protecting your directors and officers from liability

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PROTECTING YOUR DIRECTORS AND OFFICERS FROM LIABILITY

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Joseph O’NeilPartner Peabody and Arnold

Damian BrewManaging Director and National Claims Advocacy Practice Leader Marsh Inc

Peabody & Arnold LLP Marsh USA 4

ZURICH D&O WEBINARDecember 7, 2011

by E. Joseph O’Neil, Peabody & Arnold LLPand R. Damian Brew, Marsh USA


Presenters

E. Joseph O’Neil

• Partner, Peabody & Arnold LLP

R. Damian Brew

• Managing Director, Marsh USA - Financial and Professional Liability Practice (FINPRO)


Employment Practices Claims

Have you been involved in a discrimination, harassment or wrongful termination clam?



Over the last 20 years employment practices claims have become pervasive • Gender, race and disability discrimination• Sexual harassment • Wrongful termination and whistleblower

suits



At risk parties include: • The company itself• Directors and officers• Managerial employees and co-workers

Potential claimants include:• Disgruntled employees, former employees or

applicants of employment• Customers or clients• Regulatory agencies (EEOC and state equivalent)


Ways To Mitigate Exposure

EPL Insurance • Either stand alone or as part of D&O

Have a reliable and responsive “go to” law firm for EPL issues as they come up.Pay attention to warning signs:

• Abnormally high turnover in a particular area• Multiple complaints about an individual

Consider paying severance for releases (even if it hurts).Maintain accurate employee evaluations.


Bankruptcy

Have you worked for a company when it went bankrupt?


Exposure of D&Os in Bankruptcy

Breach of fiduciary duty owed to creditors when company is insolvent.

Mismanagement claim by trustee, unsecured creditors or litigation trust.

Fraud claims by lenders or vendors.


Mitigating Bankruptcy Exposure for D&Os

Have insurance that applies when company cannot indemnify.

Avoid making big claims as a creditor.

Make sure distress company stays current on tax obligations.

If you stay with a company during and after bankruptcy, make sure the Plan releases you for pre-petition conduct.


Mergers and Acquisitions

Have you worked for a company while it merged into, or acquired, another company?


Merger and Acquisition Claims Activity

Allege that company’s board of directors sold or plan to sell the company at terms unfavorable to shareholders

Transactions Affected:• Management Buyouts• Going Private Transactions• Mergers with Other Companies


Mergers and Acquisition Claims

Allegations • Breach of fiduciary duty to shareholders

– Loyalty, care or good faith• Auction Process was flawed or Conflict of Interest• Federal Suits May Raise Proxy Issues

Characteristics• Filed in State Court-Multiple Jurisdictions• Settle Quickly with Defense Costs Low (Historical)• Plaintiffs seek injunctive relief-measure to improve

returns to shareholders


D&O Risk Avoidance

Best Practices • Advisors: Counsel, Bankers, Accountants• Diligence

D&O Insurance: Key Terms• Securities Claim• Adequate Limits• Dedicated D&O only coverage• Claims Process


Securities Suits

Traditional Source of Largest D&O Exposure

Arises under Federal Securities Laws• ’33 Act: Prospectus Liability• ’34 Act (10(b)5 Liability) Aftermarket

Disclosures


Securities Claim Trends

NERA’s Recent Trends in Securities Class Action Litigation: 2011 Mid-Year Review• Click here to view the report

http://www.nera.com/nera-files/PUB_Mid-Year_Trends_0711%283%29.pdf


Issues For D&Os

Selection of Defense Counsel

Importance of D&O Insurance

Role of Counsel, Insurers and Broker

Pre-Claim Steps to Mitigate Risk • Selection of Insurer• Policy Form• Insurers’ Claims Handling Philosophies


Key D&O Policy Terms

Fraud/Personal Profit Exclusions

Definition of Claim

Representations and Severability

Notice-claims made

Consent to Settlement, Counsel

Covered Defense Costs


For more information:

E. Joseph O’Neil R. Damian Brew617-951-4705 [email protected] [email protected]

mailto:[email protected]

mailto:[email protected]


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THANK YOUTHANK YOU

protecting your directors and officers from liability

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