Doing Business in Brazil

32.5. Civil


1. Main Statutory Provisions on the Liability of the Managers

For purposes of understanding this article, “Managers” shall be understood as all individuals who have management and decision-making power inside a company and who are bound by the company’s articles of incorporation or by an employment relationship. For example, but in a non-exhaustive manner, we could mention members, officers, managers etc.

Therefore, to initiate this subject, we will provide objective and general demonstrations of the liability of these managers during performance of their duties within the corporate scope.

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

We can mention several provisions as an example of the legal environment in which the managers are inserted. The most relevant of them, for purposes of understanding this article, is that as a rule, legal entities should not be mistaken for the person of their shareholders, members, founders or managers1. 

In addition, the law provides that persons convicted of bankruptcy crime, malfeasance, bribery, concussion, embezzlement; or who have committed crimes against the public interest, the Brazilian financial system, the competition defense rules, the consumer relations, public faith or property cannot be managers. The prohibition to hold office as managers lasts as long as the effects of the conviction persist2. 

In addition, the laws that provide on and determine the liabilities of the managers jointly provide that the various statutory provisions on corporate and business rules may apply for supplementary purposes, filling gaps of other types of business companies that do not have specific rules3. 

These laws and regulations provide a guidance to several rules enacted by regulatory and corporate supervision agencies, such as, for example, the Brazilian Securities Commission, the Central Bank of Brazil, the Private Insurance Superintendence, among others, which determine the duties and responsibilities of the managers and their representatives in the performance of their corporate management duties in each specific area.

Another instrument that governs the actions and imposes limits within the scope of the liability of the managers is the articles of incorporation of the companies, represented by the By-Laws or articles of association, which shall be observed during performance of the corporate activities.

In short, this group of rules and regulations establishes the limits of the actions of managers of business legal entities, determining the guidelines for their actions during their term of office.

After depicting the legal environment in which the managers are inserted, we will note below the main duties relating to business acts of management, and which portray the characteristics of related activities.

  1. Main Duties of Business Administrators 

From among the various duties and obligations of the managers within the scope of business administration, we could note those set forth in article 1011 of the Civil Code – duties of care and diligence, which provision basically observes the literality of article 153 of the Corporation Law, as well as the subsequent articles 155 and 157 of the same law, which provide on the duties of loyalty and information.

Based on the main duties listed above, it is possible to conclude that the law indicates the need that the managers act in the most transparent and careful manner as possible, always in favor of the company and pursuant to the provisions of the corporate purpose.

Therefore, the managers shall play the best and most appropriate role they proposed to play, pursuant to the basic contractual provisions, established in light of what is currently called “new Civil and Constitutional Law”, i.e.: honesty, good faith and social function4.

In this respect, and not for other reason, the law itself provides, in the literality of articles 153 of law 6404/1976 and 1011 of the Civil Code, that the administrator shall act with the care and diligence “every active and honest person usually adopts in the management of their own business”. 

Therefore, the management regularly exercised, and here we could consider the management that observes the statutory and normative parameters already set forth in the preceding paragraphs, exempts the manager from legal liability, irrespective of the financial results obtained and from attainment of the business targets established. 

Based on the above, we may conclude that the activities of managers result in an obligation of means, and not of result. What is required from the managers, pursuant to the law, is exactly that when making their decisions, they consider all duties provided by law, without considering the end result of profit or loss for the company.

As a rule, managers are not personally liable for the obligations assumed by them in the name of the company, provided their liability is limited due to a regular act of management.

However, an irregular act of management may result in the juridical liability5 of the managers for the losses they cause, whenever they act (i) within the scope of their duties or powers, but with fault in the broad sense (fault and intent), and/or (ii) in breach of the law or By-Laws to which they should be subject. This is provided in the rule of article 158 of Law 6404/19766 and of article 1013, paragraph 2 of the Civil Code7.

