Guest Post: The Lloyd's Claims Transformation Programme
For policyholders whose interests are insured in London, it can be critically important to understand the Lloyd’s claims processes. In the following guest post, my good friend Perry Granof (pictured) takes a look at recent changes to the Lloyd’s claims processes effective January 1, 2012 that will affect a wide variety of professional liability claims. Perry is Managing Director of Granof International Group LLC, an insurance consulting and claims service firm specializing in global executive, professional and financial institutions liability. He is also also Of Counsel at the Williams Kastner law firm in Seattle, Washington.
Many thanks to Perry for his willingness to publish his article here. I welcome guest posts from responsible commentators on topics relevant to this blog. Any readers who are interested in publishing a guest post on this site are encouraged to contact me directly.
Here is Perry's guest post.
I travelled to London in late November 2011 where I met with Lloyd’s claims representatives and first learned about the Lloyd’s Claims Transformation Programme (CTP). According to Lloyd’s, CTP is intended to provide improved customer service and greater flexibility for managing agents.
CTP was introduced to the Lloyd’s market on January 1, 2010, as a pilot program for marine hull, property, and casualty treaty classes of business. The pilot was deemed successful, achieving a 40% average improvement in claims transaction time. According to Market Bulletin Y45221, dated September 30, 2011, the program was expanded to new claims in Financial Institutions (FI), Professional Indemnity (PI), which includes D&O, and medical malpractice, to be effective as of January 1, 2012.
CTP is intended to modernize, add quality and streamline the Lloyd’s claims handling process. However, it may give way to new disputes and potential opportunities for conflict resolution. Among the various procedural guidelines introduced by CTP is a streamlining of the triage categories from three to two. They are now “Standard” and “Complex” claim categories. The threshold is a specified dollar amount of exposure plus a sundry of other factors such as a potential or actual denial of coverage or allegations of fraud.
All complex claims, unlike Standard claims under the new Lloyd’s protocol, additionally have a second tier lead Managing Agent called a “Second”, which functions in conjunction with the “Lead” Managing Agent. Previously the Second underwriter only played a claims agreement role in certain circumstances, and an oursourced service provider represented the interests of the followers on every claim. The Second helps to ensure that an appropriate strategy is in place to help facilitate a proper resolution of the claim and that the other Managing Agents on the slip that make up the following market are fully represented and kept abreast of developments.
The Second reviews the documentation and other considerations, which the Lead relied on in its recommendations to the market, and confers with the Lead in connection with: the “Handling of the Claim”; the “Ongoing management of the Claim”; the “Contingent Financial Planning (Reserves, Costs, etc.)”; Experts” and the “Settlement Process." The protocol also makes it clear that the “Followers”, are entitled to “contact the Lead (or Second) to raise queries or share their views on the proposed strategy to resolve the claim.”
A review of the relevant Market Bulletins, in particular Ref: 4522 and 4531, certainly justifies Lloyd’s optimism in touting the advantages of CTP. CTP will lead to an open and more effective claims handling regime among syndicates engaged in the adjustment of Complex claims. However, it could also lead to an increase in conflicts arising between the Lead, the Second and the Follower Lloyd’s syndicates, by giving non-Lead syndicates more voice and responsibilities.
Under the CTP, non-Lead syndicates clearly have standing to raise queries and share their views and can offer platforms for followers in which to dissent to positions offered by Lead carriers. Some emerging conflicts that I can foresee, especially in the PI/FI and D&O classes of business include drop down issues. When an exposure potentially exceeds the available insurance program, a lead insurer may propose a drop down arrangement to save policy limits for itself and possibly throughout the entire tower of coverage. A Second or Follower may respond arguing that the Lead must fully exhaust its coverage before the rest of the market begins contributing to the resolution of the claim. This issue has recently been addressed in the case of Citigroup, Inc. v. Federal Ins. Co., 10-20445, 2011 U.S. App. LEXIS 16316 (5th Cir. Aug. 5, 2011). In Citigroup, the Court held that the excess policies unambiguously required that the primary carrier pay its full policy limit as a condition precedent to the excess carriers filling the gap by dropping down and providing coverage. Still, Citigroup is only binding in the 5th Circuit and the case was determined by the specific policy wordings at issue.
