempts managers from legal responsibility, regardless of the financial results obtained and the achievement of the business goals established.

From the above, we can conclude that the managers’ activity results in an obligation of means and not of result. What is required of managers, pursuant to the law, is precisely that, in their decision-making, all duties provided by law be considered, without considering the final result of profit or loss of the company.

As a rule, managers are not personally liable for the obligations they undertake on behalf of the company, provided that their liability be limited by virtue of regular acts of management.

However, irregular acts of management may hold5 managers legally liable for the damages they cause, whenever they act (i) within their duties or powers, but with fault in the broad sense (fault and intent), and/or (ii) in violation of the law or bylaws they should have observed. This is provided in art. 158 of Law 6404/19766 and in art. 1013, paragraph 2 of the Civil Code7.

Thus, if managers infringe the rules as set out in the paragraph above, the performance of an irregular management act will be characterized, at which time the managers may be held personally liable for third-party losses they may cause, which may affect their personal assets and involve them in judicial and/or administrative proceedings.

Therefore, due to the financial consequences that an irregular act of management can cause, companies have offered some instruments of protection to their managers, officers, and directors.

The best known means are (i) the comfort or indemnity letter issued by companies in favor of their managers, in order to guarantee them the necessary security to carry out their business management, and (ii) the liability insurance called D&O – Directors and Officers, which will be analyzed in further detail below.

4Art. 154 of Law 6404/1976. Managers shall perform the duties attributed to them by the law and the bylaws to achieve the purposes and in the interest of the company, satisfying the requirements of the public good and the social function of companies.

5We can consider their liability both under the civil law – for the commission of any unlawful act against a Third Party – as well as under the penal law, in cases, for example, of commission of crimes against the tax, economic system, consumer relationship, and the environment.

6Art. 158. Managers not personally responsible for the obligations they undertake on behalf of the company and by virtue of regular management acts; however, they are liable under the civil law for the damages caused whenever they act:

I – within the scope of their duties or powers, with fault or intent;

II – in violation of the law or the Bylaws.

7Art. 1.013. Except as otherwise provided by the articles of association, the management of the company is separately incumbent upon each of the members.


Paragraph 2 Managers who carry out transactions, knowing or having to know that they were acting in disagreement with the majority, are responsible for the payment of damages to the company.


32.5.3. Emergence of D&O and Historical Aspects

In order to discuss civil liability insurance of managers – which will hereinafter simply referred to as “D&O”, an acronym for “Directors and Officers Liability Insurance” – we will refer to the U.S. economic scenario of the 1920s.

At that time, the United States was experiencing the so-called economic euphoria, with the supremacy of consumption of durable and non-durable goods.

With the apogee of capitalism in that decade, companies and industry had a great development, and many of them went public, with shares being admitted to trading on the stock exchange.

As a result of increased consumption and market euphoria, industries increased their production on a large scale, agricultural production developed significantly, and resellers and distributors inflated their inventories.

However, at a certain point, production started to be dammed because consumption commenced to not keep up with the same euphoric pace.

In view of that, several companies began to feel the effects of the production and storage of products without flow, starting to suffer strongly from the repressed demand.

Therefore, an economic crisis began, with the devaluation of companies, causing a great impact on those listed on the stock exchange.

The height of this crisis occurred in 1929, when after consecutive falls in the volume of stock trading, the New York Stock Exchange literally went bankrupt on the so-called “Black Thursday” of October 24.

As a result of that, the entire North American economic system was affected, from small traders to large companies and financial institutions.

As from the economic recovery plan, the following year, new practices began to emerge in the economic, financial, and securities markets. In this sense, new rules of conduct, controls, and procedures were instituted, essentially aiming at corporate and personal financial security.

And it was at that moment that D&O insurance emerged with great force, with the aim of protecting business executives who worked in the various U.S. companies, and who essentially operated on the stock exchange and whose personal assets could be somehow financially affected due to acts of administrative management.

From then on, with good acceptance, D&O evolved consistently under the label of financial protection for managing executives, migrating to other countries, especially those with which the United States had an economic relationship.

In Brazil, D&O insurance became relevant in the early 1990s, with the offer of policies being restricted by Insurers to state-owned companies undergoing privatization.

Subsequently, with the movement of the securities market and the growing number of IPOs (U.S. acronym for “Initial Public Offering”) on the Brazilian stock exchange, which began in 2004, D&O insurance was improved, starting to have a more significant volume for managers of publicly-held companies.

