Russell Bond & Co., Inc. February 2018  
 
Directors & Officers
 
Directors and Officers of companies must remain mindful that their actions.
Management decisions can expose them to potential litigation!
 
With defense costs and settlements skyrocketing, D&O policy limits can quickly become exhausted.  That's why it is important to have a dedicated Side 'A' coverage for the personal assets of directors and officers as a "last line of defense" protection.  Typically we see the need for this coverage arise out of three key situations:
  • Derivative Settlements
  • Differ in Condition (DIC) events
  • Insolvency
Directors & Officers
Image courtesy of suphakit73 at FreeDigitalPhotos.net
 
CASE STUDIES
Derivative Settlements
Following an announcement that its financial statements would need to be restated for the preceding three years due to alleged mismanagement, a company's stock precipitously declined.  Not surprisingly, this company and its directors and officers became the subject of multiple securities class actions as well as derivative lawsuits.  Contrary to expectations, all claims against the company and insured persons survived respective motions to dismiss and the parties agreed to mediate.
Potential exposure / loss: 
At mediation, the securities class action settled for $50 million, which, when combined with the already-incurred defense costs, effectively exhausted the ABC tower.  As a result, the Side A carrier settled the remaining derivative matters for $7 million.
DIC Event
A medium-sized biopharmaceutical company, which develops certain cancer drugs, was the subject of an investigation by the Department of Justice in connection with a public announcement regarding the company's collaboration with another pharma company.  In connection with the DOJ investigation, the DOJ issued a subpoena to an individual director involved in the public announcement.  The company refused to indemnify the subpoenaed director.
Potential exposure / loss: The pre-claim inquiry coverage under the Side A policy was triggered for defense costs.  Costs of $100,000 were incurred.
 
Bankruptcy
Following the Chapter 7 bankruptcy filing of a small manufacturing company, the bankruptcy trustee brought an adversary proceeding against its directors and officers for alleged breach of fiduciary duty and gross mismanagement.  The trustee alleged that the directors' and officers' wrongful conduct caused or substantially contributed to the company's insolvency.
Potential exposure / loss:
  After litigating the case for several months, the parties settled the matter for $7.5 million.  Defense costs exceeded $2 million.  Of the total $9.5 million paid, the carrier contributed $4.5 million.
  
Call us for more information:  800-333-7226
 
Tonya Hollederer Ed Chadwick Jackie Oddo
Tonya Hollederer, ext. 133
Team Leader
thollederer@RussellBond.com
Ed Chadwick, ext. 261
echadwick@RussellBond.com
Jackie Oddo, ext. 161
joddo@RussellBond.com
     
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1950 - 2018
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