Another source of conflict could involve situations where a Lead, a Second or Followers disagree over the placement of claims in an insurance tower covering one particular policy year, over another. This may become contentious where participating insurers have different reinsurance treaties covering different policy years, impacting their net exposures. Also, if the exposure is significant, it can become a dispute, which may not be easily soluble.
A third source of conflict could involve situations where Second and Followers may perceive a given policy limits claim, directed by the Lead resulting in disproportionate and inequitable payments of insurance proceeds, constituting a waste, and possibly giving rise to extra - contractual damages.
All of these situations, and others that I am unable to currently foresee, may require an efficient and effective dispute resolution mechanism to insure that disagreements among the syndicate companies to a tower are resolve quickly cheaply and confidentially. In reviewing Section 5.0 "Resolution of Disagreements" under Market Bulletin Ref: Y4531, which describes the 2010 “Claims Scheme Process Guidelines," there does not appear to be any mention of a disputes resolution process, other than a meet and confer provision. Also Lloyd’s underwriters are required to use their best endeavours to reach a consensus under Market Bulletin Ref: Y4522 which also makes reference to a mediation and arbitration process as "prescribed by Lloyd's from time to time". These provisions are designed to make it easier for Lloyd’s co-insurers as opposed to non-Lloyd’s co-insurers to resolve issues amongst themselves without recourse to formal dispute resolution proceedings. Although it represents an effort to address future disputes among Lloyd’s co-insurers, this may not entirely avoid the risk of formal proceedings, especially considering the types of disputes that could arise from the issues I set forth above.
The CTP may require a new and expedited regime to resolve FI, PI & D&O coverage disputes among Lloyd’s carriers, quickly, quietly and efficiently, minimizing any disruptions of the claims handling process. This may ultimately give rise to mediation and arbitration opportunities in the United States and abroad to resolve disputes among Lloyd’s syndicates in connection with US and non-US venued claims.
Cornerstone Releases M&A Related LItigatoin Study: Iin a recent post (here), I previewed a then-forthcoming study from Cornerstone Research with regard to M&A related litigation. Cornerstone Research has now released its study, entitled "Recent Developments in Sharholder Litigation Involving Mergers and Acquisitions" (here). The final report contains additional information beyond the specific items I reviewed in my prior blog post. Special thanks to Cornerstone Research for sending me a link to the final report.
The North Korean Kindergarten Quintet: For today’s music interlude we are featuring a video that is simultaneously impressive and deeply disturbing. Watch these children perform and see if, in addition to being slowly but completely creeped out, you don’t find yourself gaining a little insight into the reason there were real tears when Kim Jong-Il died in December. The more basic question is why they aren’t crying all the time.
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The number of publicly traded companies that filed for bankruptcy protection under either Chapter 7 or Chapter 11 declined in 2011, compared to the year prior, although the 2011 bankrupt companies collectively listed greater amounts of pre-petition assets than 2010 bankrupt public companies did, according to data recently released by BankruptcyData.com (
The year just ended was eventful in many ways. Earthquakes, hurricanes, tornadoes, floods, blizzards and droughts were scattered across the globe, and political unrest shook many countries. In a year filled with such significant developments, events in the world of D&O liability pale by comparison. But even if there were no earth-shaking events, 2011 was nevertheless an eventful year in the directors and officers’ liability arena. Here is my selection of the top ten stories from the world of D&O.
