D&O insurance in Estonia: director liability after leaving office

Authors: Olavi-Jüri Luik and Martin Alamets

The article was published in Ärileht (Delfi) on 29 September 2026 (in Estonian): "HEA TEADA | Juhi vastutus ei kao ametist lahkudes. Kuidas seda riski maandada?" ("Good to know: a director's liability does not end on leaving office. How to manage the risk?"). The text below is an adapted and updated English version written for this site.

Date note: the date of this post (29 September 2026) is the date of the original publication. This English version was written for this website in 2026.

D&O insurance has been part of corporate risk management in mature markets for decades. In Estonia it remains the exception rather than the rule, and local capacity is limited, so cover is typically placed through international insurers, MGAs and brokers. Yet the Estonian legal framework exposes directors to personal liability that is in several respects stricter than in many other European jurisdictions. This post outlines the features of Estonian law that matter most for D&O underwriting and claims handling, as of November 2026.

The statutory standard of care

Under the Commercial Code (äriseadustik, ÄS) § 187(1), a management board member of a private limited company (OÜ) must perform their duties with the diligence of a prudent businessperson; § 315 contains the parallel rule for public limited companies (AS).¹ The standard combines a duty of care (acting in good faith, on an informed basis, without taking unjustified risks) and a duty of loyalty (avoiding conflicts of interest, observing the non-compete obligation, keeping confidential information). An adverse outcome as such does not create liability; what matters is whether the director acted as a prudent businessperson would.

Three features that increase exposure

1. Reversed burden of proof. Under ÄS § 187(2), board members who cause damage to the company by breaching their duties are jointly and severally liable, and a board member is released only if they prove that they performed their duties with the required diligence.¹ In practice this means that the director must reconstruct and document the basis for decisions often taken years earlier. For D&O insurers, this translates into higher and longer defence costs.

2. Claims by creditors and the bankruptcy trustee. A creditor who cannot obtain satisfaction from the company's assets may claim compensation for the company's damage directly from the director; in bankruptcy, the trustee brings the claim (ÄS § 187(4)). The company's waiver of, or settlement with, the director does not bind creditors or the trustee (ÄS § 187(5)).¹ An internal release given at the time of departure therefore offers limited protection.

3. Long limitation periods. The limitation period for claims against a board member is five years unless the articles or an agreement with the director provide otherwise (ÄS § 187(3)).¹ In addition, the General Part of the Civil Code Act (tsiviilseadustiku üldosa seadus, TsÜS) § 146(4) provides a ten-year period where the obligor breached its obligations intentionally.² The Supreme Court has settled how the two provisions interact. The ten-year period can apply to a damages claim against a management board member of a private or a public limited company, but only exceptionally: the breach must amount to intentional conduct contrary to good morals, in which the board member wanted the unlawful result, typically an intentional breach of the duty of loyalty causing damage where the board member did not disclose a conflict of interest to the persons supervising them. The company cannot rely on the ten-year period if the conflict of interest was known to those persons, for example to a sole shareholder who knew of the transaction. Not every intentional breach of loyalty qualifies; in other cases the five-year period applies. Both periods run from the breach, not from the time the company, its creditors or a bankruptcy trustee learned of the damage, and the start of the period for the company's own claim under ÄS § 187(2) is not governed by the tort limitation rule in TsÜS § 150.⁵ Insurers and directors should therefore assume that claims for intentional damage contrary to good morals, typically in an undisclosed conflict of interest, may surface up to a decade after the act, while ordinary breaches of the duty of care become time-barred after five years.

Lessons from international cases

The international record shows that D&O claims are not exotic. Following the emissions scandal, Volkswagen reached settlements in 2021 with former executives and its D&O insurers. Wirecard's collapse in 2020 demonstrated that even a layered programme may be inadequate relative to aggregate claims. Enron and WorldCom shaped the modern D&O market and showed that, where cover is exhausted, directors contribute from personal assets. Estonian courts have also ordered directors to pay substantial damages, typically in cases of related-party transactions on non-market terms, and high-profile special audits of state-owned companies have increased board awareness of retrospective scrutiny.

