Securities class action (SCA) claims against the management and directors of public entities have increased at a record pace for the period 2017 through 2019 relative to prior years . Among the contributing factors are legal allegations resulting from the #MeToo movement, cybersecurity breaches, environmental, social, and governance (ESG) failings, and workplace violence (e.g., mass shootings).
The coronavirus pandemic is likely to add to the number of
SCAs brought against public companies. At least two such actions were initiated
in March 2020.
SCA claims are generally covered by Directors and Officers (D&O) liability insurance for both the expenses defending such claims and the cost of settlements or verdicts. It’s probable that additional SCAs will be filed as the effects of the virus on businesses continue manifesting themselves.
In this article, Milliman’s Joy Schwartzman and Phil Borba outline potential allegations that may be brought against an organization’s management.
The risks exposing corporate boards, especially for public companies, to potential lawsuits continue to increase. As the premiums for directors and officers (D&O) insurance are rising for many companies, it is important to understand the nature of the coverage offered. The type of coverage purchased will affect policy limits available to protect corporate officers.
In her article “Reevaluating your D&O coverage,” Milliman consultant Joy Schwartzman highlights the difference between Side A-only coverage and Side A/B/C coverage and whether the company or the directors are the chief beneficiary of such coverage. She also explains why it’s important for a company and its board to discuss the objective of purchasing D&O insurance and how to maximize the effectiveness of the coverage purchased to meet those objectives.
Increasingly, stakeholders are advising corporate board members to have more oversight of how senior executive management executes enterprise-wide risk management. Stakeholders want a better understanding of how companies understand emerging risks, manage known risks with limited mitigation capital, and how risk management activities integrate with other functional activities.
Many boards are aware that the confidential, ad hoc, intuitive decision-making of the past must give way to more formalized processes that can respond to a more transparent environment.
Boards’ responses to the pressure are fragmented. There is no consistency among peer groups, but market leaders are showing a more favorable response.
Read the complete roundtable discussion.