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As explained in a recent alert, now is the time for public companies to adopt compliant clawback policies. This is because the US Securities and Exchange Commission (SEC) recently approved final rules on June 9, 2023, that required national securities exchanges like the New York Stock Exchange (NYSE) and the Nasdaq to implement new listing standards requiring public companies to institute compliant incentive-based compensation clawback policies. The NYSE and Nasdaq rules require listed companies to adopt clawback policies by December 1, 2023, which policies must apply to incentive compensation awarded after October 2, 2023. As public companies prepare to adopt compliant policies before the December 1, 2023 deadline, they should not only consider the clawback policy itself, but also the overlap between that policy and any applicable directors and officers (D&O) liability insurance. Doing so is important to address the potential new exposures created by the new SEC rules.
Continue Reading Executive Compensation Clawback Policies: Now Is the Time to Consider Insurance

Artificial intelligence (AI) is rapidly changing the way businesses operate, from the way we research and write, to the way data is processed, to the way inventory is measured and distributed, to the way employees are monitored and beyond. Soon, artificial intelligence might be providing life advice, saving hospital patients or accelerating the development of cities. It is already reshaping corporate America. Very few, if any, industries—including the insurance industry—are immune. As the consultancy McKinsey wrote in 2021, artificial intelligence “will have a seismic impact on all aspects of the insurance industry.” McKinsey’s prediction has proved prescient.

As AI continues to influence the insurance industry and the broader economy, new opportunities and risks abound for policyholders. It is therefore essential for policyholders to keep up-to-date about insurance law’s latest frontier. To help policyholders navigate this new frontier, Hunton Andrews Kurth LLP’s insurance recovery team is introducing a new resource: The Hunton Policyholder’s Guide to Artificial Intelligence.
Continue Reading Introducing The Hunton Policyholder’s Guide to Artificial Intelligence

Last week, we published a client alert discussing the importance of cyber and directors and officers liability insurance for companies and their executives to guard against cyber-related exposures.  In today’s ever-changing threat landscape, all organizations are at risk of damaging cyber incidents, and resulting investigations and lawsuits, underscoring the importance of utilizing all tools in a company’s risk mitigation toolkit, including insurance, to address these exposures. …

Continue Reading Reducing Risks from Cyber Incidents with Cyber and D&O Insurance

Hardly a day passes without hearing about another major cyber incident. Recent studies show that cybersecurity incidents are becoming more common, but they are also costly, with some reports estimating an average cost of $9.44 million for breaches in the US. In recognition of this mounting problem, government agencies continue to ramp up enforcement and issue new rules, regulations and other guidance aimed at curbing cyber risks. Last week, the SEC adopted final rules requiring registered entities to periodically disclose material cybersecurity incidents and annually disclose their cybersecurity risk management, strategy and governance plans. In announcing the new rules, the SEC specifically noted that “an ever-increasing share of economic activity is dependent on electronic systems.” According to SEC Chair Gary Gensler, “Whether a company loses a factory in a fire—or millions of files in a cybersecurity incident—it may be material to investors.” …

Continue Reading SEC Adopts New Rules Requiring Disclosure of Cyber Incidents

We recently posted about Nevada becoming the first state to prohibit defense-within-limits provisions in liability insurance policies. Defense-within-limits provisions—resulting in what is called “eroding” or “wasting” policies—reduce the policy’s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim or suit. …

Continue Reading Nevada’s Changing Liability Insurance Landscape—State Insurance Regulator Issues Emergency Regulation and Guidance Addressing Controversial “Defense-Within-Limits” Legislation

The Fifth Circuit recently held that Blue Bell Creameries’ commercial general liability (CGL) insurers do not have a duty to defend the ice cream company in a shareholder lawsuit, which arose from a Listeria outbreak. The decision underscores the importance of coordination of different coverages and policies across insurance programs, as well as the potential perils policyholders may face if forced to seek recovery for certain losses under non-traditional policies.…

Continue Reading The Scoop On The Fifth Circuit’s Ruling Against Blue Bell Ice Cream

Nevada recently became the first state to prohibit defense-within-limits provisions in liability insurance policies. Defense-within-limits provisions—resulting in what’s called “eroding” or “wasting” policies—reduce the policy’s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim or suit. These provisions are commonly included in errors and omissions (E&O), directors and officers (D&O) and other management liability policies. This is in contrast to other policies, most commonly commercial general liability policies, which provide defense “outside of limits” where defense costs do not reduce the policy’s limit. …

Continue Reading An Uncharted Frontier: Nevada First State to Prohibit Defense-Within-Limits Provisions

Artificial intelligence technology (“AI”) is poised to radically improve human functionality, although some say the technology is quietly learning how to overtake it. In the meantime, the insurance industry has been using AI to save time, attain consistency and improve risk mitigation. However, while the industry looks forward to cost savings and better business utilizing generative AI, some insurers have simultaneously cautioned policyholders about the potential risks that reliance on AI may pose. Insurer’s cautionary statements cast doubt on the integrity of their own reliance on the technology.…

Continue Reading Insurance Industry Highlights Inconsistent Reliance on AI

As discussed in a recent client alert, a Delaware court issued a significant opinion in a directors and officers liability claim involving a special purpose acquisition company. In an issue of first impression in Delaware, the Superior Court in Clover Health Investments Corp. v. Berkley Insurance Co. held that directors and officers of the post-merger entity were “Insured Persons” under the SPAC’s D&O policy because they were acting in “functionally equivalent” roles to directors and officers of the SPAC when the alleged pre-merger wrongful conduct took place. The court’s pro-policyholder rulings on coverage for government investigations, based on an ambiguous definition of “Claim,” and allocation of defense costs under the Larger Settlement Rule also have potential ramifications on future D&O claims in Delaware outside of SPAC deals.
Continue Reading Delaware Court Finds Broad D&O Coverage for Directors and Officers in SPAC Claim

Earlier this month, the US District Court for the Northern District of Illinois ruled that Call One Inc., a tele-communications company, must litigate a claim by its insurer, Berkley Insurance Company, seeking to rescind coverage based on the information provided by the policyholder in its application for insurance. The coverage dispute is illustrative of insurers’ increased scrutiny of the answers to all policy application questions—including where no response is provided—to identify new or additional grounds to avoid coverage, even if it requires rescission of the policy. Policyholders should thus carefully consider all questions and requirements during the policy application process (including during renewal) to avoid potential disclosure disputes should a claim arise.…

Continue Reading Recent Decision Highlights the Importance of Avoiding Disclosure Pitfalls