In 2008, the opening of the reinsurance market in Brazil allowed that insurance to develop further, since the capacity of the insurance market to absorb risks increased, with a drop in the average price of premiums, which allowed the taking out of the D&O by limited-liability and small- and medium-sized companies.

In 2014, in turn, the highlight of D&O insurance was the loss ratio.

This was due to the involvement of managing executives, who were covered by D&O policies, in the various operations and investigations launched by the Federal Police, in particular the “Car Wash” operation, “Zelotes” operation and their consequences with leniency agreements and state’s evidence.

This demonstrates the concern of Insureds and Policyholders with taking out D&O insurance in times of crisis when there is a greater susceptibility to the occurrence of claims.

Thus, in view of the historical evolution of D&O, we will now move on to the technical and practical aspects of this insurance.

32.5.4. Objectives and Main Characteristics of the Insurance

D&O is a civil liability insurance that aims to protect the assets of managers in the regular performance of their duties.

And the protection of the managers’ assets would be directly linked to the financial consequences arising from defense expenses and indemnities they may incur due to convictions arising from claims, which usually refer to judicial or administrative proceedings, filed by third parties and related exclusively to their management acts performed on behalf of the companies to which they are linked.

Normally, a D&O policy is structured in a triple way, with the participation of the business company, the manager, and the insurer.

Under the policy, the business company is referred to as Policyholder, and it is, as a rule, the one that takes out the insurance in favor of its managers, named Insureds.

By contractual definition, the Policyholder agrees to the Insurer to act on behalf of its managers-insureds, acting in accordance with the provisions of the policy and being responsible for payment of the premium and any advances due to the occurrence of a potentially covered risk.

The Insured, in turn, and as noted above, is the individual linked to the Policyholder and who holds, or has hold, an administration and management office as a result of appointment, election, or employment contract.

When we consolidate these concepts, we conclude that the definition of D&O insurance, when linked to its main cause, would be that of a policy that, upon payment of the premium, as a rule, by the Policyholder, transfers the risk, to the Insurer, of the possible financial consequences of management acts performed by the Insureds, and which, due to negligent conduct, may reflect on their personal assets.

In this sense, it is important to refer to the initial topics of this article, when demonstrating managers’ responsibility and the regular and irregular acts of management.

As already mentioned, as a rule, the personal liability of managers arises whenever they perform their duties or powers, with fault or intent, or even in violation of the law or Bylaws, and cause damage to third parties, being liable for compensation for damages.

And, even though the effects of the liability of managers originate from their faulty or intentional conduct in irregular acts of management, which causes damage to third parties, for purposes of D&O insurance, the coverage only encompasses faulty acts.

In fact, irrespective of the type of insurance, as expressly provided for in Article 762 of the Civil Code8intent is excluded from the policy coverage.

Intent portrays a deliberate intention of the agents to violate the law or the rules to which they are subject, being aware that their acts are illegal and that they may cause harm to third parties.

Therefore, acts of irregular management intentionally committed by managers are not a covered risk, since they distort the legal nature of the insurance contract. 

In this sense, D&O insurance coverage supports the consequences related to financial losses of the administrator’s irregular management act, in the negligent modality, which is the legitimate interest in taking out the insurance9.

The insurance, in turn, as defined by SUSEP Circular 637/2021, shall be taken out place in the claims made basis modality, as it is more suitable for guaranteeing long tail risks.

This type of policy provides for the granting of contractual coverage for a specific unlawful act committed in the past, even if claimed later, when harmful effects to the Third Party occur.

For that reason, the Insured may contract a retroactive coverage period, in addition to the policy term, in order to grant contractual protection to the commission of possible unlawful acts in the past, provided that said acts and the effects thereof on third parties be unknown by the Policyholder or Insured at the time the insurance is taken out.

In this sense, in order to verify whether a certain negligent unlawful act committed by the Insured is subject to indemnity under a D&O policy, it is necessary to confirm if the following time requirements are met: (i) if the date of the referred negligent unlawful act – characterized as a triggering event – occurred during the term of the contract, or during the retroactive coverage period, and (ii) if the claim for the damages suffered by the third party was also formalized during the contract term, or the additional coverage periods, when applicable.

It is worth briefly clarifying that the additional terms represent a definite additional period of time, after the end of the policy period, granted to the Insured in specific situations, for the submission of claims by third parties for the losses suffered due to the commission of an unlawful act that occurred during the policy term, or during the retroactive coverage period10.

