Guiding Class Actions, Derivative Suits and S.E.C. Investigations to Acceptable Resolution Without Giving D&O Insurers an Excuse to Deny Coverage

Executive Insurance Advisor

PUBLISHED ON: July 1, 2005

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The only thing worse for a risk manager or corporate counsel than hearing that the directors and officers, and the company, face class and derivative actions by shareholders (“shareholder suits”) and an SEC investigation, is the realization that the insurance companies have fully reserved their rights and are looking for ways to deny coverage. Those insurers are likely to oppose settling the shareholder suits and will attempt to develop arguments to bolster a coverage denial. Those arguments often focus on the policyholder’s duty to cooperate with the insurers’ investigation of the coverage claim, or by asserting that the policyholder has deprived them of their contractual right to associate in the defense and/or settlement of the shareholder suits, and that the policyholder has settled the cases without their consent.