Carriers generally contend that insurance does not cover amounts that represent “disgorgement” or that are “restitutionary” in nature. But what makes a particular payment a “disgorgement”? In a December 13, 2011 opinion (.jpg)
Among the most contentious D&O claims issues are questions surrounding defense cost coverage, including in particular questions such as the allowable billable rates or the involvement of multiple firms. In a detailed November 8, 2011 opinion, Eastern District of California Judge 
One of the thorniest D&O insurance coverage issues is the question of the applicability of a policy exclusion when coverage preclusive conduct has been alleged – but not proven. In a November 14, 2011 opinion (
One of the highest profile D&O insurance coverage decisions last year was the district court’s 
Every now and then, I run across a case that makes me stop and say, “What?” I had that experience recently when I read the September 21, 2011 opinion of Middle District of Tennessee Judge John T. Nixon in an insurance coverage dispute involving Cracker Barrel Old Country Store, Inc. In the opinion, which can be found 
In a case involving multiple ghosts of long lost companies, a judge in federal court in Manhattan has held that excess D&O insurers do not have a duty to “drop down” to fill the gaps in coverage caused by the insolvency of underlying insurers. The court also held, based on the language of the excess policies at issue, that the excess insurers’ coverage obligations were not triggered merely because the insureds’ losses exceeded the amount of the underlying insurance, where the underlying insurance has not been exhausted by actual payment.
The typical D&O insurance policy precludes coverage for loss arising from fraudulent misconduct. But when an insured has been convicted of fraud, whose coverage is precluded? In the second case in recent days to address the consequences for the insured entity of the criminal conviction of one of the entity’s principals, Judge 
The options backdating scandal may now be ancient history, but questions surrounding insurance coverage for the scandal’s consequences apparently continue to live on. In a 
A group of former executives of a Lehman Brothers subsidiary is seeking to block the bid by senior Lehman executives to use $90 million of the remaining D&O insurance proceeds to settle the cases pending against them. As discussed 
Every fall since I first started writing this blog, I have assembled a list of the current hot topics in the world of directors’ and officers’ liability. This year’s list is set out below. As should be obvious, there is a lot going on right now in the world of D&O, with further changes just over the horizon. The year ahead could be very interesting and eventful. Here is what to watch now in the world of D&O:
Labor Day has come and gone. The kids are back in school. The air is cooler and the nights are longer. There’s a definite autumnal feel in the air. It is time to get back to work. Fortunately, The D&O Diary kept its eye on things over the summer. So if you are feeling the need to get caught up on what happened while you were at the beach, don’t worry, we’ve got you covered. Here is a quick summary of what you missed on The D&O Diary while you were away.
It’s a Long, Long While from May to December, But the Days Grow Short When You Reach September: Summer, it was great having you around. We are sorry to see you go. Please come back again next year. We will be thinking about you while you are gone. One thing, though. Next year we can do without the heat wave, hurricanes, earthquakes, tornadoes, and tropical storms, O.K.?
In an opinion that provides an interesting glimpse of a complex D&O insurance program, on August 24, 2011, Central District of California Judge 
When corporate officials face an SEC enforcement action, the testimony of non-party corporate employees is sometimes required. The insurance question that may arise when this happens is whether the attorneys’ fees incurred in connection with these witnesses’ testimony is covered under the company’s D&O policy. According to an interesting August 15, 2011 decision from the Southern District of California and applying California law (
A recurring insurance coverage issue is the question of excess insurers’ obligations when the underlying insurers have paid less than their full policy limits as a result of a compromise between the underlying insurers and the policyholder.
One of the many distinctive traits of the litigation that surrounded the S&L crisis in the late 80s and early 90s was the plethora of lawsuits between the FDIC (and other federal banking regulators), on the one hand, and the failed banks’ insurers, on the other hand, over the interpretation of the banks’ management liability insurance policies. Among the questions surrounding the current bank failure wave has been whether or not we will see a similar round of insurance coverage litigation. If a lawsuit filed last week in the Middle District of Alabama is any indication, the anticipated insurance coverage litigation may be on its way.
When an ex- Chairman, CEO and Director sues his former company, are the company’s defense expenses covered under its D&O insurance policy? According to the June 24, 2011 report and recommendation of Middle District of Tennessee Magistrate Judge John S. Bryant, applying Tennessee law, they are not. A copy of Magistrate Bryant’s report and recommendation can be found 
During the twelve months ending June 30, 2011, at least 32 Chinese companies were hit with U.S. securities suits. In addition, the U.S. Securities and Exchange Commission has initiated a number of enforcement actions and other proceedings against U.S.-listed Chinese companies, issued a formal bulletin warning investors about the risks of investing in Chinese companies that have gone public through reverse merger transactions, and launched a task force to investigate U.S.-listed Chinese companies that have sold stock to investors in the U.S.
