D&O Insurance Law – 2014 Year in Review


D&O Insurance Law – 2014 Year in Review

Directors and Officers (D&O) liability and the insurance coverage issues presented by litigation arising from the same continued to be the subject of numerous judicial decisions at the state and federal level during 2014. The following D&O Liability Year in Review provides a synopsis of judicial decisions from both state and federal courts that address D&O exposures and the insurance coverage issues implicated by the various actions brought against D&Os. In terms of the types of D&O claims brought in 2014, litigation continued with respect to capital regulatory issues, securities class actions, SEC enforcement actions, mergers and initial public offerings. Similar trends will likely continue in 2015.

There were also several cases before the U.S. Supreme Court in 2014 that could have a material impact on D&O liability going forward. For example, with regard to securities litigation, the U.S. Supreme Court addressed the “fraud on the market” assumption in Halliburton v. Eric P. John Fund Inc., 134 S.Ct. 2398 (2014) (Halliburton II ). The U.S. Supreme Court also initially accepted, but then declined to address issues with respect to the statute of repose in certain types of securities cases. See Public Employees’ Retirements System of Mississippi v. Indymac MBS (Indymac), (See Supreme Court Docket No. 13-640; 135 S.Ct. 1515 (Mar. 3, 2014) and 135 S.Ct. 42 (Sept. 29, 2014)). Finally, in 2015, the Supreme Court will issue its decision in Omnicare Inc. v. Laborers District Council, (See Supreme Court Docket No. 13-435), which will address a split of authority among the federal circuits on the pleading standard necessary to determine when an opinion in a registration statement is considered to be false for purposes of Section 11 claims brought under the Securities Act of 1933 (the Securities Act). This review will highlight these decisions, as well as address a recent decision regarding SEC enforcement and consent judgments, a federal court decision involving the “business judgment rule” and the implications in a derivative lawsuit arising out of cyber liability.

Please see full review below for more information.

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