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HOT TOPICS IN D&O CLAIMS: Does the “Soft Market” Mean “Hard Coverage Positions” ?. Hot Topics in D&O Claims: Does a “Soft Market” Mean “Hard Coverage Positions”?. MODERATOR : Kristin Kraeger , Esq., Vice President/Counsel William Gallagher Associates - PowerPoint PPT Presentation
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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?