This article originally appeared in Anderson Kill's Executive Insurance Advisor (Summer 2006).
The number of securities class actions and the size of the settlements associated with those class actions continue to increase. Even excepting the unusually large settlements reached in the Enron and WorldCom cases, the total value of securities class action settlements in 2005 exceeded $3.5 billion. (See Laura E. Simmons and Ellen M. Ryan, Post-Reform Act Securities Settlements – 2005 Review and Analysis. Cornerstone Research, 2006.) In the face of the increased exposure to securities litigation over the last few years, both in defense costs and in settlement amounts, companies have purchased securities claim coverage under their directors and officers’ liability insurance policies (D&O Policies) to provide coverage for the company against such claims.