Insurance for Publicly Traded Companies
Helping your directors and officers understand and minimize their risk
Challenges: The legal environment, plantiffs’ bars, and regulatory compliance have opened publicly traded companies to an increasing array of complex risks and significant financial loss. In addition, directors and officers are coming under increased scrutiny and lawsuits due to the following:
- Lawsuits alleging stock price drops as a result of Director and Officer liability action – Sarbanes-Oxley has increased the statute of limitations for Securities Fraud cases, increasing companies’ potential exposure to suits.
- Continuing diversification of securities litigation – M&A challenges and corporative derivative suits pose significant risks for directors and officers.
- Increased government enforcement actions – Enforcement has reached record levels at significant cost to corporations.
- Increased bankruptcies and related securities fraud suits – Companies outside the financial services arena are being affected and sued by shareholders and others as a result of the credit crisis.
- Anti-corporate sentiment – Plaintiff firms have become increasingly successful at winning cases against corporations.
In this environment, it’s imperative to understand your company’s management liability risk, especially the risk to your directors and officers. You must know the ins and outs of your Director and Officers (D&O) Liability Insurance policies, what they cover (or, more importantly, what they don’t), and your insurance company’s track record with claims advocacy.
As a client of The Spofford Group, we’ll advise you on the following:
Directors and Officers (D&O) Liability Insurance is liability insurance payable to the directors and officers of a company, or to the organization(s) itself, as indemnification (reimbursement) for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers. Such coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well. It has become closely associated with broader management liability insurance, which covers liabilities of the corporation itself as well as the personal liabilities for the directors and officers of the corporation.
Side A Directors and Officers (D&O) Liability Insurance that provides only “direct” coverage of the directors and officers but does not cover the corporation’s legal obligation to indemnify the directors and officers (known as Side B or corporate reimbursement coverage). Side A-only forms are written either on an excess or umbrella basis over a primary Directors & Officers policy. When written on an excess basis, they provide additional limits if a claim exhausts the coverage available under the primary form. When written on an umbrella basis, Side A-only policies afford broader coverage than the underlying, primary Directors & Officers policy, as well as additional limits.
Outside Directorship Liability is the coverage provided by Directors and Officers (D&O) liability Insurance for service on boards of directors outside the insured firm. Typically, such coverage only extends to service on the boards of nonprofit, rather than for-profit companies. Outside directorship liability coverage is found within the majority of corporate Directors & Officers (D&O) Liability Policies and is written on either a double excess or a triple excess basis.
Employment Practices Liability Insurance coverage for employment practice allegations made against the insured organization and insured persons. The policy includes, but is not limited to, coverage for claims of discrimination, sexual harassment, hostile work environment, wrongful termination and employment-related issues.
Fiduciary Liability covers trustees, employers, fiduciaries, professional administrators, and the plan itself with respect to Errors and Omissions (E&O) in the administration of employee benefit programs as imposed by the Employee Retirement Income Security Act (ERISA).
Cyber Liability covers first and third party risks associated with e-business, the Internet, networks and informational assets. Coverage can include, but is not limited to, privacy issues, the infringement of intellectual property, cyber ransom, business interruption, virus transmission and breach response.
Fidelity Insurance Bond provides coverage for employee theft of money, property or securities as well as third-party theft. Coverage can be extended to cover online banking and computer systems theft.
Representations and Warranties protects when complex transactions, such as mergers and acquisitions, carry risks for both parties involved in the transaction. The Spofford Group can help structure insurance coverage to mitigate and fund uncertainties created by purchase and sale transactions.
Claims Advocacy can sometimes be a complex process which is why our dedicated claims management personnel work closely with our clients to successfully navigate the claims handling process with them. Claims advocacy includes: consulting with clients on best practices for early identification and reporting of covered matters, to claims submission on our clients’ behalf and analysis of carriers’ coverage positions through structuring of settlement agreements and oversight of expense reimbursement and claims payments. Our goal is to identify responsive coverage provisions and be instructive as to potential hurdles and consequences in the course of a claim’s adjudication.
To discuss your company’s specific needs, please call (781) 740-8990 or contact us here.