Thus, if the managers breach the rules as provided in the preceding paragraph, the performance of an irregular act of management will be characterized, and the managers may be held personally liable for the third-party losses caused by them, in which case their personal assets will be reached and they will be involved in lawsuits and/or administrative proceedings. 

Therefore, in view of the financial consequences that an irregular act of management could cause, the companies are using some instruments offered to protect their managers, officers and administrators.

The best known means are (i) the comfort letter/ indemnity letter – issued by the companies in favor of their managers, in order to grant them the required safety for performance of their business management, and (ii) the D&O – Directors and Officers insurance, which shall be more specifically analyzed below.

  1. Origin of the D&O and Historical Aspects

To discuss the D&O insurance – which will be hereinafter referred to simply as “D&O”, acronym for “Directors and Officers Liability Insurance” -, we will refer to the U.S. economic scenario in the 1920s.

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

With the apex of capitalism in that decade, companies and industry underwent great development and many of them went public, commencing to trade their shares on the stock exchange.

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

However, at a certain time, the production started to remain unsold, because the consumption commenced not to follow the same euphoric pace.

In view of that, several companies began to feel the effects of production and storage of products that were not sold, and commenced to suffer strongly from the repressed demand.

This resulted in an economic crisis, with companies devaluating, causing a great impact on those listed on the stock exchange.

The peak of this crisis occurred in 1929, when the New York Stock Exchange, on the so-called “black Thursday” of October 24, and after consecutive declines in the volume of shares traded, literally went bankrupt.

As a result, the entire U.S. economic system was affected, from small traders to large companies and financial institutions.

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

And, at that moment, D&O insurance appears with great force, in order to protect business executives who worked in the various U.S. companies that, essentially, operated on the stock exchange, and which could somehow affect their personal assets due to their acts of management.

Since then, and with good acceptance, the D&O has consistently evolved under the name financial protection for executive managers, 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 by Insurers being restricted to state-owned companies undergoing privatization.

Subsequently, with the progress of the securities market and the growing number of IPOs (acronym for “Initial Public Offering”) on the Brazilian stock exchange, which started in 2004, D&O insurance was increased, commencing to have a more significant number of managers hired for publicly-held companies.

In 2008, the opening of the reinsurance market in Brazil allowed that insurance to further develop, since the insurance market’s capacity to absorb risks increased, and there was also a drop in the average premium price, which allowed the contracting of D&O by limited-liability and small- and medium-sized companies.

In 2014, in turn, the D&O insurance was in focus due to the claims rate.

This occurred due to the involvement of managing executives, who were protected by D&O policies, in the various operations and investigations conducted by the Brazilian Federal Police, especially the “Car Wash Operation”, “Zelotes” and their consequent developments with leniency agreements and plea bargains.

Over the last years, the number of D&O insurance contracts executed in Brazil increased. The premiums collected by the Insurers increased to R$405 million in 2017, reaching R$442 million in 2018 and R$603 million in 2019.

For 2020, during the first 4-month period, according to the figures of April disclosed by SUSEP, the insurance premium income of D&O policies alone has increased in more than 140 million BRL when compared to the same period of 2019.

It shows the concern of Insured Parties and Policyholders with hiring D&O insurance during times of crisis, when there is a greater susceptibility to the occurrence of events that may be covered by an insurance policy.

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

4. Purposes and Main Characteristics of the Insurance 

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

And the protection of the asset of the managers would be directly linked to the financial consequences of the defense expenses and indemnifications they may incur due to adverse judgments originating from complaints, which normally refer to lawsuits or administrative proceedings brought by third parties and exclusively related to their acts of management performed in the representation of the companies to which they are linked.

A D&O policy is usually structured in a threefold manner, with the participation of the business company, of the manager and of the insurer.

With respect to the policy, the business company is named Policyholder, and it is normally the company that takes out insurance in favor of its managers, named Insureds.

