HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION

2010 PLUS International Conference2010 PLUS International Conference2010 PLUS International Conference2010 PLUS International Conference

HOW D&O INSURANCE TRANSFORMS HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATIONSHAREHOLDER LITIGATION

2010 PLUS International Conference2010 PLUS International Conference

The Round-Up…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


Median Ratio of Settlement Median Ratio of Settlement to Investor Lossesto 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!


Insurance Undermines Insurance Undermines DeterrenceDeterrence

Premium differences are too small to change behavior.

Underwriters don’t (can’t?) prevent bad acts.

Thanks, but gotta go … NetJet is waiting


INSURINGCORPORATE MISCONDUCT


Now the Good News!Now the Good News!

• D&O insurance is priced to risk• The merits matter• We have a deterrence fix

Uh, oh!


Our Reform ProposalOur 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


How D&O Insurance How D&O Insurance Transforms Shareholder LitigationTransforms Shareholder Litigation

Typical Shareholder Litigation

How it works:

• Derivative Litigation

• Securities Litigation



The Purpose of Shareholder Litigation

• Victim Compensation?

• Deterrence?



Does D&O Insurance Impact Deterrence?



Do D&O Insurers Deter Wrongful Conduct?



Reform

• SEC Mandated Disclosure of D&O Insurance Details

• Mitigating Moral Hazard by Reducing Corporate Coverage

• Making Merits Matter Through Settlement Disclosures


QuestionsQuestions&&

AnswersAnswers


Many Thanks To…Many Thanks To…

• Tim Burns• Sean Fitzpatrick• Stuart Grant• Tom Baker• Kim Hogrefe• Anne Myers

HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION

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