D & O TRENDS have come forward to allege that organizations ’ senior leaders engaged in sexual harassment or acted negligently in their response to other allegations of sexual harassment .
Such litigation emphasizes the importance of enforcing a zero-tolerance policy on sexual harassment , taking any reports of such behavior seriously , and requiring your senior leadership team to participate in routine sexual harassment awareness training .
The Black Lives Matter movement that was originally founded in 2013 and resurged in 2020 in the form of nationwide protests has also begun making a major impact on the D & O market .
Since its resurgence , the movement has caused organizational stakeholders to call out senior leaders on their alleged failures to promote equality and inclusion in the workplace as well as ask for greater racial diversity among senior leadership teams . This movement makes it increasingly critical for you to work closely with your senior leaders to foster an inclusive workplace and ensure diverse representation within your leadership team .
DERIVATIVE CLAIMS Although D & O claims in general have soared in the past decade , one form of claim in particular — known as a derivative claim — has become increasingly prevalent .
In such a claim , one or more of your shareholders will file a lawsuit on behalf of your organization against a specific individual ( or several individuals ) on your senior leadership team rather than the whole team or board . Derivative claims are often caused by “ event-driven ” lawsuits in which shareholders allege that particular members of your senior leadership team failed to act accordingly in the midst of large-scale disasters or trends such as the COVID-19 pandemic , cybersecurity breaches , climate change , and social movements .
In addition to derivative claim frequency , these lawsuits are also more prone to “ mega claim ” status , resulting in settlements of $ 100 million or more . Because derivative claims are often so costly and typically not indemnifiable , it is crucial to ensure that your D & O policy contains adequate Side A insurance . This form of coverage can insure individual senior leaders against losses that your organization is not legally or financially able to indemnify , thus protecting the personal assets of your senior leadership team .
THE HARD MARKET Lastly , several factors — namely , the occurrence of various large-scale disasters accompanied by a subsequent increase in both D & O claim frequency and cost — have contributed to the continued hard insurance market .
In this hard market , employers may experience a more difficult renewal process by way of increased D & O insurance premiums , lowered capacity , and more stringent policy requirements or restrictions .
Nevertheless , these market conditions should not discourage you from securing adequate insurance for your organization . After all , keeping your organization ( and its senior leaders ) properly protected from potential losses is well worth the cost . +
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