As is the case with any company risk factor, the potential exists for D&O litigation to arise based on an alleged misstatement or omission relating to the disclosure. In the current environment of heightened D&O claim levels, caused in part by the fairly recent development known as “event driven” litigation, we would not be surprised to see D&O litigation relating to the CO-VID-19 outbreak.
Given these concerns, here are several considerations for reviewing D&0 coverage in the current environment:
State of the Market & Outlook
- Even prior to the novel coronavirus pandemic, D&O for private and public renewals were under severe pressure. Resulting primarily from the litigious environment and tail effects of the Great Recession, the pandemic is only building to the market’s stress.
- Higher rates, higher deductibles or retention, and lower limits are expected to continue.
- In the event of bankruptcy, mismanagement claims can trigger D&O. Organizations should leverage D&O renewals while they are financially sound.
- Cyber challenges will continue from the new wave of telework and remote-relationships, and with it remains D&O liability. Protocols and documentation are best practices to uphold.
Things to Ask
- Are you with the right carrier?
- Do you have the right limits and deductible(s)?
- Do you have the right coverages?
- Are you aware you have to report incidents to the carrier immediately at the time of incident?
- Do you have a good price for the program and/or renewal?
- What are the run-off provisions for if you (1) do not renew the policy, (2) sell the company or (3) the company goes bankrupt?
- Do you have the right price for the tail coverage?