Tighter reporting and disclosure rules, tougher enforcement efforts and growing public sensitivity to white-collar misconduct make directors and officers insurance increasingly important, a panel of attorneys warns.
The panel, assembled for the ninth annual Anderson Kill & Olick P.C. directors and officers insurance Conference in New York, notes that those are the main factors behind a sharp rise in the risk of D&O civil suits, according to a new Business Insurance article
“It’s well known that civil settlement values increase dramatically when there’s a parallel enforcement action,” Joseph McLaughlin, a partner at New York-based Simpson Thacher and Bartlett L.L.P., says in the article.
McLaughlin and Michael Barry, a director at Grant & Eisenhofer P.A. of Wilmington, Del, pointed to federal emphasis on enforcing the Foreign Corrupt Practices Act and environmental regulations — particularly disclosure and reporting requirements for industries like mining or natural gas drilling.
But while panelists say government enforcement frequently means substantial civil awards and penalties, settling with the government doesn’t necessarily mean victory for derivative plaintiffs.
“In order to establish liability in a derivative claim, you essentially have to establish that the violation took place in the boardroom or was specifically known by the directors, and that’s a very high burden to meet,” Barry says.