As defined in the insurance contract, the Policyholder agrees to the Insurer to act in the name of its insured managers, acting in accordance with the provisions of the policy and being liable for payment of the premium and of any advances of amounts due to the occurrence of a potentially covered risk.

The Insured, as informed above, is the individual linked to the Policyholder and who holds or has held a management office as a result of appointment, election or employment contract. 

Upon consolidation of these concepts, we conclude that whenever the definition of D&O insurance is connected with its main cause, its definition would be that of a policy which, upon payment of the premium, as a rule by the Policyholder, transfers to the Insurer the risk of the possible financial consequences of acts of management of the Insureds that, as a result of their fault, affect their personal assets.

In this respect, we refer to the initial topics of this article, in the event of proof of the liability of the manager and the regular and irregular acts of management. 

As already explained, as a rule the personal liability of managers occurs whenever they are acting in accordance with their duties or powers and cause losses to third parties, with fault or intent, or also in breach of the law or of the By-laws, and are held liable for the redress of damages.

Irrespective of the fact that the effects of the liability of managers results from their conduct with fault or intent in the irregular act of management that causes losses to third parties, for the effects of D&O insurance, the coverage involves only acts performed with fault.

Irrespective of the insurance modality, and as expressly provided in article 762 of the Civil Code8, intentional acts are not covered by the policy.

Intent is a deliberate wish of the agents to breach the law or the rules to which they are subject, being aware that their act is a wrongful act and that it may cause losses to third parties. 

Therefore, irregular acts of management intentionally committed by managers are not a covered risk, since they change the legal nature of the insurance contract9. 

In this respect, the D&O insurance coverage applies to consequences relating to financial losses of the manager’s irregular act of management, with fault, and this is the legitimate interest for taking out the insurance. 

The contract, in turn, and as defined in SUSEP Circular 553/2017, shall be executed on a claims made basis, since it is the most appropriate policy to guarantee long-tail risks.

This type of policy provides on the contractual coverage for a certain wrongful act committed with fault in the past, even if claimed much time later, when the damaging effects upon the Third Party occur.

Therefore, the Insured may agree on a retroactive coverage term, in addition to the policy term of effectiveness, for purposes of granting contractual protection to the commission of any wrongful acts in past, provided those acts and their effects upon third parties are unknown to the Policyholder or Insured at the time the insurance is taken out.

In this respect, in order to confirm if a given wrongful act committed with fault by the Insured is subject to indemnity within the scope of a D&O policy, it is necessary to confirm if the following time requirements are met: (i) if the date of said wrongful act committed with fault – characterized as triggering event – occurred during the term of effectiveness of the contract, or during the retroactive coverage, and (ii) if the complaint for the damages suffered by the third party has also been made during the term of effectiveness of the contract, or within the additional or supplementary terms, whenever applicable.

We briefly explain that the aforementioned additional and supplementary terms represent a given additional period of time, after the end of the policy term of effectiveness, granted to the Insured under specific situations, for the submission of complaints, by third parties, with respect to the losses incurred due to the commission of a wrongful act occurred during the policy term of effectiveness, or during the retroactive coverage term10.

The additional term must be granted by the Insurer without any collection of premium, and the main events for application thereof are: (i) non-renewal of the policy or (ii) renewal of the policy with another Insurer, which has not assumed in full the retroactive term of coverage of the previous policy11. 

The supplementary term, in turn, must be offered by the Insurer, and it may apply after the additional term and a single time. However, the collection of additional premium is permitted. 

We further note that D&O insurance policies contain a notice clause. 

This clause grants the Policyholder or the Insured, exclusively during the policy term of effectiveness, the possibility of formally registering, with their Insurer, potentially harmful facts or circumstances that are covered by the insurance, but which have not been claimed by the third party to that date.

If the notice is delivered, the policy shall be bound by any future complaints.