In a sweeping 
As discussed in a prior post (
If a verdict form contains the jury’s specific finding that the insured engaged in “fraudulent, malicious, oppressive, wanton, willful, or reckless conduct,” you might think that would trigger the exclusion for fraudulent misconduct in the applicable D&O insurance policy. But apparently not, at least according to a May 12, 2011 Southern District of West Virginia ruling (
One of the most challenging assignments for those of us in the D&O insurance business is to try to explain to those outside the industry how D&O insurance pricing works. The explanation is difficult enough as a general matter, but it is often even more difficult to explain in connection with a specific transaction. The difficulty of the explanation is itself a reflection of a number of features of the current marketplace for D&O insurance.
Cases alleging violations of wage and hour laws have been a growing source of litigation activity in recent years. These cases present a variety of allegations, such as unpaid overtime, employee misclassification, and failure to pay minimum wage. A March 21, 2011 NERA Economic Consulting publication entitled “Recent Trends in Wage and Hour Settlements” takes a look at evolving settlement patterns in these cases. The report, which can be found .jpg)
I am pleased to reproduce below a guest post from my friend 
A frequent component of derivative litigation resolution is an award to the plaintiffs of the fees and expenses the plaintiffs incurred in pursuing the suit. A contentious, recurring question is whether D&O insurance covers fee awards to derivative litigation plaintiffs. This issue received a through going over in a February 17, 2011 opinion from a five judge panel of the New York Supreme Court, Appellate Division.
Great news – the survey is back. After year’s interruption, Towers Watson has resumed its annual D&O Liability Survey. The report for the 2010 survey (a copy of which can be found .jpg)
According to EEOC information released on January 11, 2011, there were a record number of discrimination filings in the fiscal year that ended September 30, 2010. The number of filings approached 100,000, as economic challenges and high levels of unemployment boosted the number of filings.
2010 was an eventful year in the world of D&O liability. Congress passed massive financial reform legislation, the Supreme Court issued landmark decisions in important cases and numerous claims emerged as the litigation landscape continued to evolve. With so much going on, it is a challenge to narrow the year’s events down to just the ten most significant developments.
As reflected in detail below, noted D&O maven .jpg)
An insurance broker’s settlement of claims for disgorgement of undisclosed contingent commissions does not represent covered loss under a combined lines professional liability insurance policy, according to a December 3, 2010 decision of the Illinois (Cook County) Circuit Court. A copy of the December 3 opinion can be found 
Settlement is the critical goal in every claim that cannot be resolved otherwise. It terminates the open dispute, it provides the parties with finality, and, perhaps, most importantly, it provides the parties with repose. After a settlement is final, everyone is free to get on with their lives.
I am pleased to reproduce below the latest guest post submission. This post has been submitted by 
All too often, the securities class action litigation process seems like a complicated and costly mechanism for transferring large amounts of money to the lawyers involved but only small amounts to the aggrieved investors, all at the expense of the D&O insurers. It is hard not to wonder sometimes what the whole process accomplishes, other than making D&O insurance indispensible and expensive.
In a series of posts, I have been exploring the "nuts and bolts" of D&O insurance. In this post, the seventh in the series, I examine the perennial questions of limits selection and program structure – that is, how much insurance is enough, and how should the insurance be structured? As explained below, these two questions are inextricably linked.jpg)
The astonishing pace of legislative and judicial changes - just over the last few months alone - underscores how rapidly the liability exposures in the directors and officers arena can be transformed. In the latest issue of InSights (
Among the most frequently recurring and arguably most vexatious D&O insurance coverage issues are the questions of the carrier’s obligation under the policy for defense expenses incurred either in connection with an informal SEC investigation or an internal investigation.
