Hunton Andrews Kurth Counsel Geoffrey Fehling was quoted on June 4 in a Law360 article titled “FCPA’s High Costs May Cause Tightening In D&O Market.” The article analyzed heightened FCPA enforcement risks faced by corporate policyholders, which could lead to an even harder market for directors and officers insurance coverage for those exposures, according to Fehling and other legal experts interviewed for the article. Citing recent government-led investigations into FCPA violations, the article discussed, among other things, three key expenses large corporate policyholders must consider when being investigated for a FCPA violation: costs to investigate the alleged violation, costs for any liability for a violation supported by evidence, and costs to shareholders for potential securities or other follow-on litigation.
Investigation costs, according to Fehling, can be as much as costs tied to follow-on litigation based on the allegations in wide-ranging FCPA investigations. That is because internal investigations often force companies to send attorneys, accountants, experts, and consultants globally to resolve the matter. Fehling explained: “The costs on the front end can be significant, and many times if there is coverage for pre-claim and investigation costs, those coverages may be sub-limited and not an open-ended coverage grant.”
D&O coverage for FCPA claims is available but varies widely depending on both the specifics of the claim and the policy’s insuring agreements, definitions, exclusions, and other limitations that may apply to FCPA exposures. Retaining experienced coverage counsel to evaluate relevant D&O policy language and costs associated with purchasing FCPA-specific coverage is critical to maximizing potential recovery in the event of an investigation, enforcement action, or follow-on lawsuit.