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.
Securities action lawsuits, prevailing social issues like
the #MeToo movement, and evolving cyber security risks are trends that have
increased the demand for directors and officers (D&O) insurance coverage
and overall costs to insurers. As a result, insurers are calling for higher
Many insurers believe risks are increasing without any signs of slowing, indicating 2019 may be the first of many years insureds will face unexpected D&O insurance rate hikes. For more perspective on the changing landscape of D&O insurance, read Rachel Soich’s article “Three rising trends in D&O insurance.”