Coverage structure and Estonian law

A standard D&O policy comprises Side A (non-indemnifiable loss of the insured persons), Side B (company reimbursement) and, in some forms, Side C (entity cover, usually limited to securities claims). Defence costs are the core of the cover in practice. Estonian law adds some specific points:

• Intent. Under the Law of Obligations Act (võlaõigusseadus, VÕS) § 452(1) the insurer is released if the insured caused the insured event intentionally, and the Supreme Court described the insurer's lack of an obligation where the policyholder, the insured or the beneficiary intentionally caused the insured event as a general principle of insurance. It did so in a case on a bankruptcy trustee's compulsory liability policy, whose terms, as permitted by the Bankruptcy Act (pankrotiseadus, PankrS) § 64(2), did not treat the trustee's own intentional breach as an insured event.³ In D&O cover, whose intentional act is attributed to which insured person depends on the wording. Conduct exclusions should nevertheless be drafted so that defence costs are advanced until a final adjudication.
• Claims made. VÕS does not define the insured event in liability insurance. Estonian scholarship has debated whether a claims-made trigger is permissible; in voluntary D&O insurance it is the international norm and, in our view, valid if clearly drafted and not unreasonably detrimental to the policyholder. Retroactive cover is expressly recognised in VÕS § 438.
• Run-off and discovery periods. Given the limitation periods described above, run-off cover of six years or more for departing directors and change-of-control situations is particularly important.
• Large risks. Most Estonian D&O buyers will not meet the large-risk thresholds of VÕS § 427(3) (two of three: balance sheet over EUR 6.6m, net turnover over EUR 13.6m, at least 250 employees). Below those thresholds, the semi-mandatory policyholder protections of VÕS apply, including proportionality limits on the consequences of breaches of policy conditions (VÕS § 452(2)).⁴

Limits and layering

Pricing reflects company size, sector and regulatory environment, financial condition, shareholder structure, claims history and cross-border exposure. Larger Estonian companies commonly purchase limits in the EUR 5–10 million range, but adequacy must be assessed case by case. Primary layers are proportionally the most expensive; excess layers are cheaper per million. Excess layers attach only upon exhaustion of underlying limits and on their own terms; limits of different layers should never be simply added together when assessing available cover for a particular claim.

Who needs D&O cover in Estonia

D&O is relevant not only for listed companies but also for mid-sized businesses, in particular where a foreign investor is brought in, during M&A, in regulated sectors (finance, energy, healthcare), where the company falls within the Cybersecurity Act (NIS2) regime that imposes board-level responsibility for security measures, where shareholder disputes may lead to challenges against management, and when recruiting senior executives who expect cover.

Practical notes for insurers and claims handlers

• Expect the director to bear the burden of proving diligence; early document preservation is critical.
• Monitor creditor and trustee claims in insolvency proceedings, which are frequent in Estonia.
• Check whether the policy's governing law and dispute resolution clause are compatible with Estonian court practice on standard terms (VÕS §§ 35–44).
• Coordinate D&O with cyber and crime policies to avoid gaps and overlaps.

Conclusion

Estonian law places the burden of proof on the director, allows creditors and trustees to pursue claims irrespective of internal releases, and keeps exposure alive for many years. D&O insurance does not replace good governance, but it determines who bears the financial consequences when a past decision is scrutinised. For international insurers, these features should be reflected in policy wording, run-off provisions and claims strategy.

This post is based on the article by Olavi-Jüri Luik and Martin Alamets published in Ärileht on 29 September 2026, adapted and updated for an international audience as of November 2026.

Related pages

• D&O claims in Estonia
• Estonian insurance contract law
• Cyber insurance and NIS2 in Estonia
• Large risks under Estonian law
• Services for insurers

References