The additional term shall be included in the contractual conditions in the following cases: (i) if the insurance is not renewed; (ii) if the claims made basis insurance is transferred to another insurance company that does not fully allow the retroactivity period of the previous policy; (iii) if the insurance is transformed, at the end of its term, into an occurrence-based insurance in the same or in another insurance company; or (iv) if the insurance is terminated, provided that the termination has not occurred by legal determination, due to failure to pay the premium, or due to exhaustion of the maximum guarantee limit of the contract with the payment of indemnities11.

We also explain that D&O insurance policies may have a notification clause.

Such clause grants the Policyholder or the Insured the possibility of formally registering, with their Insurer, potentially harmful facts or circumstances that are covered by the insurance but not yet claimed by a third party.

Upon notification, the policy shall be bound to any future claims.

In the most common market practice, there are D&O policies contracted on a claims made basis, with a notification clause and an unlimited retroactive coverage period for facts unknown by the Policyholder and the Insured, which is the scenario that best meets the current business needs.

8Article 762 of the Civil Code – Agreements to guarantee risk arising from intentional act by the insured, the beneficiary, or a representative of one or the other shall be null.

9Art. 757. Under the insurance contract, the insurer agrees, upon payment of the premium, to guarantee the insured’s legitimate interest, relating to a person or thing, against predetermined risks.

10Art. 2, II, “a” and “b” of SUSEP Circular 637/2021.

11Art. 19 of SUSEP Circular 637/2021.


32.5.5. Main Coverage and Exclusions

As explained in the topic above, the indemnifiable losses under the D&O are those directly linked to costs of defense, indemnity, or settlements that the Insured pays or is ordered to pay, solely and exclusively as a result of an irregular act of management and which is negligent, or of the investigation and verification of this act.

In this context, D&O insurance policies have three types of basic coverage that, in fact, only indicate the form of payment of the indemnity.

As the D&O, in its essence, is taken out by the Policyholder company, in the interest of its manager, in the capacity as insured, the basic coverages are represented as follows:

  • Coverage A – in this modality, the Insurer shall directly pay the Insured the amount of indemnities or defense costs arising from a covered risk. In this modality A, there is no interference from the Policyholder or the need for the amount paid by the Insurer by way of indemnity to pass through the business company.
  • Coverage B – in this modality, the right to receive compensation remains with the Policyholder company. Thus, in the event that the Policyholder pays the amounts of defense expenses, indemnities, or settlements on behalf of the Insured, if coverage B is taken out, it itself becomes entitled to be reimbursed by the Insurer.


  • Coverage C – this coverage is usually taken out with the sole purpose of protecting the Policyholder. It is taken out in favor of the interests of the company itself, providing coverage for claims arising from the real estate market.

Thus, coverages A, B, and C bring the classic model of D&O insurance, representing the essence of this insurance, with regard to the covered risk.

In turn, as the D&O policy is structured in an all risks model, i.e., with comprehensive coverage, as long as the risk is not included in the list of exclusions in the contract, some additional coverage is offered by the Insurers.

Such coverage are usually closely related to the consequences of the irregular act of management or investigation, or findings of this act and which, as it is a risk excluded from basic coverage, shall be contracted additionally.

Among the main additional coverages, we note the following:

  • Fines and Pecuniary Penalties: as a result of administrative investigations level, especially for regulated industries – such as banking, insurance, supplementary health, the securities market – managers may be involved in administrative proceedings and suffer pecuniary sanctions. The amounts arising from the payment of these sanctions may be guaranteed by additional coverage. SUSEP Circular 541/2016 and 553/2017, currently revoked by Circular 637/2021, introduced coverage for civil and administrative fines, which was previously prohibited;


  • Moral and Property Damage and Bodily Injury: this coverage applies to defense expenses and damages that the Insured is liable to pay, indemnifying Third Parties as a result of management acts;
  • Undue Labor Practices: coverage for acts performed by the Insured that cause damage to Third Parties, provided they are related to the employment relationship with the Policyholder. In most policies, this coverage covers damage resulting from moral harassment, sexual harassment, among other practices that occur in the work environment;
  • Crisis Management Expenses: this is coverage that guarantees reimbursement and assistance for the Insured and the Policyholder itself due to the effects and results of kidnapping, extortion, imprisonment of the Insured or their family members and which may bring financial losses to the Policyholder;
  • Checking Account Blocking (Online Levy of Execution): in the event that checking or investment accounts of the Insured are blocked due to a court order, the Insured will be entitled to reimbursement of monthly personal expenses incurred due to the unavailability of their money. This coverage can be triggered as from the thirtieth day of the bank account blocking.

