Directors and officers insurers backdating claims face dating and cheating
D&O liability policies provide three distinct coverage parts.Under Side A coverage, the insurance company promises to indemnify individual directors and officers.This broadening has been driven by the ever-changing economic, litigious, and regulatory environment in which corporations operate as well as an increasingly competitive insurance underwriting environment.”6 Changes have been made to policy wording: (a) broadening coverage to include co-indemnity between private equity investors and their portfolio company; (b) amending insured versus insured exclusions to protect coverage for derivative claims and cross-claims; and (c) revising coverage for claims relating to the Fair Labor Standards Act, pre–initial public offerings, anti-trust, and fraud.7 At renewal, effort must be made to understand whether or not a business is purchasing the best and most comprehensive coverage for its business.Lawsuits Are Often Not the Only Mechanism Triggering D&O Coverage Private companies’ misconception that D&O is superfluous (because these businesses are privately held or family-run) ignores the various events that may cause financial harm to a business.
Some policies define “claim” broadly and specifically list lawsuits, administrative proceedings, investigations, and target letters.
Private and Public Companies Have Different Coverage Opportunities Public companies maintain significantly higher limits of liability in their insurance program.
Moreover, “[f]or large public companies, it is common to separate D&O and EPL exposures whereas the majority of private organizations prefer to bundle such coverages.”4 It is interesting, however, that “11% of private organizations reported that they were unsure of the structure of their program.”5 But the D&O marketplace continues to evolve: “The trend over recent years has been towards a general broadening of cover afforded to private companies, their management and their employees.
Directors and officers of private and public companies face increased scrutiny by regulators, shareholders, and plaintiffs.
The volume of lawsuits and investigations continues to rise.