In the most usual market practice, there are D&O policies taken out on a claims made basis, with notice clause and unlimited retroactive coverage period for facts unknown to the Policyholder and to the Insured, which is the scenario that best serves the current business needs. 

5.Main Types of Coverage and Exclusions 

As explained in the preceding topic, the indemnifiable losses in the D&O insurance are those directly relating to defense costs, indemnification or settlements the Insured comes to pay or be ordered to pay, and which solely and exclusively result from an irregular act of management performed with fault, or from the investigation and verification of such act.

In this context, D&O insurance policies involve three types of basic coverage, which actually indicate only the form of payment of the indemnity.

Since the D&O insurance is, in the essence, taken out by the Policyholder company, in the interests of its manager, in the capacity as insured, the basic coverage is represented as follows:


  • Coverage A – in this modality, the Insurer shall directly pay to the Insured the amount of the indemnities or the defense costs resulting from a covered risk. In this modality A, there is no interference by the Policyholder or need that the amount paid by the Insurer by way of indemnity be transferred by means of the business company.


  • Coverage B – in this modality, the Policyholder company has the right to receive the indemnity. Therefore, whenever the Policyholder pays the defense expenses, indemnities or settlements in the name of the Insured, if the coverage B is taken out, the Policyholder itself has the right to be reimbursed by the Insurer.


  • Coverage C – this coverage is usually taken out for the sole purpose of protecting the Policyholder. It is taken out to protect the interests of the company itself, and it provides on a coverage for complaints resulting from the securities market.


Therefore, coverage A, B and C present the classic model of D&O insurance, representing the essence of such insurance, with respect to the risk covered.

Since the D&O policies are structured in an all risk model, i.e., with broad coverage, provided the risk is not included in the list of exclusions of the agreement, there are some types of additional coverage offered by the Insurers.

Such types of coverage are usually strictly related to the consequences of the irregular act of management or of the investigation or verifications of such act and, since this risk is excluded from basic coverage, it is necessary to take out additional coverage.

We note the following from among the main types of additional coverage:

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



  • Moral and Property Damages and Bodily Injury: relates to coverage for defense expenses and for the damages the Insured is required to pay, indemnifying Third Parties as a result of acts of management;



  • Undue Labor Practices: coverage for acts performed by the Insured and which cause damage to Third Parties, provided they relate to the employment relationship with the Policyholder. In most of the policies, this coverage covers damage resulting from moral harassment, sexual harassment, from among other conducts occurred in the working environment; 



  • Crisis Management Expenses: this coverage guarantees reimbursement and assistance to the Insureds and to the Policyholder itself as a result of the effects and results of kidnap, extorsion, imprisonment of the Insureds or of their family members and which may cause losses to the Policyholder;



  • Checking Account Blocking (On-line Levy of Execution): in case checking accounts or investments of the Insureds are blocked as a result of a court order, the Insureds shall have the right to reimbursement for their monthly personal expenses due to the unavailability of their money. This coverage may be used as from the thirtieth day after the bank accounts are blocked.


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

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

In this respect, the business companies and their executives find in the D&O insurance, in addition to the basic coverage, a diversified number of additional coverage, which permits an adequate planning to meet the needs of each policyholder. 

With respect to the most common exclusions from D&O insurance, some of them are peculiar and deserve a brief notice.

We could mention, in this respect, (i) the damage caused by Insureds to Third Parties, whenever they are not acting in the performance of their duties representing the Policyholder; (ii) environmental damage, since there is a specific line of insurance for this modality, which permits that an individualized policy be taken out for this purpose; (iii) intentional conducts of the insureds who, by committing an irregular act of management in purpose and consciously, are ordered to indemnify Third Parties and (iv) triggering events already performed and unequivocally known to the Policyholder and to the Insured at the time the insurance is taken out.

The D&O policies contain many other exclusions of coverage, which list is usually significant and broad, since, as already explained, the characteristics of the policy are that of an all risks coverage, and therefore all events that will not be covered must be expressly excluded.