In a series of posts, I have been exploring the "nuts and bolts" of D&O insurance. In this post, the sixth in the series, I examine the range of D&O insurance policy exclusions. Though some exclusions are found in most D&O insurance policies, others appear only occasionally , while yet other particular exclusions may only appear in specific policies or specific kinds of policies. For purposes of analysis, I have tried to group the various kinds of exclusions in separate categories below.
The First Circuit has overturned a lower court’s decision holding that Genzyme’s D&O insurance policy did not provide coverage for additional amounts paid to claimants who asserted they had not received enough in a share exchange. Though the First Circuit reversed and remanded the case, the First Circuit did not invalidate the so-called bump up exclusion and indeed agreed that the exclusion precluded entity coverage for bump up amounts.
Stanford Financial’s D&O insurers do not have to continue to advance the criminal defense attorneys’ fees of R. Allen Stanford and two other former Stanford related individuals, according to an October 13, 2010 ruling by Southern District of Texas 
In a series of posts, I have been exploring the "nuts and bolts" of D&O insurance. In this post, the fifth in the series, I examine D&O insurance issues of particular concern to private companies. Both the potential liability exposures and the available insurance solutions for private companies and their directors and officers are quite a bit different than for public companies..jpg)
In a series of posts, I have been exploring the "nuts and bolts" of D&O insurance. In this post, the fourth in the series, I examine issues surrounding the application for D&O insurance and the surrounding application process. Although this might seem like a pretty straightforward topic, there are actually quite a few issues involving the D&O insurance application..jpg)
Every fall since I first started writing this blog, I have assembled a list of the current hot topics in the world of directors’ and officers’ liability. This year’s list is set out below. As should be obvious, there is a lot going on right now in the world of D&O, with further changes just over the horizon. The year ahead could be very interesting and eventful. Here is what to watch now in the world of D&O:
If the number of out of office messages sent back when I sent out new blog post email notifications during August are any indication, many readers have been away for some or all of the past few weeks. I hope you saved the little paper umbrella from the fruity drink that you and your spouse shared on the terrace of the outdoor café and that you are still finding sand in your tennis shoes..jpg)
The question of insurance coverage for the attorneys’ fees of 
The September 2008 collapse of Lehman Brothers resulted in the .jpg)
My primary objective on this blog is to address important developments in with world of directors’ and officers’ liability as they occur. From time to time, however, readers contact me with more fundamental questions about executive liability and protection, particularly regarding the basics of indemnification and D&O insurance. In response to these recurring questions, I intend to prepare a series of posts, to be published intermittently in the weeks ahead, discussing these more basic issues..jpg)
In a June 30, 2010 opinion (
One of the recurring D&O insurance coverage issues is the question of excess D&O insurers’ obligations when the underlying insurers have paid less than their full policy limits as a result of a compromise between the underlying insurers and the policyholder..jpg)
The SEC has made it clear that it intends to use 
The strange sequence of legal events surrounding R. Allen Stanford has taken yet another bizarre turn. The latest developments began earlier last week when Stanford 
According to 
In a March 23, 2010 Summary Order (
Within the space of just a few days, two federal appellate courts – the Fifth and Sixth Circuits – issued separate opinions consider D&O insurers’ obligations to advance defense expenses. The Fifth Circuit entered its March 15, 2010 decision in the high-profile Stanford Financial insurance coverage dispute. The Sixth Circuit’s March 11, 2010 opinion was entered in an insurance coverage dispute involving Abercrombie & Fitch and a rather unusual set of circumstances surrounding the company’s D&O insurance policies. The Sixth Circuit’s opinion was also accompanied by a rather spirited dissent. Both decisions are interesting and provide illuminating perspective on D&O policy interpretation.
Data security and privacy could be the "stealth issue of 2010," according to a recent report. Despite the intense focus on financial and related issues during the current economic crisis, a variety of legislative and regulatory initiatives suggest that data privacy and security issues necessarily will become a top corporate priority. These developments have important risk management consequences, among which are the increasing importance of privacy breach and network security liability insurance within a company’s overall insurance program.
In recent posts (
The problems facing many banks in the current economic environment are well-documented. For troubled banks’ directors and officers, the banks’ D&O insurance may represent a last line of protection. But what if the insurers could just cancel the policies? Surprisingly, many bank D&O insurers have that right under their policies, and while cancellation is rare, it is not unprecedented, and some insurers are now invoking that right to shed the risks associated with failing or problem institutions.