The above list of additional D&O insurance coverage is merely expository and not exhaustive.

There are several other additional types of coverage and assistance that Insurers offer in their D&O policies, such as, for example, coverage for retired executives, claims from Insureds against Insureds and the Policyholder itself, among others.

In this sense, companies and their executives have in D&O insurance, in addition to basic coverage, a diverse range of additional coverage, which allows them to plan appropriately to the needs of each contracting party.

As far as the most common D&O insurance exclusions are concerned, there are some that are peculiar and deserve a brief mention.

We can mention, in this sense (i) the damage caused by Insureds to Third Parties, when they are not performing their duties on behalf of the Policyholder; (ii) environmental damage, since there is a specific line of insurance for this modality, which allows the taking out of an individual policy for this purpose; (iii) intentional conduct by insureds who, by committing an irregular management act in an intentional and conscious manner, are ordered to indemnify third parties and (iv) triggering events already committed and unequivocally known by the Policyholder and the Insured when taking out the insurance.

D&O policies contain several other exclusions of coverage, which list is usually significant and wide, since, as already explained, the characteristic of the policy is that of all risks coverage, expressly excluding what is not intended to be covered.

Another important issue to be clarified regarding exclusions of coverage is directly related to the defense costs incurred by the Insured and reimbursed by the Insurer.

These amounts, once paid by the Insurer, often occur in advance or even during the course of an investigation, lawsuit, or administrative proceeding.

Therefore, upon verification of the commission of a possible intentional conduct or conduct related to an excluded risk or related to the loss of rights, which is only characterized as such after the Insured’s judgment, if the Insurer has reimbursed/advanced the defense expenses, it will have the right to recover the amount paid on this account.

In fact, in this case, there was an advancement of amounts related to coverage, and it was later verified that it was an excluded risk/loss of rights. This fact shall grant the Insurer the right to recover from the Insured the amount advanced by way of defense expenses.

32.5.6. D&O as a Tool to Protect Managers

In view of all the above, D&O insurance is perceived as an important instrument of personal protection for directors, executives, and managers of business companies.

Managers in general experience significant moments in the performance of their duties, having to make important decisions and take important actions in the course of their activities, often in an environment of pressure for results and to obtain solutions to problems.

Such actions invariably place managers in an environment of risk, and an act by them, committed in favor of the company’s corporate name, may be deemed harmful or an undue practice, which may result in potential personal liability.

Therefore, D&O insurance becomes an instrument of protection for the Insured who, in the regular performance of their duties, can put their assets at risk, given the subjection to the most diverse means of controls to which companies are currently subject, as well as valuing ethical principles, regulating the codes of ethics and conduct to which they are subject, the internal controls of said companies, and their corporate governance needs.

Finally, given the complexity of the matter, which involves business law and a policy with a differentiated contractual structure, when taking out D&O insurance, it is extremely important for the Policyholder and the Insured to observe their actual needs and characteristics in view of the details that could jeopardize their coverage in the future.

And this concern with the insurance is due to the peculiarities of claims-made insurance, in most cases, with the agreement on a notification clause, since the policy is subject to specific conditions of terms such as validity, retroactivity, and additional terms, which, depending on the case, may lead to the lack of coverage for a specific situation that the Policyholder and the Insured did not expect.


ALVIM, Pedro. O contrato de seguro. 3. Ed. Rio de Janeiro: Forense, 2001.

FARIA, Clara Beatriz Lourenço. O seguro D&O e a proteção ao patrimônio dos administradores. 2 Ed. São Paulo: Almedina Brazil, 2015.

GOLDBERG, Ilan. O contrato de seguro D&O. 1. Ed. São Paulo: Revistas dos Tribunais, 2019.

POLIDO, Walter A. Seguros de responsabilidade civil: manual prático e teórico. Curitiba: Juruá, 2013.

Authors: Adalberto Amorim Silva, Luís Fernando Garcia

Schalch Sociedade de Advogados

Avenida Faria Lima, 4509, Itaim Bibi

CEP: 04538-133 – São Paulo/SP

Phone: +55 (11) 3889-8996

E-mail: [email protected]