WGA InsureBlog

Leading primary insurers for Directors’ & Officers’ Liability (D&O) have recently taken a big leap forward in their commitment to protecting individuals and the companies that indemnify them. Not since the introduction of “entity” coverage for securities related claims has the public D&O landscape seen such a dramatic change.

Many of these new primary coverage enhancements were previously available only via what is called “Side A Difference In Conditions Excess” policies. But with increased tension between Ds/Os and/or the company with respect to their perspectives as fiduciaries of the company, particularly if a company refuses or fails to indemnify the Ds/Os, the continued evolution of the claims process and a soft and somewhat overcrowded D&O market – public companies who in the know can take advantage and benefit from the increase in insurance coverage. For more insight into the changes, see our recent whitepaper for more details, or contact a member of our ExecutiveRisk team.

An article in today’s Wall Street Journal, ” ‘Objection!’ Older Lawyers Resist Forced Retirement”, points out the tip of an emerging iceberg. We have all heard those catchy phrases like “60 is the new 50″. Well, some of that thinking is coming to a courtroom near you. The article outlines ageism-related cases brought by partners at law firms who are routinely forced to give up their equity partner status upon achievement of a certain age. The newspaper also outlines that some large law firms have started to drop or amend their retirement policies thereby putting forced retirements into a case by case basis.

Lawyers, of course, often start legal trends. This one could really catch on fire. Lots of entities have mandatory retirement ages for officers, directors, partners and employees. Not just law firms, but churches, government entities, and other large employers. All of them susceptible to mass torts and class actions. It seems likely that age discrimination legal battles will increase. Underwriters of Employment Practices Liability Insurance need beware.

Today every company faces some kind of global challenge. We held an hour-long webcast earlier today that explored the complexities of protecting an international operation and spoke specifically on how to protect executives and board members, whether traveling overseas or those managing from the U.S. The list of nuances to consider within certain countries is endless, but we managed to touch on those that we see most often. We explored different exposures that foreign resident directors face when serving on the board of an international company, including the potential for both civil and criminal liabilities. For example, did you know that officers can be held personally liable in France if deemed to have mismanaged a company, or that a breach of data privacy in the U.K. is considered a criminal offense? We also touched on some countermeasures that can be taken to protect directors, officers and other management in these situations. If you have execs traveling overseas or coordinate a global insurance program, the recording of the presentation is worth checking out.

Various year-end securities litigation studies have shown exactly what one might expect, that cases involving financial services companies have dominated securities lawsuit filings for the last few years. What is surprising though is that plaintiffs’ attorneys have continued to pursue claims against companies in other industries, specifically the life sciences. Read more…

Lawyers are reporting that the Securities and Exchange Commission (SEC) is increasing the expectations that publicly-traded companies should outline climate change related issues. As a sample description of this trend, see this Advisory to from Sullivan and Worcester.

Failure to notify shareholders of the impact of operations on climate change may leave management exposed to extensive securities litigation with little ability to offer a strong defense. Directors & Officers ( D & O) Liability Insurers are still studying these SEC developments but it would not be surprising to see more emphasis on these issues at upcoming renewals.

WGA client, Ironwood Pharmaceuticals, completed their initial public offering of stock earlier this week.  Ironwood sold 16.7 million shares at $11.25 per share.  They ended up their first day of trading up by more than 3%.  The gross proceeds of over $187 MM were the most raised by a biotechnology R & D company since 2002.  Their post-IPO market capitalization is over $1B.

One significant new expense for a company going public is the greatly heightened cost of Directors & Officers Liability Insurance. This is due to the increase in risk exposures arising out of a plethora of new shareholders.  Securities litigation, in particular, becomes much more likely for publicly-traded companies.  Read more…