The individual defendants in the various Stanford Financial-related SEC enforcement and criminal proceedings have been engaged in a long-running and procedurally complicated battle over whether the firm’s D&O insurers must advance the individuals defense expenses. In a sweeping January 26, 2010 opinion (
Every now and then, I read a court opinion on a coverage issue, and though I can understand how the court reached its decision, I still find the outcome surprising and troubling. A January 19, 2010 per curiam opinion from the Connecticut Supreme Court (.jpg)
In an earlier post (
In an earlier post (
According to its January 6, 2010 press release (
In a January 4, 2010 order (
Among perennial D&O insurance issues are questions whether policy coverage is available for defense expenses incurred in connection with investigative costs, subpoenas and the costs associated with special litigation committees. A 
2009 was an eventful year, with significant developments across a wide variety of economic, financial, judicial and legislative fronts. With the arrival of the New Year, it seems appropriate to take a look back at the past year’s most significant D&O developments.
In a series of recent rulings in coverage litigation arising out of the 2007 collapse of 
Pop quiz: the law of which jurisdiction should govern a coverage dispute arising under D&O insurance policies issued by U.S-domiciled insurers to an NYSE company incorporated in Delaware with its headquarters in Oregon? If you find the answer "British Columbia" as surprising as I do, read on. The court decision discussed below could have important implications for the typical U.S. D&O policy, with its extension of "worldwide coverage," particularly as both commerce and litigation become increasingly global.
There are certain constant issues in the D&O insurance marketplace, but at the same there is always a steady stream of critical issues that emerge and dominate the dialog. In the latest issue of InSights (
D&O insurance policyholders typically do not have to provide "fresh warranties" when they renew their policy of the kind they provided when they originally purchased the coverage – that is, they do not have to represent to the insurer that at the time of the renewal they are not aware of any facts or circumstances that could give rise to a claim. However, when policyholders increase their limits of liability at the time of renewal, they often are required to provide "fresh warranties" as to the increased limits, whether in the form of an increased limits application or in a separate warranty letter.
One of the questions insurance professionals have been asking with interest and anxiety since the financial crisis began is whether the economic recession will lead to a "hard market" for insurance (characterized by rising prices and tightening terms and conditions).
Stanford Financial Group’s D&O insurer may advance the individual directors’ and officers’ defense expenses without violating the court’s receivership order, according to an October 9, 2009 ruling by Northern District of Texas Judge 
On September 30, 2009, in a decision that will be widely discussed both because of the high profile figures involved as well as because of the outcome, Southern District of New York Judge 
One of the recurring D&O insurance issues is the question of policy coverage for additional acquisition consideration paid to an acquired companies’ shareholders – so-called "bump up" claims. In an interesting and colorfully written September 28, 2009 opinion (
On September 9, 2009, 
Each fall for the last three years I have taken a look at the current trends and hot topics in the world of D&O. There are of course the perennial topics that always remain important. However, this overview is intended to address the most significant concerns of current interest for D&O insurance professionals and their clients. My list of the current issues to watch is set out below.
In prior posts (refer .jpg){kind=small}
In a move that recapitulates a classic dispute that has been brewing in bankruptcy court for years, the Stanford Financial Group receiver has asserted that the proceeds of Stanford’s D&O insurance policies are "receivership assets" and that his right to the proceeds "supersedes" the rights of insureds under the policy. Moreover, he has specifically threatened the insurer with "contempt" if it were to advance the individual insureds’ defense expenses. This sequence raises some fundamental issues about the D&O insurance structure and coverage and could highlight the importance of certain policy provisions that have recently become prevalent. It also raises some questions about some coverage structures.
Claims arising out of corporate bankruptcy represent a significant stress test for directors’ and officers’ liability insurance coverage. Among other frequently recurring issues are questions whether post-bankruptcy claims against the bankrupt company’s directors and officers run afoul of the Insured vs. Insured (I v. I) exclusion found in most D&O insurance policies.
