News Corp. will receive $139 million worth of insuranceproceeds in a rare cash settlement that resolves a lawsuit byshareholders alleging the board failed to investigate the company'sphone hacking scandal.

The $139 million, which will be paid by the liability insurancefor the board members, is the largest cash settlement in such aderivative case, according to one of the plaintiff's attorneys.

In a derivative lawsuit, shareholders seek to step into theshoes of the company and hold board members and officersresponsible for harm caused to the corporation. The cases oftensettle for changes to corporate governance, and as is the case withNews Corp., any payment goes to the company, with shareholdersbenefiting indirectly.

The original lawsuit, brought by plaintiffs including the laborunion-owned Amalgamated Bank and the New Orleans Employees'Retirement System, accused the board of refusing to investigatealleged phone hacking because the directors were more interested inprotecting the interests of the Murdoch family.

Rupert Murdoch, who is chairman and CEO of News Corp, controlsthe company. His sons, Lachlan and James, sit on the News Corp.board.

Since the breadth of the phone hacking and bribery scandal inGreat Britain came to light in 2009, scores of News Corp. employeeshave been arrested and one of its most popular tabloids News of theWorld was shuttered.

The lawsuit also alleged that Murdoch used News Corp. funds forpolitical donations to advance his conservative political agenda,which the plaintiffs said showed the board lacked independence andcould run afoul of election laws.

As part of the deal, News Corp. said it would adopt enhancedcorporate governance procedures – including a policy to disclose toits shareholders political contributions made directly by thecompany.

The agreement indicated the settlement is not an admission ofwrong doing by News Corp.

“We are pleased to have resolved this matter,” News Corp said ina statement.

The settlement comes as News Corp prepares to separate into twopublicly traded companies later this year: One dedicated to itspublishing assets such as The Wall Street Journal and Times ofLondon, and the other, which will operate its entertainmentdivision, and includes the Fox network.

The adopted corporate governance procedures will apply to bothcompanies.

HOLDING BOARDS TO THE FLAME

Experts said insurers would certainly take the settlement intoconsideration when pricing future policies, though one suggestedthey might actually save money, having resolved a huge overhanginglegal issue.

Joseph Monteleone, a lawyer with Tressler in New York whosepractice is focused on directors and officers insurance, said hecould see some insurers actually feeling more comfortable insuringthe company's directors now, because this agreement resolved twomajor areas of potential liability.

News Corp declined to comment on its directors and officersinsurance rates.

The plaintiffs first sued in March 2011 over News Corp's $670million acquisition of Shine Group Ltd, a company owned by ChairmanRupert Murdoch's daughter.

Cash settlements of derivative lawsuits became more common withlast decade's lawsuits that related to the backdating of optionsawarded to executives, according to Kevin LaCroix of OakBridgeInsurance Services, who runs the D&O Diary blog.

Some big settlements of recent years included a $100 milliondonation to charity in 2005 by Larry Ellison of Oracle Corp, whowas alleged to have traded using nonpublic information.

Independent research firm GovernanceMetrics International, whichgrades companies' corporate governance, has given News Corp an 'F'grade in each of the past six years.

Still, investors have driven up News Corp shares 65 percent overthe past 12 months.

News Corp closed up 1.4 percent at $31.64 on Monday.