The Bureau of Land Management (BLM) issued a final rule (the 2018 rule) on September 28, 2018 (83 FR 49184) that revised, rescinded, or replaced requirements in its “Waste Prevention, Production Subject to Royalties, and Resource Conservation” (the 2016 rule) (81 FR 83008). The 2016 rule, also known as the Methane and Waste Prevention Rule, required operators of onshore federal and Indian (other than Osage Tribe) leases to take various actions to reduce the waste of gas. The rule established clear criteria for when flared gas qualified as waste and was, therefore, subject to royalties, and also clarified which on-site uses of gas were exempt from these royalties. Prior to the 2016 rule, provisions related to venting, flaring, and royalty-free use of gas were contained in the agency’s 1979 Notice to Lessees and Operators of Onshore Federal and Indian Oil and Gas Leases, Royalty or Compensation for Oil and Gas Lost [NTL–4A]).Read More
Audit, Compliance and Risk Blog
Millions of people live and work in flood-prone areas, and rely on federal insurance to facilitate their activities. The Federal Emergency Management Agency (FEMA) administers the National Flood Insurance Program (NFIP), under which FEMA defines which flood-prone areas qualify for insurance. In March, FEMA announced plans to change its definitions and underwriting; meanwhile legislation has been introduced in Congress to change NFIP. Depending how these changes turn out, thousands of locations will gain or lose eligibility, and the costs of NFIP insurance could change considerably. As climate change exacerbates the likelihood and severity of floods, the importance of these changing provisions grows – for participants and for the general tax-paying public who often end up subsidizing them.Read More
But there are many other potential risks that could result in lawsuits against corporate directors and officers (D&O). These include an ensuing drop in stock price after an incident, mishandling of personal information, effects of the opioid crisis, sexual harassment allegations, and pollution risk created by the use and disposal of dangerous chemicals used in manufacturing. Even liability suits for mass shootings in the workplace can find their way to directors and officers.
Insurance designed to protect corporate directors and officers has been on the market for almost a century, but it was not until the scandals of Enron and WorldCom in the early 2000s that many executives became more aware of the need for liability protection. While we all remember those two bankruptcies, many may not recall that directors of WorldCom had to contribute their personal assets to settle the D&O claims that ensued.
Today, the risk factors motivating the purchase of additional D&O insurance are compelling, but the type of coverage purchased has a material impact on the limits available to protect directors from liability. As corporate officers reevaluate their current D&O coverage, it is important to thoroughly understand the type of coverage purchased and to quantify a board’s potential risk or “claim severity.”
Understanding and Quantifying D&O RiskIn 2017, 9% of public companies in the United States faced securities class actions—an all-time high. These are highly correlated with ensuing D&O claims, and the risks facing every company continue to grow. A U.S. Supreme Court ruling late last year, for example, now enables litigants to pursue class action suits regarding initial public offerings in state courts, which are commonly perceived to be more sympathetic to plaintiffs. These suits are also generally more expensive to defend because they cannot be consolidated and must be negotiated or litigated case by case.
Despite this increase in risk and liability exposure, the market for D&O insurance continues to be soft, with low premiums relative to the potential exposure. There continues to be ample competition for this business, preventing any meaningful increase in pricing. As such, this is a good time for companies to purchase additional coverage as pricing may be at a low point, especially in the excess layers. That said, not all D&O coverages are alike. An understanding of the coverages and their differences is essential for decision-makers looking to evaluate risk mitigation options.
Differences In D&O Coverage
With the introduction of the Private Securities Litigation Reform Act (PSLRA) in 1995, there followed a change in D&O coverage available in the marketplace. PSLRA is a federal law enacted in response to the perceived increase in frivolous class action suits alleging securities fraud under the Securities Act of 1933 and the Securities Exchange Act of 1934. The key features of PSLRA are:Read More
The Environmental Protection Agency (EPA) has just proposed to assign chemical review priorities for 40 chemicals, as required by the 2016 Amendments to the Toxic Substances Control Act (TSCA; the “Frank R. Lautenberg Chemical Safety for the 21st Century Act”). As required by the 2016 Amendments, the proposal identifies 20 high priority chemicals for evaluation within three years, and 20 low priority chemicals that do not require further evaluation. Once each evaluation is completed, EPA is to determine appropriate regulatory requirements. Organizations that manufacture, process or use any of these chemicals should follow the rulemaking and evaluation process(es), and consider possible substitutes in order to reduce hazards and possible regulatory changes after completion of each relevant evaluation.Read More
The Environmental Protection Agency (EPA) has completed a long review, and reaffirmed the primary National Ambient Air Quality Standard (NAAQS) for oxides of sulfur (SOX; usually measured as sulfur dioxide (SO2)). This is the first review of the primary SOX NAAQs since 2010 (primary standard – EPA did not review the secondary SOX NAAQS established in 2012).Read More
The Environmental Protection Agency (EPA) has just made massive updates to the largest national data base of chemical information, the TSCA Inventory. Since 1976, the Toxic Substances Control Act (TSCA) has provided EPA with broad authorities to collect information about chemical substances in commerce in the U.S., including new chemicals that manufacturers and importers hope to bring into commerce. Information about all these substances is collected in the TSCA Inventory.Read More
On March 11, the Trump Administration issued its budget proposal for federal Fiscal Year (FY) 2020 (October 1, 2019 through September 30, 2020), entitled “A Budget for a Better America: Promises Kept. Taxpayers First.” The proposal includes a 31% cut in the Environmental Protection Agency (EPA) budget, from $8.28 billion in FY 2019 (under a Continuing Budget Resolutions rather than a fully-new federal budget), to $6.07 billion for FY 2020, with corresponding personnel cuts from 14,376 full-time-equivalent employees (FTE) to 12,415. (these are numbers for EPA in the government-wide budget from the Office of Management and Budget (OMBB) summary of the entire budget proposal, and EPA provides additional details on its own website).Read More
After a long rulemaking, the US Environmental Protection Agency (EPA) has just promulgated rules defining certain waste pharmaceuticals as “hazardous wastes” under the Resource Conservation and Recovery Act (RCRA), and establishing standards for their management by selected healthcare and “reverse distribution” waste management facilities. These regulations replace general RCRA generator and treatment requirements otherwise applicable to hazardous wastes.Read More
With casinos and other forms of legal gambling proliferating in the United States, you would think that there would be emerging clarity in the laws and regulations regarding gambling online. You’d be wrong. Instead, the law governs Internet gambling in the United States that is still a confusing morass of state and federal laws. Making this even more problematic is that both the federal government and state governments have prosecuted Internet gambling companies, making navigation of the confusing and contradictory rules a dire journey in which a misstep can have major consequences.Read More
On December 11, 2018 the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps) jointly proposed to revise their regulatory definitions of “waters of the United States”, applying authority under the Clean Water Act (CWA). CWA does not define this term clearly, so after decades of rulemakings and litigation, it remains in dispute. Generally, Democratic presidents and the judges they appoint tend to support geographically and semantically broad applications, while with Republican presidents and the judges they appoint tend to take narrower views. The latest proposal would narrow the definition, reversing Obama-era rules adopted in June 2015, and presently in effect in 22 states based on the present status of ongoing judicial appeals (I summarized the 2015 rules, and the litigation leading up to them here and the Trump-era EPA’s 2017 proposal to roll back the 2015 revisions here). The agencies characterize this narrowing as an increase in certainty for stakeholders, accomplished by eliminating some of the site-specific discretion that the 2015 rules provided to permit writers. Because of the government shutdown, this latest proposal was not published in the Federal Register until February 14, 2019.Read More