HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION
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Transcript of HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION
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2010 PLUS International Conference
HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION
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2010 PLUS International Conference
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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2010 PLUS International Conference
Median Ratio of Settlement to 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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2010 PLUS International Conference
Insurance Undermines Deterrence
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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2010 PLUS International Conference
INSURINGCORPORATE MISCONDUCT
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2010 PLUS International Conference
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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2010 PLUS International Conference
Our 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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2010 PLUS International Conference
How D&O Insurance Transforms Shareholder Litigation
Typical Shareholder Litigation
How it works:• Derivative Litigation
• Securities Litigation
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2010 PLUS International Conference
How D&O Insurance Transforms Shareholder Litigation
The Purpose of Shareholder Litigation
• Victim Compensation?
• Deterrence?
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2010 PLUS International Conference
How D&O Insurance Transforms Shareholder Litigation
Does D&O Insurance Impact Deterrence?
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2010 PLUS International Conference
How D&O Insurance Transforms Shareholder Litigation
Do D&O Insurers Deter Wrongful Conduct?
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2010 PLUS International Conference
How D&O Insurance Transforms 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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2010 PLUS International Conference
Questions&
Answers
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2010 PLUS International Conference
Many Thanks To…
• Tim Burns• Sean Fitzpatrick• Stuart Grant• Tom Baker• Kim Hogrefe• Anne Myers