how d&o insurance transforms shareholder litigation
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HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION. The Round-Up…. MODERATOR: Timothy W. Burns, Esq., Partner, Perkins Coie LLP PANELISTS: Tom Baker Ph.D., William Maul Measey Professor of Law and Health Sciences, University of Pennsylvania and the Wharton School - PowerPoint PPT PresentationTRANSCRIPT
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HOW D&O INSURANCE TRANSFORMS HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATIONSHAREHOLDER LITIGATION
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The Round-Up…The Round-Up…
MODERATOR:
• Timothy W. Burns, Esq., Partner, Perkins Coie LLP
PANELISTS:
• Tom Baker Ph.D., William Maul Measey Professor of Law and Health Sciences, University of Pennsylvania and the Wharton School
• Sean M. Fitzpatrick, Esq., Lecturer, University of Connecticut School of Law
• Stuart M. Grant, Esq., Managing Partner, Grant & Eisenhofer P.A.
• Kim D. Hogrefe, Esq., Senior Vice President, Senior Specialty Claims Officer, Chubb & Son
• Anne R. Myers, Esq., Partner, Kaufman Dolowich Voluck &Gonzo LLP
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Median Ratio of Settlement Median Ratio of Settlement to Investor Lossesto Investor Losses
0%
1%
2%
3%
4%
5%
6%
7%
8%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Settlement Year
January 1, 1996–June 30, 2010
It’s really just pocket
shifting!
And such small
Portions!
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Insurance Undermines Insurance Undermines DeterrenceDeterrence
Premium differences are too small to change behavior.
Underwriters don’t (can’t?) prevent bad acts.
Thanks, but gotta go … NetJet is waiting
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INSURINGCORPORATE MISCONDUCT
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Now the Good News!Now the Good News!
• D&O insurance is priced to risk• The merits matter• We have a deterrence fix
Uh, oh!
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Our Reform ProposalOur Reform Proposal
• DISCLOSURE: D&O program details and who pays what in settlement
MAGNIFY the pricing signal
IDENTIFY the insurance effect on settlement
• COINSURANCE: Sides B &C Keep the corporation’s skin in the game Control costs and reduce collusion
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How D&O Insurance How D&O Insurance Transforms Shareholder LitigationTransforms Shareholder Litigation
Typical Shareholder Litigation
How it works:
• Derivative Litigation
• Securities Litigation
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How D&O Insurance How D&O Insurance Transforms Shareholder LitigationTransforms Shareholder Litigation
The Purpose of Shareholder Litigation
• Victim Compensation?
• Deterrence?
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How D&O Insurance How D&O Insurance Transforms Shareholder LitigationTransforms Shareholder Litigation
Does D&O Insurance Impact Deterrence?
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How D&O Insurance How D&O Insurance Transforms Shareholder LitigationTransforms Shareholder Litigation
Do D&O Insurers Deter Wrongful Conduct?
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How D&O Insurance How D&O Insurance Transforms Shareholder LitigationTransforms Shareholder Litigation
Reform
• SEC Mandated Disclosure of D&O Insurance Details
• Mitigating Moral Hazard by Reducing Corporate Coverage
• Making Merits Matter Through Settlement Disclosures
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QuestionsQuestions&&
AnswersAnswers
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Many Thanks To…Many Thanks To…
• Tim Burns• Sean Fitzpatrick• Stuart Grant• Tom Baker• Kim Hogrefe• Anne Myers