WHEN CLASS ACTIONS SETTLE, WHO PAYS?

In its May 2013 issue, the PLUS Journal will publish SLA’s second of two articles exploring the resolution of securities class action litigation.  The article, How Protective Is D&O Insurance in Securities Class Actions?-An Update, explores the extent to which companies, directors, officers, and D&O insurers contribute to class action settlements.  Utilizing its extensive database, the SLA team analyzed class actions filed from 2006-2010, and settled by the end of 2012.  We believe our analysis may benefit parties that litigate these cases, negotiate coverage with D&O carriers, and others.

Our analysis reveals that, on the whole, D&O Liability Policies are highly protective of both companies and their directors and officers.  In fact, D&O insurers contributed funds in 85% of settlements for which we found data on such payments. Officers paid out of pocket in 2% of cases despite receiving harsh penalties in parallel cases brought by the SEC 92% of the time.

Does settlement size or the severity of a misstatement correlate with the protection afforded by a D&O Policy? How does the nature of an alleged misstatement correlate with the targeting of particular officers or directors, for example, the CFO or audit committee member?  For the answers to these questions and further analysis we encourage you to read the article upon publication in the PLUS Journal.  Also check our site regularly as we highlight subjects trending in the world of securities litigation.

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