Director and Officer Liability

The coronavirus pandemic poses a host of threats and challenges for every organization. The outbreak also presents a number of serious challenges for boards of directors as well. In the following guest post, Paul Ferrillo, a partner in the McDermott, Will & Emery law firm, considers the challenges that boards are facing and the litigation threats that may arise as a result. I would like to thank Paul 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 Paul’s article.
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Francis Kean

In a post published last month, I wrote about an interesting U.K. case in which a claim had been asserted post-bankruptcy against a director of a private company. In the following guest post, Francis Kean, a partner in the financial lines team at McGill and Partners, takes another look at the case and considers its implications. A version of Francis’s article previously was published on LinkedIn. I would like to thank Francis for allowing me to publish his article as a guest post on my site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly of you would like to submit a guest post. Here is Francis’s article.
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Over the last few days, as updates about the spread of the coronavirus have dominated the news cycle and roiled financial markets, I have had a number of conversations about whether the emerging coronavirus outbreak could result in D&O claims. There is no doubt that if a building fire, a plane crash, or an oil spill can result in D&O claims, the impacts on any given company arising from a global pandemic might at least as a theoretical matter also result in a D&O claim. As discussed below, there are a number of ways in which circumstances surrounding the evolving coronavirus health crisis might result in D&O claims.
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In prior posts on this site (for example, here), I have noted the phenomenon of directors’ and officers’ liability claims arising in the wake of antitrust enforcement actions. These follow-on civil actions arguably represent one part of an increasing trend toward trying to hold individual directors and officers accountable for their companies’ antitrust violations. According to a recent paper, as a result of trends in relevant doctrines and enforcement policies, the risk to directors and officers from these developments is “likely to continue rising in the foreseeable future.” In his February 12, 2020 paper entitled “D&O Liability for Antitrust Violations” (here), University of Arizona Law Professor Barak Orbach details the developments contributing to these trends and reviews the implications for director and officer liability. Professor Orbach’s paper raises a number of interesting considerations, particularly from an insurance perspective, as discussed below.
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A recent judicial ruling out of the U.K. provides an interesting perspective on directors’ duties under applicable law when a bankrupt company is in liquidation. As discussed below, the Court held that a director’s duties continue in relevant respects even if the director’s powers cease as of the date of the bankruptcy filing. The circumstances of the case provide an interesting example of a claim that arose against a former director post-liquidation. As discussed below, the circumstances also provide an illustration of why the purchase of post-liquidation run-off coverage is advisable. Though the circumstances arose under U.K. law, the situation bears enough similarities to what might arise under equivalent U.S. law that the liability and insurance lessons are instructive even in the U.S. context.
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Eric C. Scheiner
Jennifer Quinn Broda

The long-standing and traditional view is that corporations’ objectives should be to maximize shareholder value. More recently, a variety of commentators and observers have argued that corporations have larger social responsibilities. However, as discussed in the following guest post from Eric C. Scheiner and Jennifer Quinn Broda, efforts by companies to fulfil corporate social responsibilities may involve their own risks and even result in D&O claims. By the same token, failing to take action could result in claims as well. These trends have important implications for insurers and for policyholders alike. Eric is a Partner and Jennifer is Of Counsel in the Chicago office of Kennedys. I would like to thank Eric and Jennifer 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Eric’s and Jennifer’s article.
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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.
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The liability environment for directors and officers is always in a state of change, but 2019 was a particularly eventful year in the D&O liability arena, with important consequences for the D&O insurance marketplace. The past year’s many developments have significant implications for what may lie ahead in 2020 – and possibly for years to come, as well.  I have set out below the Top Ten D&O Stories of 2019, with a focus on the future implications.
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Samantha Wu

In prior posts, I have noted the series of U.S. securities class action lawsuits that have been filed recently against publicly traded companies in the cannabis business, including several Canadian companies. In the following guest post, Samantha Wu of the Bersenas Jacobsen Chouest Thomson Blackburn law firm in Toronto provides an overview of the unique exposures that directors and officers of Canadian cannabis companies face. A version of this article previously was published on the law firm’s website (here). I would like to thank Sam for allowing me to publish her 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 Sam’s article.
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