2008 D&O2008 D&O SymposiumSymposium

New York City ~ February 6 & 7, 2008

HOT TOPICS IN D&O CLAIMS:HOT TOPICS IN D&O CLAIMS:Does the Does the “Soft Market”“Soft Market” Mean Mean “Hard Coverage Positions”“Hard Coverage Positions”??

Hot Topics in D&O Claims: Hot Topics in D&O Claims: Does a “Soft Market” Does a “Soft Market” Mean “Hard Coverage Mean “Hard Coverage

Positions”?Positions”?• MODERATOR: Kristin Kraeger, Esq., Vice President/Counsel

William Gallagher Associates• Steven Gladstone, Esq., Senior Vice President, Claims

XL Professional Insurance• Matthew L. Jacobs, Partner

Jenner & Block• Lewis Loss, Esq., Partner

Thompson, Loss & Judge

• Susanne Murray, Esq., Executive Vice President

Hilb, Rogal & Hobbs

• Michael W. Smith, President, Domestic Claims

AIG Executive Liability

THE WHISTLE’S BLOWNTHE WHISTLE’S BLOWN

• NotUsAgain Corporation (“NotUs”), a publicly-traded company receives a call on its fraud hotline. Whistleblower reports that the CFO used favorable dates for granting stock options to certain employees, including executives. NotUs launches an internal investigation and retains outside counsel to conduct an investigation into Whistleblower’s claims.

NOT YOUR AVERAGE NOT YOUR AVERAGE RENEWAL RENEWAL

FACTSFACTS NotUs is renewing its D&O NotUs is renewing its D&O

program; 5 months since program; 5 months since Whistleblower callWhistleblower call

Broker gets application Broker gets application waivedwaived

At underwriter meeting, At underwriter meeting, Whistleblower facts Whistleblower facts discloseddisclosed

Underwriters are extremely Underwriters are extremely concerned; they want a concerned; they want a Specific Event Exclusion Specific Event Exclusion

THE ISSUES Claim or Circumstance?

Should the expiring policy be noticed?

Effect of Application Waiver

Effect of Specific Event Exclusion

TO PROFIT OR NOT TO TO PROFIT OR NOT TO PROFIT? PROFIT?

THAT IS THE QUESTION THAT IS THE QUESTION FACTSFACTS

CFO and GC resignCFO and GC resign

NotUs restates NotUs restates financialsfinancials

In 10K company states In 10K company states that CEO, CFO & GC that CEO, CFO & GC agree to payback money agree to payback money on optionson options

THE ISSUES Profit Exclusion

Disgorgement

Definition of Loss

CNL Hotels vs. Houston Casualty

Sever? Rescind?

ClearOne vs. National Union

SHAREHOLDERS & SEC SHAREHOLDERS & SEC COME KNOCKING COME KNOCKING

FACTSFACTS NotUs receives Formal Notice NotUs receives Formal Notice

of Investigation & Subpoenas of Investigation & Subpoenas from SECfrom SEC

GC has separate GC has separate Indemnification AgreementIndemnification Agreement

NotUs receives Shareholder NotUs receives Shareholder Demand LetterDemand Letter

NotUs served with Derivative NotUs served with Derivative and and Class-Action ComplaintsClass-Action Complaints

THE ISSUES “Duty to Co-operate”

“Waiving Privilege”

Can the broker destroy “privilege”?

Presumptive Indemnification

Derivatives –Indemnifiable?

Triggering Sides A,B,C

THE SETTLEMENT – THE SETTLEMENT – EVERYONE ON BOARD EVERYONE ON BOARD

FACTSFACTS NotUs settles with SECNotUs settles with SEC

SEC pursues litigation SEC pursues litigation against CFO and GCagainst CFO and GC

Derivative and Class-Derivative and Class-Action Settlements Action Settlements

Two Excess Insurers say Two Excess Insurers say settlement must be paid settlement must be paid solely by underlying solely by underlying insurer in order for their insurer in order for their policies to be triggered.policies to be triggered.

THE ISSUES Triggering Excess Limits

Shaving of Limits Endorsements

Allmerica vs. Lloyds

Comerica vs. Zurich

Payments under Side A,B or C? Does it really matter?