NU Online News Service, May 4, 4:23 p.m.EDT

A first-quarter jump of 38 percent in securities cases isworrisome to insurers of directors and officers named as defendantsin such cases, but the pace of filings could slow, a research firmsaid.

New York-based Advisen, which counted 169 securities filings ina database that it refers to as the Master Significant Case andAction Database (MSCAd), said 30 percent of these first-quartercases relate to the Madoff Ponzi scheme.

Advisen said if that filing rate were to hold up for the nextthree quarters the 676 cases that would result would be far greaterthan a roughly 500-case average the firm has tabulated over thepast three years.

Advisen said the high percentage of Madoff cases might mean 2009will simply end up with a "heavy front-end load of lawsuits."

Unlike other trackers of securities litigation data, Advisendoes not just count up securities class actions in its quarterlyreports. Instead, Advisen's totals include:

o Securities class actions, representing 67 of the 169first-quarter 2009 filings.

o Securities fraud actions, which largely are the result ofregulatory actions, such as lawsuits or proceedings by the U.S.Securities and Exchange Commission, which totaled 34 in thequarter.

o Securities cases alleging breaches of fiduciary duty,accounting for 26 first-quarter filings.

o Derivative actions, which are brought by shareholders onbehalf of the company, naming directors and officers as defendants,accounting for 14 of the 169 first-quarter filings.

o Collective actions, similar to U.S. class actions but broughtin non-U.S. courts against U.S. and non-U.S. companies, totaled20.

The inclusion of suit categories other than class actionsexplains why Advisen's 2008 total of 490 appears to be out of linewith more typical figures reported by other research organizations,which publish numbers in the 210-225 range. Advisen reported 218securities class actions as just one part of its 490-case total forlast year.

Reviewing the distribution of cases among the categories,Advisen said that class actions have been shrinking as a percentageof the total, now representing less than 40 percent of securitiestracked in MSCAd–down from 44 percent for all of 2008.

The report also tracks dollars paid in settlements and judgmentsin the quarter, finding that the overall settlement/award value was$27.9 million.

While Advisen said this was in line with prior years, awards andsettlements for securities class actions only averaged $12.1million in the quarter in which securities fraud case awards soaredto a $43.4 million average–the highest of any category and muchhigher than amounts recorded in recent years, which typicallyaverage $5 million.

Advisen's report notes that although securities cases havetraditionally triggered coverage under D&O policies, recentsecurities cases may also trigger coverage under errors &omissions and fiduciary liability policies.

Noting that cases dealing with subprime/credit issuesrepresented 26 percent of the first-quarter cases, Advisen foundthat suits related to subprime/credit crisis issues and Ponzischemes deal with professional judgment and fiduciary duties, whichmay be excluded under D&O policies but covered under E&Opolicies.

Fiduciary liability suits alleging violations of the EmployeeRetirement Income Security Act of 1974–the claim in many Ponzischeme cases–may trigger fiduciary liability policy coverage,Advisen said.

Tallying up all the Madoff-related cases so far, Advisen saidthat since the Madoff fraud was disclosed on Dec. 11, 2008,securities filings totaled 82 suits, with 50 in first-quarter2009.