Proposal for E.U. Collective Redress Mechanism Advances

As I have noted in prior posts, there has been in recent years a slowly developing E.U. initiative for the introduction of a rights of collective redress on a Union-wide basis. As discussed here, in April 2018, the European Commission introduced a proposal – as part of what it called a “New Deal for Consumers” – that would introduce a European collective redress right for consumers. More recently, on March 26, 2019, the EU Parliament, in plenary session, adopted the Commission’s proposal. The next step is that the Council of Europe will now take up the proposal, moving the E.U. one step closer toward the adoption of a pan-European collective redress mechanism for consumers that would be available in all of the member states.  The March 26, 2019 application on which the EU Parliament acted can be found here. Continue Reading

The U.S. Securities Litigation Exposure of Non-U.S. Companies with Level I ADRs

I have been fortunate in recent years to be able to travel around the world and to speak to D&O insurance professionals in a wide variety of different countries. One recurring question I get in these meetings has to do with non-U.S. companies that have Level I American Depository Receipts (ADRs) trading in the U.S. The question is usually something along the lines of – “these Level 1 ADR companies don’t have U.S. securities litigation exposure, right?” This question always puzzles me, given the several high profile cases in recent years (discussed below) demonstrating that —  while there may be  an interesting question between sponsored and unsponsored ADRs — transactions in Level 1 ADRs certainly can be subject to the U.S. securities litigation.   Continue Reading

Tribune Execs Must Contribute Personal Assets to $200 Million Settlement

Billionaire Sam Zell and other former executives of the bankrupt Tribune Company have reached a $200 million deal to settle the bankruptcy trustee’s adversarial claims against them arising out of the disastrous 2007 leveraged buyout (LBO) of the company. According to press reports about the settlement, the $200 million settlement amount will “significantly” exceed the company’s remaining D&O insurance; the settlement amount in excess of the remaining insurance is to be split among the various individual defendants.  The settlement is subject to bankruptcy court approval. The trustee’s May 31, 2019 motion for court approval of the settlement can be found here. Jonathan Stempel’s June 12, 2019 Reuters article about the settlement can be found here. Continue Reading

D&O Insurance: Continuity of Coverage as a Counter to Late Notice

As anyone involved in the world of D&O insurance knows, a frequently recurring coverage issue is the question of whether or not the insured has provided timely notice of claim as required by the policy. These kinds of  disputes takes a variety of forms, but one particular recurring variation involves the question whether or not the policyholder has satisfied the policy’s notice requirements when a claim is made against the policyholder during the policy period of one policy but the policyholder does not provide notice until the policy period of a subsequent renewal policy. That was the issue in a case recently decided by the Sixth Circuit Court of Appeals, in which the appellate court affirmed the district court’s holding that the policyholder’s provision of notice during the renewal policy of a claim made during a prior policy period did not satisfy the applicable notice requirements. Because this is a recurring claims issue, I have some thoughts and suggestions about this situation, below. The Sixth Circuit’s May 31, 2019 opinion in the case can be found here. Continue Reading

Chubb Sounds Securities Litigation Alarm, Calls for Reform

Regular readers of this blog know that the statistics surrounding U.S. securities litigation in recent years are nothing short of alarming, including, for example, both record numbers of lawsuits and record percentages of listed companies sued. Severity trends are concerning as well. All of these trends are exacerbated by the impact of the U.S. Supreme Court’s 2018 Cyan decision, which opens companies conducting securities offerings to multiple, conflicting lawsuits in state and federal court. Given these trends, it is hardly surprising that there have been renewed calls from business groups for securities class action litigation reform. Now, Chubb, a leading global insurer, has added its voice to the calls for reform. In an interesting June 11, 2019 paper entitled “From Nuisance to Menace: The Rising Tide of Securities Class Action Litigation” (here), the company details the extent of the current securities litigation mess and sets forth a number of proposals for securities litigation reform.  Continue Reading

Mootness Fees: The Latest in the Merger Objection Litigation Phenomenon

One of the most significant phenomena in the world of corporate and securities litigation has been the rise of merger objection litigation. As has been well-documented, merger objection litigation reached the point in recent years that virtually every public company merger transaction drew at least one lawsuit. The circumstances surrounding merger objection litigation began to change after the Delaware courts evinced their displeasure with this kind of litigation in a series of rulings that culminated in the 2016 decision in Trulia, in which the court rejected the kind of disclosure only settlement that had characterized the resolution of these kinds of cases. Since then, the merger objection lawsuits have shifted to federal courts. Moreover, these cases, now in federal court, increasingly are not settled; rather, they are dismissed in exchange for the defendants’ willingness to pay the plaintiffs’ counsel a so-called “mootness fee.”


In a May 29, 2019 paper entitled “Mootness Fees” (here), Matthew Cain and Steven Davidoff Solomon of UC Berkley Law School, Jill Fisch of Penn Law School, and Randall Thomas of Vanderbilt Law School take a look at the recent rise of mootness fee dismissals in merger objection litigation. Their paper documents that the rise of mootness fee settlements has turned merger objection litigation into a process for a small number of lower tier plaintiffs’ firms to in effect extract a toll from companies involved in M&A transactions, largely without court scrutiny or even minimal disclosure requirements. The authors suggest a number of procedural mechanisms to try to provide some scrutiny  and transparency over these kinds of settlements. Continue Reading

Barcelona in June

The D&O Diary was in Barcelona this last week for business meetings and for an industry event. Though my schedule was full (and though we lost an entire day thanks to flight delays), we still had a chance to enjoy being in beautiful Barcelona. This city features a  unique combination of climate, seaside beauty, and scenic mountains that really can’t be beat anywhere. Continue Reading

Guest Post: Evolving Solutions for Private Capital Investors

Jonathan Legge

In a three-post series, Jonathan Legge, a Senior Vice President at RT ProExec, is taking a look at the key insurance issues relating to Private Capital Investment. In the first of the three articles in the series (here), Jon examined the issues involved with getting the insurance for private equity-backed portfolio companies’ right. In the second post in the series (here), Jon discussed transactional risk insurance, and in particular, contingent liability insurance. In today’s post, the third and final post in the series, John takes a look at the evolving insurance solutions for Private Capital investors’ changing needs. I would like to thank Jon for allowing me to publish his series of articles as guest posts on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Jon’s article.


