The Supreme Court Confirms the Essential Limits of D&O Insurance

A key ruling for insurers and policyholders

The Spanish Supreme Court, in its Judgment No. 1349/2025 of 30 September 2025, has delivered a landmark decision reinforcing legal certainty in the interpretation of Directors & Officers (D&O) liability insurance policies.

The ruling confirms that exclusions for personal injury and property damage are valid if they comply with the transparency requirements of the Insurance Contract Law, even when claims are based on alleged management errors attributed to directors or officers. With this, the Supreme Court reaffirms the purpose of D&O insurance: to cover improper acts of management, but not those that cause personal injury, which should be covered by other liability insurance policies.

This is a decisive ruling for insurers and policyholders.

The case arose from a tragic accident suffered by a minor during a school extracurricular activity, which led to extremely serious and permanent injuries. Claims were brought against the educational institution, its administrator, and the D&O insurer.

Following conflicting rulings in previous instances, the Supreme Court definitively declared that the D&O policy did not cover the personal injury claims. The decisive factor was compliance with the transparency requirements of Article 3 of the Insurance Contract Law: the clause was clearly worded, properly highlighted, and the policy signed by the policyholder, thus guaranteeing their knowledge and acceptance. Furthermore, the Supreme Court ruled that the exclusion did not constitute a detrimental clause, as the policy did cover typical risks associated with the management of directors and officers.

This decision provides much-needed clarity for:

• Insurers, in the design and enforcement of D&O policies.
• Corporate directors and officers, in understanding the true scope of their insurance protection.
• Risk managers and brokers, in structuring comprehensive insurance programmes.

Our role in the proceedings

We are proud to highlight the participation of Miguel Gaviña, who represented our insurance client throughout the proceedings. His strategic handling of the case contributed to a final judgment that strengthens market certainty and consolidates Supreme Court case law on the interpretation of D&O insurance exclusions.

Why this matters

The ruling sends a clear message to the market: clarity in contract wording, highlighting of exclusion clauses, and the policyholder's acceptance of the policy terms and conditions are crucial. If these requirements are met, the courts will uphold the validity of such exclusions, even in cases that are particularly complex from both a human and legal perspective.

Kennedys continues to advise insurers on high stakes insurance disputes, policy interpretation, and risk allocation, combining technical excellence with a pragmatic, business oriented approach.