Securities class action lawsuit filings remained at elevated levels in 2019, but the mix of cases changed during the year, according to the recently published annual report from NERA Economic Consulting. According to the report, which is entitled “Recent Trends in Securities Class Action Litigation: 2019 Full-Year Review,” there were relatively fewer merger objection lawsuits during the year, and relatively more standard securities suits. NERA’s January 21, 2020 press release about the report can be found here, and the report itself can be found here. My own analysis of the 2019 securities litigation can be found here. Continue Reading NERA Economic Consulting: Federal Securities Suit Filings Remain at Recent Elevated Levels

As the various stories and revelations came to light during the peak of the #MeToo movement, there were also a number of D&O lawsuits filed against companies whose executives were the target of the stories. Among these lawsuits was the #MeToo-related securities class action lawsuit filed against CBS. On January 15, 2020, in a lengthy and detailed opinion, Southern District of New York Judge Valerie Caproni largely granted the defendants’ motion to dismiss the lawsuit, although the lawsuit did survive as to one set of allegations involved alleged statements by former CBS executive Leslie Moonves. The court’s ruling underscores the difficulty for plaintiffs in trying to translate sexual misconduct allegations into securities claims. Continue Reading CBS #MeToo-Related Securities Suit Largely Dismisse, Though Some Allegations Survive

Francis Kean

As long time readers know, I have long been warning that climate change-related issues could have a significant impact on directors and officers liability exposures. In the following guest post, Francis Kean provides a summary outline of the specific litigation exposures that corporate directors and officers may face as a result of emerging climate change-related concerns. Francis is Executive Director FINEX Willis Towers Watson. Francis will be joining McGill and Partners in early spring 2020. I would like to thank Francis for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Francis’s article. Continue Reading Guest Post: Climate Change Litigation Threats to Directors and Officers

One of the hot topics for mainstream P&C insurers these days is dealing with “silent cyber” – that is, the coverage for cyber-related losses in traditional property and casualty insurance policies. There are a number of initiatives underway in the insurance underwriting community as insurers try to address silent cyber. However, as noted in an interesting January 14, 2020 memo from the Covington law firm entitled “The Noise About ‘Silent Cyber’ Insurance Coverage” (here), these initiatives have important implications for policyholders. Among other things, these initiatives potentially could result in a gap in policyholders’ coverage for cyber-related losses, as discussed below. Continue Reading Addressing “Silent Cyber” and the Risk of Coverage Gaps

Plaintiffs seeking to pursue negligence claims for the disclosure of their personal information in a data breach often face hurdles in pleading a sufficient injury. The claimants’ failure to plead a sufficient injury frequently is the basis for dismissal. However, in a very interesting recent decision, the Georgia Supreme Court reversed the intermediate appellate court’s affirmance of the dismissal of the plaintiffs’ data breach claims, finding that the claimants had sufficient standing to assert their claims where they alleged that the disclosure of their personal information left them at an “imminent and substantial risk of identity theft.” As discussed below, the Court’s holding arguably makes data breach claims under Georgia law less susceptible to dismissal. However, as also discussed below, there are important limitations to the Court’s holding. Continue Reading Georgia Supreme Court: Risk of Future Identity Theft Sufficient to Support Data Breach Negligence Claim

Regular readers know that among the recurring themes on this site are concerns about problems with the application of notice rules to preclude insurance for claims that would otherwise be covered under the policy. These problems are, in my view, particularly abrupt where a claims is made during one policy period and the notice is provided during the policy period of a subsequent renewal policy issued by the same insurer. I have argued that continuity of coverage between the two policies and with the same insurer ought to be taken into consideration and that coverage should be denied only if the insurer can show that the late notice of claim during the renewal period prejudiced the insurer’s interests. In a recent appeal, the Ninth Circuit rejected this continuity of coverage argument. The appellate court’s opinion, though brief, raises a number of interesting points, as discussed below.


The Ninth Circuit’s December 13, 2019 opinion in the case can be found here. A January 6, 2020 post on the Wiley Rein law firm’s Executive Summary Blog about the case can be found here.



EurAuPair International Inc. is one of several federally authorized au pair programs. In November 2014, all 14 of the federally authorized au pair programs, including EurAuPair, were named as defendants in a lawsuit filed in the United States District Court for the District of Colorado (the “underlying lawsuit”). The complaint in the underlying lawsuit asserted a number of different claims against the defendants, including in particular a claim specifically against EurAuPair for alleged violation of the Sherman Anti-Trust Act.


