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Miranda Jannuzzi

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Directors’ and Officers’ liability (“D&O”) insurance offers key protections to a company’s board members and management by serving as a financial backstop for their indemnification rights as well as their personal assets in the event directors or officers are the subject of claims or investigations based on their service to the company.  D&O insurance also adds value and financial protection directly to the company that purchases it, including by reimbursing the company when it indemnifies a director or officer, and insuring the company directly against its own liability for securities claims or (in the case of private companies) certain other claims.

Given the importance of D&O insurance to a company’s corporate governance and risk management, it is critical that companies carefully approach the procurement and renewal process for their D&O insurance.  Unlike many other types of insurance policies, D&O policies are neither standardized nor regulated, and the procurement and renewal process can be more complex to navigate.  Although, the individual facts and circumstances of each particular company will dictate the coverages that are needed, there are a number of key issues and policy provisions that should be at the forefront for every company engaged in the procurement or renewal process.  We address a few of these considerations here. 

Key definitional terms

Certain key definitions found in D&O policies impact whether and when coverage will be owed, including who is an insured and the types of matters that constitute a “Claim” for which coverage may be owed.

With respect to the term “Insured Person” (or similar terms), definitions vary widely as to who qualifies for coverage.  Despite being called “directors and officers” insurance, D&O policies often insure individuals who are neither directors nor officers of the company.  To determine what policy language is necessary for a particular company, it is imperative to closely evaluate the proposed language and ensure that the definition captures the company’s decision-makers—whether that includes just directors and officers, or other employees or consultants beyond those individuals.Continue Reading Key considerations for companies in procuring or renewing D&O coverage

Whistleblower lawsuits under the False Claims Act, also known as qui tam actions, have become more common in recent years. This is particularly so in heavily regulated industries and those in which the government routinely pays or reimburses costs, such as health care, pharmaceuticals, finance, construction and defense. Companies defending themselves against government investigations and FCA actions often have the insurance coverage they need — but frequently overlook it.

Our group recently authored an article in Business Insurance discussing insurance coverage for FCA investigations and actions. As discussed at greater length in the article, businesses facing whistleblower suits and government investigations often have coverage in standard policy types, including employment practices liability (EPL), errors and omissions (E&O), directors and officers (D&O), and commercial general liability (CGL) policies. For instance, EPL policies, which cover losses from claims stemming from wrongful employment practices, may respond to FCA claims because FCA suits frequently include a claim of retaliation by the whistleblowing employee. Where employment-related claims are also at issue and intertwined or interrelated with the FCA claims, courts have ruled that EPL insurers have a duty to defend the entire action.
Continue Reading Double-check existing policies for whistleblower coverage

Increasingly, companies are being named as defendants in putative class actions, like those brought under the Fair Credit Reporting Act and Telephone Consumer Protection Act, involving violations of statutes that contain provisions mandating certain damages or ranges of damages. One question raised is whether “statutory damages” are uncovered “fines” or “penalties,” or whether they are covered losses.
Continue Reading Insurance Coverage for Statutory Damages Under Professional Liability Policies