A recent German legislative action creates some interesting requirements for and limitations upon insurance for German corporate director liability. These legislative changes are designed to try to ensure greater director exposure to personal liability, as a deterrent to corporate misconduct. However, the legislative changes are susceptible to circumventions that may limit their intended effects.
One of the most striking things I have found when talking to corporate officials about D&O insurance is how different the conversation can be when talking to non-officer directors compared to talking to corporate officers. Without meaning to over-generalize, the two groups sometimes have different questions and concerns. And indeed there are very good reasons why the insurance needs and interests of non-officer directors should be analyzed differently from those of the corporation and its officers.
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One byproducts of the turmoil that has swept over insurance giant AIG has been a cascade of litigation. But even before the company’s latest woes, it was locked in a series of hotly contested legal battles with its former Chairman and CEO, 
In an interesting decision that raises a host of important issues, a federal district court applying Arkansas law held that due to renewal application misrepresentations, a hospital’s D&O insurance policy is void ab initio, and therefore that the hospital must refund amounts the insurer previously paid as defense costs. The April 17, 2009 opinion, written by Eastern District of Arkansas Judge 
Deteriorating economic conditions threaten a massive wave of corporate defaults. Corporate borrowers’ inability to fulfill debt obligations could not only prompt a bankruptcy filing surge, but could also result in a flood of lawsuits and claims as creditors and shareholders seek to recoup their losses. These claims could present a host of challenging D&O coverage issues. 
The global financial crisis has produced challenges across the entire economy, but the financial sector, where all the problems arguably began, has been particularly hard hit. While the most investment firms and other banking institutions may have experienced the most dramatic consequences, insurance companies have also been swept up in the whirlwind.
Among the recurring sources of D&O insurance coverage disputes are issues relating to timely notice of claim. A 6-3 decision by the 
Private equity firms and the funds they organize frequently place individuals on their portfolio companies’ boards. However, all too frequently, it is not until a claim has arisen that the various entities consider how the potentially implicated indemnities and insurance will interact. Unanticipated interactions sometimes can produce unintended consequences, particularly from the perspective of the private equity firm.
Last fall, the New York Department of Insurance ignited a firestorm when it issued an opinion that a D&O insurance policy may not place the duty to defend on the insured. As I discussed in an earlier post (
A liability insurance policy is not intended to provide policyholders a means to shift to the insurer their separate, voluntarily undertaken contractual obligations. Private company D&O insurance policies generally embody this principle in a separate exclusionary provision. However, the wording of the exclusionary clause can substantially affect the scope of coverage otherwise available under the policy. In particular, the expansive reading given certain exclusionary language in recent cases suggests that a more narrowly constructed exclusion would more appropriately address the concern that the provision was originally intended to address.
On March 2, 2009, in an opinion with important implications for the availability of coverage when a company official has inculpatory knowledge at the time of policy formation, Judge 
Deteriorating economic conditions threaten a massive wave of corporate defaults. Corporate borrowers’ inability to fulfill debt obligations not only could prompt a bankruptcy filing surge, but also could result in a flood of ensuing lawsuits and claims as creditors and shareholders seek to recoup their losses. These claims could present a host of challenging D&O coverage issues.
The question of coverage for fees and costs incurred in connection with responding to subpoenas is a perennial D&O insurance issue. Policyholders are sometimes surprised and disappointed when their D&O insurer takes the position that their policies do not cover these amounts.
Investors whose fortunes were tied to Bernard Madoff and his firm have already been counting (and mourning) their losses. But for the insurers that provided coverage for financial firms targeted in the Madoff-related litigation, the losses have only just begun to accumulate..jpg)
As the details about the 
2008 was a remarkably eventful year, from the dramatic events that rocked the financial markets to the Presidential election that resulted in a change in national leadership. Virtually all of the significant events during 2008 also had an impact on the world of D&O insurance, one way or another. In all likelihood, significant developments will continue to emerge during 2009, with further implications for the D&O marketplace.