EurAuPair was served with the complaint in the underlying action in January 2015. According to the declaratory action complaint that EurAuPair subsequently filed against its D&O insurer, EurAuPair believed at the time it received service of the complaint that its defense expenses would be entirely within the applicable deductible. EurAuPair did not formally tender the claim to its D&O insurer until April 2016, after a motion to dismiss had been denied in the underlying lawsuit.


EurAuPair had a non-profit D&O insurance policy in place during the time period October 1, 2014 through October 1, 2015. EurAuPair subsequently renewed its D&O insurance policy for the policy period October 1, 2015 through October 1, 2016.


After EurAuPair formally tendered the claim to its D&O insurer, the D&O insurer denied coverage for the claim, based, among other reasons, on the grounds that EurAuPair’s provision of notice was untimely under the terms of the policy. EurAuPair filed a declaratory judgment action and action for bad faith against the insurer, in the Central District of California. The District Court granted the insurer’s motion to dismiss and EurAuPair appealed.


The D&O insurer’s policy requires EurAuPair to report claims to the insurer “as soon as practicable but in no event later than thirty (30) days after the end of the Policy Period.”


The December 13, 2019 Ninth Circuit Opinion

In a December 13, 2019 three-judge panel per curiam opinion designated as Not for Publication, the Ninth Circuit affirmed the district court.


On appeal, EuroAuPair had tried to argue that the notice-prejudice rule applied to its policy. However, the appellate court said that under California law the notice-prejudice rule does not apply to claims-made-and-reported policies. EuroAuPair’s policy, the appellate court said, is a claims-made-and reported policy, and therefore the insurer “need not demonstrate substantial prejudice to deny coverage.”


EuroAuPair had also tried to argue on equitable grounds that its late provision of notice should not preclude coverage, owing to its renewal of the coverage with the same insurer. The appellate court rejected this argument, saying that “equitable relief is only justified under unique circumstances, such as when the insured did not have the opportunity to purchase extended reporting period and the insured reports the claim immediately upon learning it exists.” Here, the appellate court said, EurAuPair knew of the claim within the policy period and had thirty days after the policy period expired to report it “yet waited sixteen months to do so. Accordingly, the court said, equitable relief is not appropriate.



This was always going to be a tough case for EurAuPair. The organization’s long delay in providing the insurer with formal notice was always going to be tough to explain. Late notice disputes are always going to be tough for policyholders that whose actions do not bespeak diligence.


Beyond that, there is the added problem that the court here did not need to reach, that this might be one of those cases where the insurer actually might be able to show prejudice as a result of the late notice. The fact that the motion to dismiss in the underlying case had already been denied before EurAuPair finally provided notice to the insurer undoubtedly would have been relied on by the insurer to try to argue that the late provision of notice had prejudiced its interests.


However, even if there are aspects of this situation that are not sympathetic to the policyholder, it still bothers me that the notice prejudice rule is not be available based on the categorical principle that it does not apply to claims made and reported policies. In my view, this elevates form over substance and it creates the possibility that a mere process error will result in a total forfeiture of coverage. As I have noted at length in prior posts, late notice happens — it happens for many reasons, it happens for no reason, simply because people are involved. In my view, late notice ought not eliminate coverage unless the policyholder’s late provision of notice prejudiced the insurer. If the law in certain jurisdictions prevents this, then the right solution is for the policy to address it. The inclusion of language along these lines would, in my view, correctly address this situation:


If the Insured fails to provide notice of such Claim to the Insurer as required under this Section, the Insurer shall not be entitled to deny coverage for the Claim based solely upon late notice unless the insurer can demonstrate that its interests were materially prejudiced by reason of such late notice.


This provision represents an honest recognition that late notice happens. If the insurer is prejudiced as a result then the insurer can rely on the late notice as a defense to coverage. But otherwise – not.


There is another thing about the sequence of events here that rubs me the wrong way. The insurer collected and will keep two consecutive premiums in order to provide this organization with insurance – indeed, or so EurAuPair argued in its declaratory judgment complaint, to provide insurance for the very type of claim that EurAuPair faced in the underlying lawsuit.


This situation, which comes up all too frequently (in my view), has motivated me to argue in the past that “continuity of coverage” ought to be recognized as a remedy for the late provision of notice – not necessarily to excuse the late notice altogether, but at least to specify that the insurer that accepted consecutive premiums and received notice during a renewal policy period can only deny coverage based on late notice upon a showing that the late notice caused the insurer prejudice.


