Never before have corporate transactions and executive decisions been so contested. Whether politically, financially or environmentally motived, we’re now living in an age of activism where everyone from shareholders to employees and consumers, are influencing decision making, resulting in missed business opportunities, reputational damage, executive changes and potential stock drops. And it’s affecting both public and private companies alike.
CONSUMER ACTIVISM
In addition to raising anxiety, the Coronavirus is also raising some unique workplace challenges and interesting legal questions in the context of employment liability. Can companies require their employees to travel to affected areas for work? Is a virus contracted at work considered a workplace injury? Can companies terminate employees that refuse to come to work or insist on working from home?
Economic slowdowns and recessions pose considerable challenges for companies. In addition to the potential for decreased revenues, increased costs, and declining valuations, companies will encounter additional turbulence as the potential for litigation, occupational fraud and cyber-attacks all increase. In an effort to reduce costs, many companies may decide to reduce or eliminate insurance coverage, however this approach may adversely impact an organization’s total cost of risk.
Few social media campaigns, if any, have generated the momentum achieved by the #MeToo movement. With reports estimating a 10-20% increase in sexual misconduct claims since its inception, its success at raising awareness and encouraging victims to come forward is undeniable.
It’s 9 am Friday morning. You arrive at the office, login, check your email and see you’ve received an email from an unknown sender referencing a registration to an upcoming corporate event that you attend annually. You’re intuitively a bit suspicious about its authenticity but the email address appears to check out and the timing would make sense. Reassured, you open the email and click the attachment…the hacker has won. Hackers are getting good, frighteningly good! Which is why we’re more likely today, to become a victim of a cyber attack, than ever before.
Public companies operate in a complex, constantly shifting risk environment. Emerging compliance requirements, regulatory enforcement trends, precedent setting court rulings, and trending follow-on claims are just a few examples of shifts in the GRC landscape that can significantly alter the risks public company directors and officers must navigate. Below we summarize the current risk environment while addressing public company D&O insurance and its role in protecting both the corporate entity and its executives.
Recent surveys indicate that cyber security has become a primary concern within the c-suite, in some surveys surpassing concerns of regulatory investigations, employment claims and shareholder litigation, which is why it’s no longer possible to address executive liability without addressing cyber risk. There is also considerable confusion among companies when it comes to the topic of cyber risk and cyber insurance. In order to be better prepared when placing coverage, there are some intricacies all companies should be aware of.
Side A coverage is the insuring agreement within a D&O policy that provides first dollar coverage (in the form of defense costs and settlements) for claims asserted against directors and officers, whose costs are not indemnified or advanced by the corporate entity. We have outlined some of the most common claim scenarios in which Side A coverage may be triggered (below).
As highlighted in our recent Public Company D&O Exposure Assessment, shareholder litigation following allegations of sexual misconduct have become more frequent in the #metoo era signaling an emerging risk to the c-suite (of both public and private companies alike).
In order to ensure their EPLI insurance policies will respond, in light of growing employment liability claims, companies and their directors are becoming increasingly aware of the importance of in depth EPLI insurance assessments. In order to supplement our previously published D&O CHECKLIST and assist the c-suite in their coverage audits, we have recently published a thorough 4 page EPLI CHECKLIST (HERE).