NU Online News Service, June 19, 2:05 p.m. EDT
Chubb says there is a "general lack of concern" among surveyed public companies that their directors and officers will face a lawsuit.
According to the survey of 145 public companies, 80 percent think it is unlikely their executives will be sued.
"No one thinks they are going to get sued, but we are paying a lot of claims," says Evan Rosenberg, senior vice president and global specialty lines manager for Chubb.
He calls the results of the survey "disconcerting," since 23 percent of the surveyed companies admitted their directors and officers have been sued.
The question of how much coverage a company should buy can be answered by asking the company how much they can afford, saysRosenberg.
"Rates have gone down the last 7-8 years but the number of cases is not down; neither is how much attorneys charge for a defense," he says. "Companies need to perform a scientific measuring of D&O risk."
Those that manage exposure "have a greater chance of receiving more favorable terms and pricing for the directors' and officers' liability insurance," Rosenberg adds.
He says the newest phenomenon relates to mergers and acquisition cases. Both companies involved in the transaction can be sued. In fact, there is a 90 percent chance that the acquired company will be sued by its shareholders, Chubb says.
Despite this, 26 percent of companies do not have a documented merger and acquisition protocol, which may help to improve their defense in court and/or result in a lower settlement amount, Rosenberg says.
Surprisingly, 78 percent of survey respondents are not worried about an investigation due to a violation of the Foreign Corrupt Practices Act, which is now more aggressively enforced by the U.S. Securities and Exchange Commission and the Department of Justice. These investigations and related fines could cost a company millions of dollars.
D&O policies can cover defense costs and fines for non-willful violations of the act, Rosenberg says.
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