Adviser LeadingAge New York Winter 2014 Winter 2014 | Page 16

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Trends in Healthcare D&O

Insurance Made Simple

W

e at Peckar & Abramson, a national Employers Practices Liability (EPL) and Directors
and Officers (D&O) defense firm, noticed an increase in D&O claims in long term
healthcare. Although regulatory evolution can result in sweeping nationwide changes to
many industries, perhaps none are as susceptible as the healthcare industry.

In 2013, national businesses rated “Regulatory and Legislative Changes” the #2 concern for
directors and officers, behind only “Economic Uncertainty.” This concern is only amplified
in the healthcare industry, where “Regulatory & Legislative Changes” ranked as the #1
concern.1 D&O insurance provides a security blanket to corporate managers who struggle
keeping abreast of our country’s ever-evolving regulatory scheme.
Statistics show that employers are generally unfamiliar with the importance of obtaining
D&O policies. In fact, according to a national survey, 65 percent of companies believe that
General Liability (GL) policies cover general D&O liability, while 60 percent believe that
GL policies cover EPL. 2 This explains why purchases of these policies have remained flat
despite the fact that corporate concern over D&O/EPL issues has doubled over the last
three years. Such concern stems from a host of factors that enhance corporate exposure.
There is a strong correlation between company size and the number of reported D&O
claims. For example, companies with less than 50 employees account for no more than
38 percent of reported D&O/EPL claims.3 That percentage spikes to 58 percent for
companies with 500-749 employees, and 76 percent for companies with more than 750
employees.4 Other factors that naturally increase corporate exposure include social
media, corporate hiring policies and data storage.
Based on a recent survey, 39 percent of companies have cloud-based storage, but lack any
plan to cover data breach or loss.5 68 percent of companies are marketing via social media
but fail to adequately protect themselves from liability for their own posting mistakes
or errors made by the media platform.6 Lastly, 42 percent of companies reported having
blanket polices that prohibit the hiring of job candidates with criminal records despite
changes in state law and the potential of such a practice to cause a discriminatory disparate
impact.7 Unpreparedness leads to increased exposure, which can ultimately lead to
litigation.
Between 2010 and 2013, 44 percent of private companies reported at least one D&O
loss event, with 38 percent of those events being employment-related.8 For nonprofits,
63 percent reported a D&O event during the past 10 years, with 85 percent of
those claims considered employment-related.9 There are a host of reasons company
directors and officers may find themselves on the receiving end of a lawsuit.
Such claims usually involve breaches of fiduciary duty, unethical and/or harmful
employment practices, employee fraud and theft, or cyber liability including data security
breaches.10 Our own research shows a large increase in all sorts of D&O/EPL claims.
In recent years, employers have faced a veritable onslaught of class action lawsuits intended
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(See Trends in Healthcare on page 16)
Source: Aon Risk Solutions Global Risk Management Survey 2013.
Source: Chubb 2013 Private Company Risk Survey.
Id.
Id.
Id.
Id.
Id.; EEOC Enforcement Guidance, “Consideration of Arrest and Conviction Records in Employment Decisions
Under [Title VII],” April 25, 2010.
Source: Chubb 2013 Private Company Risk Survey.
Source: Towers Watson D&O Liability survey, 2012.
Source: Ch ubb 2013 Private Company Risk Survey.

Adviser a publication of LeadingAge New York | Winter 2014