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

Once these amounts are paid by the Insurer, many times they are advanced or even paid during an investigation, lawsuit or administrative proceeding.

Therefore, upon verification of the performance of any intentional conduct or conduct relating to an excluded risk or related loss of rights, it shall only be declared so after trial of the Insured, in which case the Insurer that has reimbursed/advanced the defense expenses shall be entitled to recover the amount paid on that account.

In fact, in this case amounts relating to the coverage have been advanced and, subsequently, it is confirmed that the risk was excluded/a loss of rights. This fact will allow the Insurer to recover the amount advanced to the Insured by way of defense expenses.

6.D&O Insurance as an Instrument to Protect Managers

In view of all the above, we note that the D&O insurance is an important instrument for the personal protection of administrators, executives and managers of business companies.

Managers in general experience significant moments in the performance of their duties, since they have to make important decisions and take important actions, often in an environment of pressure for results and for the obtainment of solutions to problems.

These actions invariably place managers in a risky environment, and an act performed by them in favor of the company may be deemed harmful or an improper practice, which may result in potential personal liability.

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

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 of paramount importance that the Policyholder and the Insured observe their actual needs and characteristics in view of the details that may compromise their coverage in the future.

And this concern when taking out the insurance is due to the peculiarities of claims based insurance, in most cases with the existence of a notice clause, since the policy is subject to specific conditions of terms such as the terms of effectiveness, retroactivity, additional and supplementary terms, which, depending on each case, may lead to the absence of coverage for a specific situation that neither the Policyholder nor the Insured expected.


1 – Articles 47 and 49-A of the Civil Code.

2 – Article 1011, paragraph 1 of the Civil Code.

3 – Such as, for example, the rule set forth in article 1011, paragraph 2, which provides that general partnerships shall be governed, to the applicable extent, by the provisions relating to the power of attorney, as well as by the head provision of article 1053, which provides that limited-liability companies are governed, whenever the law is silent, by the rules governing general partnerships. We also mention the rule set forth in articles 1053, sole paragraph (limited-liability company) and 1089 (joint-stock company).

 4 – Article 154 of Law 6404/1976. The managers shall perform the duties granted to them by the law and by the By-Laws to achieve the purposes and in the interest of the company, upon satisfaction of the requirements of public good and of the social function of the company.

5 – We could consider both their civil – due to the performance of any wrongful act to Third Party -, and criminal liability, in those cases, for example, of commission of crimes against the tax and economic order, consumption relations and the environment.

6 – Article 158. The managers are not personally liable for the obligations assumed by them in the name of the company and in view of regular management actions; however, they shall be held civilly liable for the losses they cause whenever they act:

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

II – in breach of the law or of the By-Laws.

7 – Article 1.013. If the articles of association are silent, the company shall be individually managed by each of the members.


Paragraph 2 The managers who carry out transactions shall be liable for damages to the company whenever they knew or should know that they were acting in nonconformity with the majority.

8 –Article 762 of the Civil Code – The risk guarantee agreement originating from willful act of the insured, of the beneficiary, or of a representative of one or the other shall be null.

9 – Article 757. Pursuant to the insurance contract, the insurer agrees, upon payment of the premium, to guarantee a legitimate interest of the insured, relating to a person or thing, against predetermined risks.

10 – Article 13, paragraph 5 of SUSEP Circular 553/2017 and articles 9 and 10 of SUSEP Circular 336/2007 

11 – Article 9, items I and II of SUSEP Circular 336/2007, without prejudice to observance of the other items of the same article.


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 Brasil, 2015.

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

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

Authors: Adalberto Amorim Silva, LuĂ­s Fernando Garcia

Schalch Sociedade de Advogados

Avenida Faria Lima, 4509, Itaim Bibi

CEP: 04538-133 – São Paulo/SP

Tel.: (11) 3889-8996

E-mail: [email protected]