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Protecting Your Directors and Officers from Liability

Sponsored by. Protecting Your Directors and Officers from Liability. Real time feedback and interactivity Q/A pod, chat pod Handouts Take-away Pod Questions to Hillary. Joseph O’Neil Partner Peabody and Arnold.

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Protecting Your Directors and Officers from Liability

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  1. Sponsored by Protecting Your Directors and Officers from Liability

  2. Real time feedback and interactivity Q/A pod, chat pod • Handouts Take-away Pod • Questions to Hillary

  3. Joseph O’NeilPartner Peabody and Arnold Damian BrewManaging Director and National Claims Advocacy Practice Leader Marsh Inc

  4. ZURICH D&O WEBINAR • December 7, 2011 • by E. Joseph O’Neil, Peabody & Arnold LLP • and R. Damian Brew, Marsh USA

  5. Presenters • E. Joseph O’Neil • Partner, Peabody & Arnold LLP • R. Damian Brew • Managing Director, Marsh USA - Financial and Professional Liability Practice (FINPRO)

  6. Employment Practices Claims Have you been involved in a discrimination, harassment or wrongful termination clam?

  7. Employment Practices Claims • Over the last 20 years employment practices claims have become pervasive • Gender, race and disability discrimination • Sexual harassment • Wrongful termination and whistleblower suits

  8. Employment Practices Claims • At risk parties include: • The company itself • Directors and officers • Managerial employees and co-workers • Potential claimants include: • Disgruntled employees, former employees or applicants of employment • Customers or clients • Regulatory agencies (EEOC and state equivalent)

  9. Ways To Mitigate Exposure • EPL Insurance • Either stand alone or as part of D&O • Have a reliable and responsive “go to” law firm for EPL issues as they come up. • Pay attention to warning signs: • Abnormally high turnover in a particular area • Multiple complaints about an individual • Consider paying severance for releases (even if it hurts). • Maintain accurate employee evaluations.

  10. Bankruptcy Have you worked for a company when it went bankrupt?

  11. Exposure of D&Os in Bankruptcy Breach of fiduciary duty owed to creditors when company is insolvent. Mismanagement claim by trustee, unsecured creditors or litigation trust. Fraud claims by lenders or vendors.

  12. Mitigating Bankruptcy Exposure for D&Os Have insurance that applies when company cannot indemnify. Avoid making big claims as a creditor. Make sure distress company stays current on tax obligations. If you stay with a company during and after bankruptcy, make sure the Plan releases you for pre-petition conduct.

  13. Mergers and Acquisitions Have you worked for a company while it merged into, or acquired, another company?

  14. Merger and Acquisition Claims Activity • Allege that company’s board of directors sold or plan to sell the company at terms unfavorable to shareholders • Transactions Affected: • Management Buyouts • Going Private Transactions • Mergers with Other Companies

  15. Mergers and Acquisition Claims • Allegations • Breach of fiduciary duty to shareholders • Loyalty, care or good faith • Auction Process was flawed or Conflict of Interest • Federal Suits May Raise Proxy Issues • Characteristics • Filed in State Court-Multiple Jurisdictions • Settle Quickly with Defense Costs Low (Historical) • Plaintiffs seek injunctive relief-measure to improve returns to shareholders

  16. D&O Risk Avoidance • Best Practices • Advisors: Counsel, Bankers, Accountants • Diligence • D&O Insurance: Key Terms • Securities Claim • Adequate Limits • Dedicated D&O only coverage • Claims Process

  17. Securities Suits • Traditional Source of Largest D&O Exposure • Arises under Federal Securities Laws • ’33 Act: Prospectus Liability • ’34 Act (10(b)5 Liability) Aftermarket Disclosures

  18. Securities Claim Trends • NERA’s Recent Trends in Securities Class Action Litigation: 2011 Mid-Year Review • Click here to view the report

  19. Issues For D&Os • Selection of Defense Counsel • Importance of D&O Insurance • Role of Counsel, Insurers and Broker • Pre-Claim Steps to Mitigate Risk • Selection of Insurer • Policy Form • Insurers’ Claims Handling Philosophies

  20. Key D&O Policy Terms Fraud/Personal Profit Exclusions Definition of Claim Representations and Severability Notice-claims made Consent to Settlement, Counsel Covered Defense Costs

  21. For more information:E. Joseph O’Neil R. Damian Brew617-951-4705 212-345-2584eoneil@peabodyarnold.comrichard.d.brew@marsh.com

  22. Write into the Q/A pod Time for Your Questions

  23. Thank you

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