Transactional And Securities Update: Directors’ And Officers’ Liability Insurance - A Changing Landscape

Overview: As a result of the events at Enron, WorldCom and other companies, recent financial restatements and allegations of financial misreporting, increased responsibilities for directors and officers as a result of the Sarbanes-Oxley Act and a rise in securities litigation, directors' and officers' ("D&O") liability coverage is more important than ever, but the cost of D&O insurance is going up and coverage is becoming more restrictive. Some of the key points for companies and their directors and officers to consider when buying or renewing D&O coverage are - D&O Policies Are Negotiable, Unlike most other kinds of insurance, D&O policies are not standardized. Coverage terms are frequently negotiable. It pays to shop around, and it pays to negotiate. This is particularly true in the current “hard” D&O market. D&O coverage is, of course, only one piece of what should be an overall plan to protect directors and officers. For example, indemnification should also be available to a director or officer under applicable state corporate law, the company’s Articles of Incorporation and/or Bylaws or under an indemnification agreement. But, to the extent that these protections depend on the continued existence or financial solvency of the company, they alone are not sufficient. The D&O insurance market continues to change and evolve. One insurer recently introduced an individual D&O policy that is personal to the particular director or officer.

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Format: HTML | Size: 136KB | Date: Feb 2003 | Pages: 5