Millions of Dollars on the Line as Insurers Deny D&O Claims
The cost of insuring directors and officers has soared in the last couple of years. And while prices may have leveled off in recent months, premiums continue to be high for board members and executives.
At the same time, sources say policies are covering less than they used to, and company insiders may be alarmed to receive a denial of coverage note from insurers, for instance, when the government approaches for an interview or with a document request. Directors should be aware of these trends so they can avoid an unpleasant surprise when they need coverage most.
Insurers are taking a “really strict” view of claims and what is covered by a D&O policy, according to Jared Zola, a partner in Blank Rome’s policyholder-only insurance practice.
There tend to be very clear examples of what constitutes a covered claim under a D&O policy, Zola said, such as service of a securities litigation complaint. Questions are now arising when a policyholder receives or is served with a subpoena, such as a grand jury subpoena, a request for documents or a search warrant, he noted. “I’m finding that insurers, with a much higher frequency, are taking the position that the receipt of those subpoenas is not a claim because the definition of a claim does not expressly list a subpoena or search warrant as one of the categories that constitutes a claim,” he said.
“I personally have seen a dozen of these cases in the last 21 months, and before this, we hadn’t seen it in years,” Zola said, adding that the costs of such a denial can reach into the millions of dollars for companies.
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“Millions of Dollars on the Line as Insurers Deny D&O Claims,” by Jennifer Williams-Alvarez, was published in Agenda on December 17, 2021.