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 local insurance rates for directors and officers policies are on the rise for the firsty time inseveral years, in tandemm with a rise in investor lawsuits and failinf banks. During the past year, 46 bankds had failed as of Aprilk 14, compared with only five during the two yeara priorto that, accordiny to the Those failures, pairedc with the rise in unemployment, layoffs and corporatwe scandals, led to the highest rate of legal complaints againsr directors and boards of directords since 2002, when the Sarbanes-Oxley Act was according to the As a result, some insurers that offer directors and officers, or D&O, policies are raisingv premiums and limiting the amouny of coverage offered to some clients.
Sandra Carroll, senioe vice president and FINPRO client adviserfor ’s Louisville noted that financial institutions and public companiesz have been most affected by the risinv prices. And, she some insurance underwriters are limiting the amount of coverage theywill provide. who writes policies primarilty for a mixtureof nonprofits, for-profits and public and privat companies, said large, publicly tradedx companies already pay several milliomn dollars in premium coverage annually, as they have exposurse to security litigation, which is more costly to And that cost is rising “For example, for the firsf quarter of this year, we have seen average rate increasews of 34 percent for large financial she said.
“For those with substantial subprime and credit their rates are substantially higher thanthis average. “Outside of the challengingh industries, we are seeing on average a five to 10perceng increase,” she added. Overall, D&O premiumsz nationwide rose 3.15 percent durinvg the fourth quarter of 2008 the first increase in premiums in recent according to information from AonRisk Services. (For more on see related item at Bill Parris, a senior account executive with Louisville-based insuranced broker , said the pricinyg he has seen “has continued to go down slightly for privatre companies and nonprofits with good loss history.
” However, “due to the ugly volatility of the stocok market, public companies have seen materialp increases in premiums,” he “We suspect that there will continue to be upwar rate pressure through 2009,” Carroll said. Both Carrol l and Parris said they stillrecommend D&O coverage for their business and nonprofit clients to protect their boards of directors and officerx from personal liability for alleged wrongdoinv or mistakes.
They noted that coveragre is available for just aboutany organization, rangingf in size from a smalkl homeowner’s association to a large, for-profit Frank Goins, director of the Kentucky Departmenft of Insurance’s Property and Casualty division, said D&i insurance has grown in prevalence sinced the 1960s and is readily available throughout the statew for those seeking coverage. There are 95 insurance carriers that have filec tooffer D&O in the he said. John Sands, central services coordinatod for Inc., said the nonprofit agency held D&O insurance on its boardx and staff members long beforde he arrived sixyears ago.
The curren annual premium is about $3,600 for $1 million in Metro United Way obtained its policywith , throughu , a Louisville agency with $250.3t million in total premiums in 2007, according to Busineses First research. So far, Sands said, therse have been no claims made onthe organization’z policy. “It’s basically to kind of protecg our directors and officersif there’s a lawsuit filed against Metro United Way,” Sandss said. “It’s also so we can protect Metroi United Way from suits related toemployment practices.
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