In our initial post we described the increasing importance of Private Capital to the global economy and the need to make sure that Private Capital backed companies have the right insurance to protect their investments and the assets of the Private Capital investors and their management teams. Ensuring that a portfolio company maintains coverage that is broad enough to properly respond to D&O, Employment Practices and Fiduciary liability claims is crucial, but even the best coverage for a portfolio company will not completely protect the Private Capital investor.

Until the late 1990’s if a Private Capital investor purchased coverage, it was generally a General Partners’ Liability policy that protected the General Partner against suits by Limited Partners (investors). While this coverage was certainly needed, it was hardly ever called into use because Limited Partners very rarely sued the General Partner. The majority of claims against the Private Capital investor arise from (1) employment issues at the Private Capital level, (2) M&A related claims when an investor is buying or selling a portfolio company and (3) stakeholder claims when a portfolio company is in financial distress.

Over the past 20 years, Private Capital liability coverage has expanded to better meet the unique needs of these investors. For example, most Private Capital investors are unable to distinguish their professional liability risk from their management liability risk because they simultaneously act as investors in their portfolio companies and as operators of their investment funds. For this reason, the General Partners’ Liability policies of the past have evolved into Fund Liability policies which include coverage for professional liability exposures stemming from the operation of investment funds and the services provided to portfolio companies in addition to more traditional management liability exposures. Similarly, Private Capital investors routinely sit on the boards of their Portfolio Companies, so the Private Capital Liability policy also needs to contain a broad Outside Directors’ Liability coverage grant to insure the investors as they serve as board members, advisors and observers.

While the marketplace has generally favorably addressed these high level structural coverage issues, careful attention needs to be paid to the nuances within each coverage. Language that is not normally questioned in traditional management liability policies can cause meaningful problems for Private Capital investors. For example, most D&O policies contain an ERISA exclusion. In the context of a traditional D&O policy, the purpose of this exclusion is to clarify that the D&O policy does not cover the ERISA exposures of the ERISA plan fiduciaries-that coverage is found under the Fiduciary policy.  With regard to Private Capital liability, however, the ERSIA exclusion can be particularly troublesome because the pension funds that invest in Private Capital Funds are often subject to ERISA.  As such, the Private Capital liability policy needs to be amended to make it clear that the exclusion applies only to the Private Capital Investor’s own employee benefit programs; and not to claims arising out of any ERISA issues stemming from Limited Partners or other investors in the funds.

While coverage for traditional Private Capital companies has become very strong, Private Capital companies continue to change, and this change requires fresh thinking from an insurance perspective.  In the past, the Private Capital universe was essentially limited to Private Equity and Venture Capital firms, and the Fund Liability policies generally provided coverage for their unique exposures.  Over the last 10 years these fund structures have expanded to include Family Offices, Real Estate (not new, but growing), Private Debt Funds, Direct Investment from Pensions, Sovereign Wealth Investors, Fundless Sponsors and Search Funds.

The insurance industry is again evolving to address the nuances of these different structures. An actively managed Family Office may have the normal investor exposure of a Private Equity or Venture Capital Fund, but they will also be exposed to risk from their family office activities. These could involve oversight of a foundation, responsibility for trusts for various family members or even the management of household staff.

Real Estate investors are basically private equity investors focused on real estate. They face the same risks as a traditional private equity investor with added vicarious liability exposures related to property management, general contracting and appraisals.

The point is that when it comes to insurance, the world of Private Capital has evolved dramatically over the past decade and will likely continue to expand. The old General Partners’ Liability policies gave way to Fund Liability policies for Private Equity and Venture Capital firms. The trend to greater specialization and unique structures is continuing in the Private Capital universe, which means that insurance professionals will be required to continue driving Private Capital Liability policies to address these and future coverage needs.

Thinking About the Differences Between Private Company and Public Company D&O Insurance

Privately-held companies, on the one hand, and companies whose shares are public traded, on the other hand, face very different liability exposures. Because of these differences in liability exposures, the directors and officers liability insurance available for these types of entities varies – the D&O insurance form available for private companies is quite a bit different from the D&O insurance form available for public companies. A recent law firm memo took a brief look at the differences between the two forms of coverage. There some important additional considerations, that I discuss below. Continue Reading

Guest Post: Rating Agency Downgrades Following Cyber Breaches — Are They the Canary in the D&O Coal Mine?

In the following guest post, Paul Ferrillo and Chris Veltsos take a look at the latest consequences that companies are now facing following a data breach – a rating agency downgrade. Paul is a shareholder in the Greenberg Traurig law firm’s Cybersecurity, Privacy, and Crisis Management Practice. Chris is a professor in the Department of Computer Information Science at Minnesota State University, Mankato where he regularly teaches Information Security and Information Warfare classes. I would like to thank Paul and Chris for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest article. Here is Paul and Chris’s article. Continue Reading