The initiation of a criminal investigation against a company or its directors and officers can be a watershed moment in the life of any company. In addition to the question of how it will respond, the company must also determine how it will fund the associated legal expense. It is at this critical juncture that the company confronts issues surrounding the availability and limitation of D&O insurance in connection with criminal investigations.
A December 15, 2008 opinion (
In a deeply troublesome decision, the New York Department of Insurance has issued an October 16, 2008 opinion (
A recent appellate court opinion interpreting a D&O liability insurance policy securities exclusion carries some important reminders both about policy wording precision and about exclusionary language, and also raises some critical questions about the scope of coverage for securities claims generally.
This past week, in conjunction with the 
One of the most closely followed recent case developments in the D&O insurance arena is the ruling in the CNL Hotels & Resorts case that a Section 11 settlement did not represent covered loss under a D&O insurance policy. As I noted in a recent post (
In a statement issued on Tuesday evening (
Because of trees felled last night as Ike’s remnants swept through Ohio, I was unable to make it to the office today. I spent more or less the entire day on the telephone talking about AIG, looking out at my yard strewn with fallen tree limbs, branches, twigs and leaves – a visually suitable tableau give the winds that ripped through Wall Street over the last 48 hours.
Each fall for the last two years, I have taken a look at the current trends and hot topics in the world of D&O. There are of course certain perennial topics that are always critical, but this overview is intended to focus on the issues the most significant current interest for D&O insurance professionals and their clients. Here is my list of the current issues to watch:.jpg)
A recurring D&O insurance coverage concern involves the question whether the standard pollution exclusion typically found in most D&O policies could preclude coverage for a securities lawsuit alleging pollution-related misrepresentations or omissions. An August 15, 2008 opinion (
In prior posts (
Observers outside the D&O insurance industry frequently comment to me that with all the subprime-related litigation, D&O pricing must be skyrocketing. These observers are often puzzled when I respond that the D&O marketplace remains generally competitive and pricing advantageous to buyers. This same conversation recurs with sufficient frequency that if may be worth exploring in greater depth. It may also be worth considering whether or not current marketplace conditions may be vulnerable to abrupt change.
In an unpublished August 18, 2008 per curiam opinion (
On June 26, 2008, Judge 
In a June 25, 2008 decision (.jpg)
A June 18, 2008 opinion (
Last week, 
For many companies, one of the hardest parts of the D&O insurance transaction is determining how much insurance to buy. Against a backdrop of basic affordability, the company must consider complex issues of limits adequacy – that is, how much insurance is “enough”? These issues are even more fraught in a time of generally rising claims severity (about which, refer 
In a development that is in my experience absolutely unprecedented, 
Company managers are increasingly sophisticated about D&O liability insurance. Largely as a result of the corporate scandals from earlier in this decade, what used to be a peripheral and disfavored topic is now a top agenda item in many C-suites and boardrooms. But even as company officials have developed a deeper appreciation for the importance of D&O insurance, many misunderstandings about D&O underwriting persist. One thing that is frequently misunderstood is what D&O underwriters are looking for. 
It is generally understood that under Delaware law, directors enjoy broad rights of indemnification and advancement. The Delaware statutory regime does allow corporations a great deal of flexibility in how they adapt these provisions to their own circumstances. But while these principles are generally understood, it may nevertheless come as a surprise to many that a corporation’s flexibility to adjust the provisions includes the ability to eliminate former directors' advancement rights, at least according to a recent Delaware Chancery Court opinion.
As I have noted in prior posts (most recently 
One of the standard provisions of the typical D & O insurance policy is a clause requiring the insurer’s prior consent to settlement. This clause can be the source of tension between carriers and policyholders, and policyholders and their counsel sometimes view the clause as little more than an impediment. However, a March 13, 2008 opinion (.jpg)
Although there have been some significant exceptions in recent years, it is still generally the case that securities class action settlements are largely funded by D & O insurance. Yet the impact of D & O insurance on the process and ultimate value of securities lawsuit settlements is little understood outside the small world of practitioners in this area. In an excellent March 2, 2008 paper entitled “How the Merits Matter: D & O Insurance and Securities Settlements” (