Willis North America, a unit of Willis Group Holdings, has published its Directors and Officers Liability (D&O) Insurance Dictionary, offering firms an overview of terms that are likely to be used in describing their D&O insurance and liability exposures.
This longstanding Willis publication, updated in response to recent significant changes to the litigation environment facing executives and their firms, as well as related developments in D&O insurance coverage, can be used by risk management practitioners attending D&O insurance renewal meetings or making other key decisions about financial and executive matters.
The dictionary, available for download here, details over one-hundred terms and provides important context for why the term may be relevant. The updated publication includes new terms that have entered the vernacular, including:
- Bump-up claims: In the context of an acquisition, these are claims by shareholders of the company-to-be-acquired alleging that the company has been undervalued. These actions seek to have the purchase price raised or “bumped-up.”
- Clawback: Generally, money or benefits that were distributed and later taken back under special circumstances. Both Sarbanes-Oxley and the Dodd-Frank Act create circumstances where compensation may be “clawed back” from executives following financial statements at their companies.
- Entity versus insured exclusion: A recent (favorable) variation on the Insured vs. Insured exclusionfound in a D&O policy. It precludes coverage for claims brought by the company or insured organization against other insureds. So the company itself can’t sue its directors or officers and gain coverage for their defense or settlement under the D&O policy.
- Double derivative claim: A rare derivation on derivative suits,this is a lawsuit brought by a shareholder of a parent corporation on behalf of a wholly owned subsidiary for alleged wrongs to a subsidiary. They generally occur where shareholders have lost standing to maintain a standard derivative action due to the acquisition of the corporation in a stock-for-stock merger; the shareholder, in his new capacity as a shareholder of the acquirer, then reasserts the claim double derivatively.
- Updated information as it relates to Sections 11, 12, & 15 of the 1934 Act dealing with securities offerings, including IPOs.
Commenting on the dictionary, Ann Longmore, executive vice president, WNA FINEX, said, “In discussions regarding D&O insurance, we invariably mingle the language of law, finance and insurance; all otherwise separate and distinct disciplines with their own unique concepts and terms of usage. This makes every conversation potentially full of pitfalls for unwary individuals knowledgeable in their own areas of expertise, but not so much when addressing insurance matters.”
“In the rapidly evolving environment of executive risk, keeping up with the latest terms and technical components of a D&O program can be a challenge. Our goal was not to just describe what something plainly is, such as “Application,” but also to provide context as to why the term may be relevant,” said Longmore.
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