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Earlier this month, current and former Boeing Company directors agreed to a $237.5 million settlement to resolve claims that they ignored safety issues concerning Boeing’s 737 MAX aircraft. While the settlement, which came quickly on the heels of the Delaware Chancery Court’s September denial of the defendants’ motion to dismiss, ranks as one of the largest derivative settlements of all time, the silver lining for the directors and officers named in the suit is that the entire settlement is to be funded by the company’s D&O insurers. The Boeing case is yet another example of the necessity for public companies to purchase sufficient D&O liability coverage, particularly “Side A” insurance coverage, to protect officers and directors implicated in derivative claims, securities class actions, enforcement actions, and similar claims. Because many states, including Delaware, prohibit companies from indemnifying officers and directors for payments made to the company in settlement of stockholder derivative claims or other suits brought on behalf of the company, securing Side A coverage to protect individuals for non-indemnified loss is essential.
Continue Reading Historic Boeing Derivative Settlement Funded By D&O Insurers: How to Ensure Directors and Officers Land Safely With Side A DIC Insurance

The Nasdaq stock market has filed a proposal with the US Securities and Exchange Commission requesting permission to enforce new rules aimed at advancing diversity among board members of Nasdaq-listed companies and increasing disclosure of diversity statistics. Investors and shareholders have devoted significant attention (and several lawsuits) in recent years to addressing environmental, social, and governance (“ESG”) issues at the board level. Nasdaq’s proposal would bring diversity to the forefront of the boardroom, as well as present new compliance obligations and possible D&O exposures to companies subject to the proposed listing requirements.
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Continue Reading Nasdaq Board Diversity Proposal Highlights Importance of ESG Issues, Increased D&O Risks

The US Securities and Exchange Commission has levied $125,000 in civil penalties on Cheesecake Factory as part of a settlement to resolve the agency’s allegations that the company made materially misleading statements to investors about the impact of the COVID-19 pandemic on its business. While this is the first such case reported by the SEC, it is only one in a string of recent third-party liabilities companies have faced that implicate directors’ and officers’ liability insurance coverage.
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Continue Reading Cheesecake Factory’s SEC Fines Are Latest D&O Liability to Stem from COVID-19 Pandemic

In March, we reported on the initial filing of several securities class action suits arising from the coronavirus pandemic (COVID-19). For example, at the start of the pandemic, shareholders of Norwegian Cruise Lines Holdings, Ltd. filed a class action alleging that the company and certain officers violated the Securities and Exchange Act of 1934. The lawsuit alleged that the cruise line made false and misleading statements about COVID-19 in order to persuade consumers to purchase cruises. This allegedly caused the share prices to be cut in half.
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Continue Reading COVID-19 Event-Driven Litigation Continues to Sail

Much of the commentary on insurance issues arising from the COVID-19 crisis, including multiple posts on this blog, understandably has focused on recovery under first-party property policies providing business interruption coverage for losses incurred due to office closures, government orders, extra expenses, and other direct costs experienced by employers. There is a much broader…

In a prior post, we predicted that novel coronavirus (COVID-19) risks could implicate D&O and similar management liability coverage arising from so-called “event-driven” litigation, a new kind of securities class action that relies on specific adverse events, rather than fraudulent financial disclosures or accounting issues, as the catalyst for targeting both companies and their directors and officers for the resulting drop in stock price. It appears that ship has sailed, so to speak, as Kevin LaCroix at D&O Diary reported over the weekend that a plaintiff shareholder had filed a securities class action lawsuit against Norwegian Cruise Line Holdings, Ltd. alleging that the company employed misleading sales tactics related to the outbreak.
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Continue Reading All Aboard! COVID-19 Securities Suit Sets Sail, Implicates D&O Insurance

The CDC reports that, as of the end of last week, the coronavirus disease had spread through China and to 31 other countries and territories, including the United States, which has now seen its first two related deaths. The public health response in the United States has been swift and includes travel advisories, heightened airport screening, and repatriation and quarantine of potentially infected individuals. Outside the United States, countries like China, Italy, and South Korea have implemented more severe measures to combat the disease. From smart phones to automobiles, coronavirus has major short- and long-term implications for public and private companies facing potentially significant supply chain disruptions, store and office closures, and other logistical issues. These business losses, however, may be covered by insurance. Below are several key insurance considerations for policyholders to contemplate when evaluating the availability of insurance coverage for coronavirus-driven losses.
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Continue Reading Three Key Insurance Issues to Consider In Securing Coverage for Coronavirus Losses

Equifax Inc. recently announced that it has agreed to pay up to $700 million to settle numerous government investigations and consumer claims arising out of a 2017 breach that exposed Social Security numbers, addresses and other personal data belonging to over 148 million individuals. Following the breach, Equifax faced investigations from the Federal Trade Commission, the Consumer Financial Protection Bureau, all 50 state attorneys general and consumers prosecuting nationwide multidistrict litigation. As part of the deal, Equifax will contribute approximately $300 million to compensate consumers, with the potential to increase to $425 million depending on the number of claims filed. Equifax also agreed to pay $175 million to state governments, plus another $100 million in civil penalties to the CFPB.
Continue Reading Equifax’s Hefty $700M Bill is a Powerful Reminder to Close Cyber & D&O Coverage Gaps

In a victory for policyholders, a New York trial court rejected insurers’ summary judgment arguments, ruling that an insurer must establish a common “fact, circumstance, situation, transaction or event” underlying an investigation before it can rely on a prior and pending litigation and investigation (“PPLI”) exclusion based on that earlier investigation. The court further ruled that the insurer cannot base its coverage denial on a common “fact, circumstance, situation, transaction or event” learned during the investigation.
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Continue Reading New York Court Rejects Insurers’ Use of Prior/Pending Investigation Exclusion; Requires Factual Predicate to Exist Before the Prior Investigation and not Arise From It