D & O TRENDS
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 .
such as conducting office closures , having employees work remotely , halting business travel , conducting furloughs or layoffs , making financial adjustments , and altering various workplace procedures to comply with new health and safety standards .
Such changes can carry a wide range of D & O exposures as there is the potential for organizational stakeholders to allege that your senior leadership team committed wrongful acts in the process of making these workplace changes . On the other hand , a lack of such changes within your organization can also cause D & O liability concerns as stakeholders could allege that your senior leaders were negligent and failed to respond appropriately to COVID-19 . These types of allegations have become increasingly prevalent in the form of class-action lawsuits .
It ’ s crucial to work closely with senior leadership to identify any organizational risks that may arise from the pandemic and determine a course of action that prioritizes the needs of your stakeholders . In addition , any workplace adjustments related to COVID-19 should be diligently evaluated prior to implementation to ensure regulatory compliance and minimize legal or financial fallout . Furthermore , organizational procedures should be closely monitored and updated as needed to reflect frequently changing federal , state , and local COVID-19 requirements .
INSOLVENCY ISSUES The global recession caused by the COVID-19 pandemic has led to major financial disruption for many organizations . These economic struggles have resulted in a wide range of employers going bankrupt or experiencing insolvency issues .
Insolvency is a key contributor to D & O claims for both publicly and privately held organizations . Insolvency-related claims can result from stakeholders alleging that senior leaders failed to properly plan for financial disruption or did not respond correctly to prolonged periods of reduced revenue , ultimately putting the senior leadership team at fault for the financial hardship .
As this economic downturn continues , it ’ s important for your senior leaders to follow safe and secure financial practices ( e . g ., timely payments , educated investments , accurate documentation , and reasonable reimbursement procedures ) as well as be transparent with stakeholders about your organization ’ s economic state to avoid misrepresentation concerns .
CYBERSECURITY As workplace technology continues to advance , so do the tactics of cybercriminals . The growing number of employees working remotely due to the COVID-19 pandemic has resulted in additional cyber exposures for organizations .
When cyber-attacks occur , costly consequences can often lead to D & O claims . Specifically , stakeholders affected by a cyber-attack may allege that your senior leadership team failed to properly address cybersecurity threats or establish a plan for responding to an attack .
To reduce the likelihood of such claims occurring , it is crucial for your senior leadership team to be actively involved in monitoring your organization ’ s unique cyber risks , implementing proper cybersecurity practices to help prevent potential attacks ( especially in the realm of remote work arrangements ), ensuring compliance with all applicable data security standards , and establishing an effective cyber incident response plan to minimize any damages in the event of an attack .
ESG CONCERNS Various environmental , social , and governance ( ESG ) topics have also impacted the D & O market in recent years . In the realm of environmental concerns , a cultural shift regarding the pressing issue of climate change — evidenced by a continued surge in natural disasters worldwide ( e . g ., earthquakes , wildfires , and hurricanes )— has resulted in an increased demand on organizations across industry lines to “ go green ,” thus holding senior leaders accountable for ensuring eco-friendly operations .
This shift also led to a rise in environmental legislation and enforcement from governing bodies , making it even more vital for your senior leadership team to take steps to reduce your organization ’ s carbon footprint .
Several social movements have recently led to an increase in lawsuits and claims against senior leaders as well , including the # MeToo movement and the Black Lives Matter movement .
The # MeToo movement has contributed to a sharp rise in D & O litigation as employees and other stakeholders
26