Executives (D&O): when does it become relevant in French-speaking Switzerland?

Introduction

Directors and officers of SMEs in French-speaking Switzerland make daily decisions that impact not only the company but also potentially their personal assets. Directors and Officers (D&O) insurance aims to transfer some of this risk to an insurer. But when does this coverage become relevant for an SME? This structured guide helps you manage the assessment of this insurance, understand the specific risks, structure your decision-making process, and ask the right questions of your broker or insurer. After reading this guide, you will know if and when to integrate D&O insurance into your governance strategy.

Section 1 – What is D&O insurance in Switzerland

Operational definition

D&O insurance is a type of liability insurance that protects directors and officers of a company against claims arising from errors, omissions, or deficiencies in the performance of their duties, as well as the associated legal defense costs: attorneys' fees, compensation, and settlements in civil or administrative proceedings. It primarily provides coverage against the financial consequences of decisions that could be challenged by shareholders, employees, authorities, or third parties.

Personal liability under Swiss law

In Switzerland, directors, officers, and other corporate officers are personally liable for damages caused by breaches of their obligations, and this right applies regardless of the size of the company. This personal liability can lead to having to pay out of their own assets if a poorly planned or poorly executed decision causes significant financial harm to the company or to third parties.

Why isn't this a classic RC?

Unlike professional or business liability insurance, D&O insurance specifically covers the personal liability of directors and officers, not property damage or bodily injury. No other liability policy provides equivalent coverage for this type of risk.

Section 2 – Concrete risk scenarios for SME managers

Scenario 1: Contested strategic decision

A small business decided to invest in a new technology to remain competitive. However, implementation proved costly and results were slow to materialize. Some shareholders and external partners challenged the decision, arguing a lack of analysis or due diligence. Without due diligence, management could face personal liability for losses. The key question to address is: was the prior risk analysis documented and tracked?

Scenario 2: Regulatory non-compliance

A regulatory change in the field of data protection imposes new obligations that have not been integrated into internal compliance processes. A third party or authority takes legal action against management for non-compliance. The costs associated with legal defense, even if the company is acting in good faith, can be significant: D&O insurance can cover these costs and prevent a personal financial burden for management.

Section 3 – Factors determining relevance for an SME

Company size and complexity of operations

An SME may not have the same resources as a large corporation, but it is subject to the same legal rules regarding the liability of its governing bodies. Even in a human-scale structure, decisions affecting markets, regulations, or financial commitments can generate disputes. The complexity of operations (internationalization, specific regulations) increases the likelihood of claims.

Stakeholder profile

The more shareholders, external investors, or financial partners a company has, the higher the risk of management decisions being challenged. In some cases, investors explicitly require D&O coverage as a condition of financing.

A moment in the life of the company

During major transactions (fundraising, acquisitions, restructurings), the risk of management lawsuits increases. This type of period is a typical time when the relevance of a D&O (Director's and Officers' Rights) policy should be reassessed as part of your risk management strategy.

Section 4 – Guidelines and checklist for decision-making

Analytical benchmarks

Documenting the decision-making framework

Having traceable internal records that show how decisions were made, on what basis of information and with what validations.

Assess the specific risks

Identify activities or decisions with high potential impact (financial, regulatory, reputational).

Analyze the stakeholders

Map shareholders, creditors, key customers and their risk appetite or litigation history.

Decision-making checklist (to be completed internally)

• Are there any specific legal or regulatory obligations that expose my managers?

• Have I documented major strategic decisions with independent risk analyses and assessments?

• What is the risk appetite of my investors/financial partners?

• Does my business continuity plan in case of litigation include the protection of the personal assets of the managers?

• Have I compared different D&O offers in terms of defense cost coverage, compensation, and exclusions?

Section 5 – Common Mistakes and How to Avoid Them

Mistake 1: thinking that the legal structure (SA, Sàrl) protects the directors

Personal liability remains possible despite a corporate structure. The legal form does not eliminate this risk.

Mistake 2: Underestimating defense costs

Even unfounded claims can lead to high defense costs. Thinking that legal expenses insurance is sufficient is a mistake, as it does not specifically cover D&O risks.

Mistake 3: Ignoring contract exclusions

Some policies exclude certain types of claims (intentional acts, criminal penalties). It is important to clarify these exclusions before subscribing.

Section 6 – Questions to ask your insurer/broker (10)

1. What is the precise scope of the proposed D&O coverage?

2. What types of defense costs are included?

3. Are past actions covered retroactively?

4. What are the main exclusions (e.g. intentional acts)?

5. What is the recommended insured amount for an SME of my size?

6. How does the police handle changes in leadership?

7. What is the impact of an international dispute on coverage?

8. Does the policy cover claims from external investors?

9. What is the reporting deadline for a potential claim?

10. What tools or support services do you offer (e.g., legal assistance)?

Conclusion

Damage and obligation (D&O) insurance in French-speaking Switzerland isn't just for large corporations. Its relevance depends on your SME's risk profile, the decision-making context, and the stakeholders involved. By following a structured management approach—documenting your decisions, assessing risks, defining concrete scenarios, and asking the right questions of your insurer—you'll be able to determine if and when D&O should be an integral part of your risk governance. The next step is to integrate this analysis into your overall insurance portfolio and plan a comparative audit of available proposals.