Filed Under:Claims, Litigation

D&O Uh-Oh: Large Class-Action Settlements Down, But Smaller Cases Way Up

Rates are increasing—but so are government actions, defense costs, diversity of claims; some express concern about the market being “significantly under-reserved”

The Directors and Officers liability market is definitely unpredictable, probably mispriced and very likely an under-reserved mess, sources say—and new federal provisions have many experts expecting a surge of filings.

While the number of securities class-action settlements and settlement amounts were down in 2011 vs. 2010, according to data compiled by Cornerstone Research, that fact alone does not paint a clear picture of the litigation landscape that D&O policyholders and carriers are facing.

The FDIC has authorized lawsuits in connection with 54 failed institutions against 469 individuals for D&O liability, with damage claims of at least $7.9 billion as of March 20. That includes 27 filed D&O lawsuits naming 222 former directors and officers—which means the FDIC has even more cases on the way.

What we have seen from the FDIC is the “tip of the iceberg,” Howard warns.

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