Just about every publicly traded company and most private companies carry D&O insurance. It is just common sense in the current litigious environment. But while most companies recognize the need for D&O insurance, not every company maximizes its investment when purchasing the insurance. In the following guest post, Michael J. Biles, a partner in the Securities Litigation Group at King & Spalding LLP, takes a look based on his perspective as a securities litigator at ten common mistakes many companies make when buying their D&O insurance. In addition to the points Mike makes in his guest post, I would add that companies are likely to avoid these and other common mistakes if they take the time to ensure that the have enlisted the assistance of a knowledgeable and experienced broker in connection with their purchase of D&O insurance.
I would like to thank Mike for his willingness to publish his article on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of the blog. Please contact me directly if you would like to submit a guest post. Here is Mike’s guest post.
D&O insurance is a must-have for every public company. The risks and costs of private lawsuits or government investigations are too great for any rational person to serve as an officer or director of a company without a solid D&O insurance policy. After nearly twenty years of defending officers and directors in securities litigation, I have experienced firsthand the hardship caused by inadequate or inappropriate D&O insurance. Contrary to public perception, most officers and directors of public companies are not extraordinarily wealthy – the cost of financing the defense of a securities class action, derivative lawsuit or government litigation (much less of funding a settlement) is too great to bear for most individuals without D&O insurance.
The following are the top ten mistakes that I’ve seen companies make in selecting D&O insurance. Although some of these mistakes concern complex insurance coverage issues, I’ve prepared this article for the non-lawyer, stripped of legalese, so that officers and directors can discuss these issues with their insurance brokers to avoid these mistakes. D&O insurance is a competitive industry. While the core language of a standard D&O policy is generally fixed, companies can, and often do, negotiate better terms in endorsements to the policy.
Continue Reading Guest Post: Ten Mistakes Companies Make When Buying D&O Insurance –A Securities Litigator’s Perspective