Public Company D&O Insurance

Serving on the board of a public company is challenging. Decisions need to be made intelligently and in consideration of shareholder interests and regulatory compliance which is constantly changing. Even the most compliant, diligent companies operating entirely within their legal and regulatory framework, can feel as though litigation is always lingering, often because it is. With each new landmark ruling such as Cyan, Haliburton and Omnicare, that legal landscape shifts, as new doors for litigation are open. Combine that shifting landscape with litigation trends, regulatory initiatives such as “the Yates memo”, the SEC pursuing more actions through ALJ’s (administrative law judges), cyber related follow-up derivative claims, and litigation financing - and an already dynamic environment becomes increasingly complex. With directors and officers personal assets at stake, this can be unsettling. And claims asserted against the c-suite don’t require teeth to cause damage – even seemingly frivolous accusations can be costly, time consuming and brand damaging.

We recently published a public company D&O exposure assessment that outlines the current risk landscape public company directors and officers will have to navigate going into 2019. To summarize our publishing:

  • Securities class action filings are at a record high for 2017 & 2018
  • Regulatory investigations and enforcement actions are more aggressively targeting individual directors/officers.
  • Cyber events and privacy failures are resulting in costly regulatory investigations and fines
  • Cyber events, privacy failures and sexual misconduct allegations are resulting in event-driven shareholder action in the form of follow-on derivative claims and shareholder class actions
  • Emerging industries including crypto-companies and cannabis companies are encountering a difficult D&O market
  • Companies planning IPO’s may encounter turbulent and costly litigation as a result of the recent Cyan ruling

As most public companies are already aware, thorough protection of its officers requires a multi-faceted program which should include; strong corporate governance and internal controls, well drafted bylaws & indemnification agreements and carefully structured D&O insurance. Executives seeking the broadest level of protection should also consider the inclusion of a separate Side-A DIC policy which provides a number of benefits as outlined (here).

As a relationship driven brokerage focusing on management liability and D&O insurance, GB&A is particularly well aligned to meet the liability needs of small public companies including micro-cap, nano cap, those trading on OTC markets, and pre-IPO companies. While our passion for executive liability helps us address current risk trends and emerging exposures - our deep knowledge helps us tailor our clients' D&O programs to best respond those risks. Some of the services we provide include:

  • Program analysis, coverage comparison and policy coordination
  • Thorough carrier saturation allowing us to reach a wide range of insurers when securing proposals
  • Negotiation of coverage terms, clauses and policy language
  • Benchmarking to assist with limit setting using peer groups as reference points
  • Assessment of insurer’s credit rating, claim experience and international coverage capabilities
  • Types Of Policies
    • Stand Alone D&O (Side A, B C)
    • D&O Package (including EPLI, Crime, Fiduciary)
    • Side A Only DIC (Broad Director/Officer Coverage)
    • ODL (Outside Directorshp Liability)
  • Protects Against
    • Banlruptcy claims
    • Derivative shareholder/investor claims
    • Direct shareholder/investor claims
    • Regulatory investigations/actions
    • Breach of fiduicary duties
    • Fraud
    • Negligence
    • Employment related claims & claims from employees
    • Class Action Claims
    • Accusations of misrepresentations in PPM's (private placement memonrandums)
    • M&A litigation
    • FCPA claims
  • Claimants
    • Shareholders, Investors & Creditors
    • Customers
    • Regulators
    • Former directors
    • Employees and business partners
    • Competitors
    • Trustees
    • Vendors
  • Coverages & Endorsements
    • Fraud Exclusion amended to provide defense costs until a “final adjudication in the underlying action” with a carve back for defense costs related to SOX 304 and Dodd Frank 954 violations
    • Definition of “Application” limited to 12 month SEC look back
    • 3-5 year extended reporting “policy tail” options
    • Coverage for employed lawyers
    • Global liberalization endorsement(s)
    • Non-rescindable Side-A coverage with no “void to inception” clause
    • Removal of modification of the “presumptive indemnification clause” for advancement of Side-A coverage in the event that the entity wrongfully refuses to indemnify
    • Broad bankruptcy carve-backs (addressing any “change in control” clauses and the “entity vs Insured” exclusion)
    • Application and Exclusion Severability
    • Replacement of the “Insured Vs Insured” exclusion with an “entity vs insured” exclusion
    • Broad coverage for regulatory/administrative investigations against insured individuals (with a broad range of “claim receipts”
    • Priority of payments clause prioritizing coverage for directors & officers
    • Affirmative coverage for FCPA Fines

Get (Risk) Managed.

Ready to review your existing insurance program? Interested in setting a reminder for a renewal review? Or simply have a question? We're here to help. We also understand you're busy - let's schedule a time to speak that works best for you. Simply schedule a call and we'll reach out when it's convenient.

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