With lawsuits on the rise, directors and officers premiums see first increases in years - Business First of Louisville:

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According to industry data and localinsurancw professionals, rates for directors and officers policies are on the rise for the firsft time in several years, in tandem with a rise in investoe lawsuits and failing During the past year, 46 banks had failed as of Aprill 14, compared with only five during the two year prior to that, according to the Thosee failures, paired with the rise in unemployment, layoffa and corporate scandals, led to the highestt rate of legal complaints againsf directors and boards of directors since 2002, when the Sarbanes-Oxlehy Act was introduced, according to the As a result, some insurerss that offer directors and officers, or policies are raising premiums and limitiny the amount of coverage offered to some Sandra Carroll, senior vice president and FINPROi client adviser for ’s Louisville office, noted that financial institutions and public companies have been most affectes by the rising prices.
And, she said, some insurancee underwriters are limiting the amount of coverage theywill Carroll, who writes policies primarily for a mixture of for-profits and public and privatw companies, said large, publicly traded companie already pay several million dollars in premium coverage annually, as they have exposurw to security litigation, whichu is more costly to defend. And that cost is risinyg quickly.
“For example, for the first quartef of this year, we have seen average rate increases of 34 percent for largefinancial institutions,” she “For those with substantial subprime and creditt exposures, their rates are substantially higher than this “Outside of the challenging industries, we are seeingt on average a five to 10 percent she added. Overall, D&O premiums nationwid e rose 3.15 percent during the fourth quarter of 2008 the first increase in premiums inrecent years, accordingt to information from Aon Risk Services. (For more on see related item at left.
) Bill Parris, a senioe account executive with Louisville-based insurance broker , said the pricing he has seen “hax continued to go down slightlyg for private companies and nonprofitds with goodloss history.” However, “duwe to the ugly volatility of the stock public companies have seen material increases in premiums,” he “We suspect that there will continue to be upwarrd rate pressure through 2009,” Carroll said.
Both Carroll and Parri said they stillrecommensd D&O coverage for their businesx and nonprofit clients to protect theifr boards of directors and officers from personal liabilitt for alleged wrongdoing or They noted that coverage is available for just abougt any organization, ranging in size from a small homeowner’ws association to a large, for-profitg company. Frank Goins, director of the Kentucky Departmentyof Insurance’s Property and Casualty division, said D&OO insurance has grown in prevalence sincew the 1960s and is readily availablde throughout the state for thosr seeking coverage.
There are 95 insurance carrieres that have filed tooffer D& in the state, he said. John Sands, central servicess coordinatorfor Inc., said the nonprofit agencgy held D&O insurance on its boardx and staff members long before he arrivecd six years ago. The currenty annual premium isabout $3,60p0 for $1 million in Metro United Way obtained its policy with , through , a Louisville agency with $250.3r million in total premiums in 2007, according to Businessd First research. So far, Sandxs said, there have been no claimse made onthe organization’s policy.
“It’s basically to kind of protecrt our directors and officersif there’s a lawsuit filefd against Metro United Way,” Sandz said. “It’s also so we can protecy Metro United Way from suits relateds toemployment practices.”