D&O claims counsel in Estonia for insurers and directors

Claims against directors and officers of Estonian companies are becoming more frequent, driven by insolvencies, creditor and trustee claims, regulatory investigations and new statutory duties such as those under the Cybersecurity Act. I advise D&O insurers on coverage, monitor defence counsel, and, where the insurer appoints or approves me and there is no conflict, defend board members as panel defence counsel. The liability framework is described in the D&O claims guide; this page explains how I support insurers on D&O files.

1. Who is a "director" in Estonia?

Estonian companies have a two-tier structure in the public limited company (aktsiaselts, AS) and an optional supervisory board in the private limited company (osaühing, OÜ):

• management board members (juhatuse liige) manage and represent the company;
• supervisory board members (nõukogu liige) plan activities and supervise management.

D&O wordings drafted for single-board systems must be checked to ensure both boards are covered, together with liquidators, de facto directors and employees with management functions. Liability insurance of business activities extends by statute to persons employed to manage or supervise the enterprise (§ 512 lg 1 of the Law of Obligations Act (võlaõigusseadus, VÕS)), but that rule concerns the company's own liability cover, not D&O cover for personal liability.¹

2. Sources of liability

• Duty of care and loyalty. Members of a legal person's directing bodies must perform their duties with the diligence normally expected of a member of that body, and are jointly liable for damage caused by breach (General Part of the Civil Code Act (tsiviilseadustiku üldosa seadus, TsÜS) § 35; Commercial Code (äriseadustik, ÄS) § 187 for management board members of an OÜ, § 315 for an AS, § 327 for supervisory board members).²
• Insolvency duties. If the company is insolvent and the insolvency is not temporary, the management board must take steps to restore solvency or file for bankruptcy, at the latest within 20 days (ÄS § 180 lg 5¹ for OÜ, § 306 lg 3¹ for AS).²
• Creditors' claims. Creditors may in certain circumstances bring the company's claim against board members if they cannot obtain satisfaction from the company (ÄS § 187 lg 4, § 315 lg 4); in bankruptcy, the claim is pursued by the trustee.
• Limitation. Claims against management and supervisory board members of an OÜ or AS expire five years after the breach unless the articles or an agreement provide otherwise (ÄS § 187 lg 3, § 315 lg 3, § 327 lg 3); a contractually shortened period does not bind creditors and the trustee (§ 187 lg 5, § 315 lg 5, § 327 lg 5). For other legal persons the five-year period follows from TsÜS § 37 lg 4.²
• Regulatory duties. Under the Cybersecurity Act (küberturvalisuse seadus, KüTS) § 6¹, a designated management board member is responsible for cybersecurity measures; if none is designated, all board members are.³

3. Typical D&O claim types in Estonia

1. Trustee claims after bankruptcy, alleging late filing, preferential payments or loss-making transactions.
2. Shareholder and company claims after a change of control.
3. Tax and social security liability of board members for unpaid taxes (secondary liability).
4. Criminal investigations (for example for misappropriation or breach of trust), where defence costs coverage is crucial.
5. Regulatory investigations by the Financial Supervision Authority, the Competition Authority or RIA.

4. Coverage issues

5. Role in a D&O claim

• Coverage counsel to the insurer: initial coverage assessment, reservation of rights, coverage position letters with the § 475 lg 3 warning where cover is declined.
• Monitoring counsel: review of defence strategy and budgets, reporting to the insurer, settlement evaluation.
• Defence counsel: for insured persons, where appointed or approved by the insurer and no conflict exists. Where coverage is disputed, I do not act both as defence counsel for the insured person and as coverage counsel for the insurer in the same matter; one of the roles goes to other counsel.
• Settlement: structuring settlements with trustees and creditors, including the effect on the policy limit and on other insured persons.

6. Interaction with cyber and crime

Many incidents trigger several policies: a ransomware attack may lead to a cyber claim, a crime claim (if funds were diverted) and a D&O claim (for failure to implement security measures). Coordination is needed to avoid gaps and double recovery; see crime and fidelity investigations and breach coach. The author's risk book for management deals with these interactions from the board's perspective.

Related pages

• D&O claims in Estonia: liability and insurance
• Insolvency of the policyholder or tortfeasor
• Liability insurance and direct action
• Professional indemnity in Estonia
• Coverage opinions

References