Sentence recognizes the legitimacy of a clause for the exclusion of coverage for Harmful Acts Committed against the Public and Private Administration in D&O Insurance

The judge of the 17th Civil Court of Brasília, André Silva Ribeiro, dismissed the lawsuit filed by the Insured against the Insurer, and addressed important issues related to the Civil Liability Insurance contract, especially regarding the Directors and Officers Liability Insurance (D&O) modality, in a decision published on July 11, 2021, within the scope of case No. 0702802-86.2022.8.07.0001.   

In the case at issue, the Insured, a former director of the Policyholder company in a D&O Liability Insurance Policy, had his request for insurance coverage denied after reporting the occurrence of a loss to the Insurer – consisting, in summary, of the inclusion of the Insured in five criminal investigations related to bidding processes. The coverage denial was based on the following arguments:   

  • The Policy provided for an express exclusion of coverage for Harmful Acts committed against the Public and Private Administration; and
  • Since the investigations against the Insured resulted from acts already known to the Policyholder and not communicated to the Insurer when contracting the insurance, the Policyholder omitted information and, therefore, lost the right to insurance indemnity, pursuant to the terms of the Policy.

Despite the Insured’s claims that the clause that provides for exclusion for acts against the public and private Administration would be abusive, the Judge understood that the contracting was based on predetermined risks, in accordance with article 757 of the Brazilian Civil Code, and that the risk exclusion was legitimate and subject to approval of the Superintendence of Private Insurance (SUSEP).  

Regarding the omission of information, the Judge rejected the Insured’s argument that he was not aware of the statements made by the Policyholder, noting that “the penalty for the insured who acts in bad faith by making inaccurate statements or omitting circumstances that may influence the acceptance of the proposal by the insurer or in the amount of the premium results in loss of the insurance guarantee, pursuant to articles 765 and 766 of the Brazilian Civil Code”.  

In addition, the Judge considered and dismissed the argument that the claim was time-barred, and applied the recent precedent of the Superior Court of Justice (REsp 1,970,111), to the effect that the initial term of the statute of limitations would be the date of issuance of coverage denial by the Insurer. Thus, the judge understood that this decision would have overcome the previous position established in Precedent No. 229/STJ.  

In this scenario, the decision dismissed the Insured’s claims, partially accepting the legal argument raised in the Insurer’s defense, which is currently carried out by Demarest’s Insurance team.  

Considering that the judgment was published recently, the period for the Parties to file appeals is still running.  

The decision under analysis brings to light the applicability of the legal provisions contained in articles 757, 765 and 766 of the Brazilian Civil Code, and represents an important judicial statement on Civil Liability Insurance contracts, especially the D&O modality, in such a way that the considerations in such decision may serve as a basis for defense arguments of Insurance Companies in similar lawsuits. 


Demarest’s Insurance, Reinsurance, Health and Private Pension team is available to provide any further clarifications that may be necessary.