While I believe this continuity of coverage argument has equitable merit, it has actually not fared that well in the courts recently. As I noted in a blog post last month (here), an Ohio appellate court, applying Ohio law, recently rejected this argument.


Given the rejection by some courts of this argument, perhaps the answer is for the “continuity of coverage” issue to be addressed in the policy. As I noted in my recent blog post about the Ohio appellate decision, I have seen policies from other jurisdictions that have continuity of coverage provisions, along these lines:


Notwithstanding  the provisions of Section X, coverage is provided under this Policy for Claims that could have or should have been noticed under any policy of which this policy is a renewal or replacement or which it may succeed in time, provided that:


(i) the Claim could have and should have been notified after the Pending and Prior Date set forth in the Policy Declarations;

(ii) the Insurer has continued to be the insurer under such previous policy without interruption; and

(iii) the coverage provided under this Section shall be in accordance with all the terms and conditions (including the limits of liability and deductible amounts) of the policy under which the Claim could have been notified. Any limit of liability available under this Section is part of, and not in addition to, the Limit of Liability set for in the Policy Declarations, and the payment by the Insurer of any such limit erodes the limit of liability erodes the Limit of Liability set forth in the Policy Declarations.


I can imagine that there are insurer-side advocates that will contend that this type of provision unfairly exposes insurers to stale claims or encourage lack of diligence on the policyholder’s part. To address that concern, it would be appropriate for the section to provide further that the provisions do not apply if the insurer can show that it was prejudiced by the policyholder’s failure to provide notice of Claim.


As I have also previously observed, this kind of provision will at least encourage a policyholder to renew with the same insurer.


All of that said, I do think there is an important lesson to be drawn from this specific situation, beyond how the recurring late notice issues might be addressed. That is, that policyholders need to be diligent in protecting their own interests. A corollary is that policyholders should not talk themselves out of providing notice.


At least according to EurAuPair’s declaratory judgment complaint, the reason it did not provide notice at the time it receives service of the underlying complaint is that it assumed that its defense expenses would be within the applicable deductible.


This kind of analysis of the notice issue is always a bad idea; this reasoning should never be the basis for deciding not to provide notice. Unfortunately for EuroAuPair, this case provides a clear example of what can go wrong for any organization failing to provide notice on the assumption that the case with be resolved within the deductible. The problem is, as EuroAuPair found out, that you may not be able later to secure coverage if it turns out the case cannot be resolved within the deductible. Better – always better – to provide notice of claim at the earliest opportunity.

Securities class action litigation has been an important part of the corporate and securities litigation environment in the United States and Canada for many years. What has been interesting in more recent years has been the steady rise of collective investor actions outside North America. As these various claims have accumulated, a number of them have developed into significant settlements, as documented in a recent report. ISS Securities Class Action Services has published an interesting report entitled “The Top 25 Non-North American Settlements: Largest Securities-Related Settlements Outside of North America of All-Time” (here) detailing the largest collective investor action settlements in Europe, Australia, and Asia. Continue Reading The Top 25 Securities-Related Settlements Outside of North America

On my beat here at The D&O Diary, I cover the liabilities of corporate directors and officers. One objection I frequently hear is that I focus too much public companies and not enough on private companies. The reason I write about public company issues more than private company concerns is that the public company world usually is more eventful. However, every now and then, something comes up involving a privately-held company that reminds all of us that plenty happens in the private company D&O world, too. The most recent example is the shareholder derivative and class action lawsuit filed last week against executives of the electronic cigarette company, Juul Labs. As discussed below, this new lawsuit highlights the exposures that private company directors and officers can face and underscores the fact that even private companies can get hit with shareholder class action lawsuits. Continue Reading Private Company Directors and Officers Hit with Shareholder Class Action Lawsuit

As one of my year-end features on this site, I published in late December a post with my Top Ten favorite pictures from my travels during 2019. In the same post, I also invited readers to send in their favorite pictures from their own 2019 travels, with the idea that I would post the readers’ pictures here, on this blog. Last week, I published the first installment of readers’ travel pictures. Today, I am very happy to publish the second set of readers’ pictures. There are some great pictures in this set. Continue Reading More of Readers’ 2019 Travel Pictures 

John Reed Stark

In the following guest post, John Reed Stark takes a look at the troubling rise of ransomware attacks, and the disturbing relationship between ransomware attacks and bitcoin. John is the President of John Reed Stark Consulting and former Chief of the SEC’s Office of Internet Enforcement. I would like to thank John for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is John’s article. Continue Reading Guest Post: Ransomware’s Year-End Thank You Note to Bitcoin