Recent Securities Suit Filings Reinforce "Backlog" Theory

Recent Securities Suit Filings Reinforce "Backlog" Theory - 8/10/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

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Recent Securities Suit Filings Reinforce "Backlog" Theory
Kevin LaCroix

The D & O Diary. August 10, 2009
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EXCERPT: […] For D&O underwriters, the possibility of lawsuits over long past events may pose a particularly difficult underwriting challenge, as it makes it particularly tricky to determine when a company that has experienced problems is "out of the woods." Compounding the difficulty is the fact that while the D&O insurance market for financial sector companies has "hardened" as a result of economic and related litigation developments, the market for companies outside the financial sector remains competitive, and underwriters may face pressures to compete even for a company with past problems, not withstanding these underwriting uncertainties. It would be all to easy, based on a review of the various recently released mid-year securities litigation reports, to conclude that securities class action lawsuit filing activity is both concentrated in the financial sector and declining. As I have suggested before, it is premature to conclude that overall securities litigation activity is in some sort of secular decline. By the same token, it would be incautious to conclude that the securities litigation threat is largely confined to the financial sector. The recent lawsuit filings in fact confirm that companies outside the financial sector continue to face considerable securities litigation exposure. D&O Insurance in Troubled Times: An August 7, 2009 post on the Harvard Law School Forum on Corporate Governance and Financial Regulation blog incorporates a memorandum from the Wachtell, Lipton law firm summarizing the critical D&O insurance issues in the current era of "historically significant dislocation." The memo provides a good but brief summary of critical issues, emphasizing the importance of Side A excess insurance, as well as considerations relating to the financial condition of insurers.

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