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
Audit, Compliance and Risk Blog
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
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
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
When companies claim they’re reducing their environmental impacts, how does anyone distinguish actual improvements from greenwashing? A growing number of national and international nonprofits and industry trade associations offer benchmarks and standards that companies can subscribe to, and third parties offer their services to evaluate and validate claims. Effective October 1, 2018 the state of Delaware has added a governmental layer, which Delaware companies can use to submit information and claims under penalty of perjury in order to gain formal state acknowledgement. The state claims this is the first such law.Read More
The Occupational Safety and Health Administration (OSHA) requires employers to prepare and maintain records of occupational injuries and illnesses (I&I Logs) as they occur. OSHA also requires employers to post an annual I&I Summary in each “establishment” within their workplace by February 1, summarizing that workplace’s I&Is during the previous calendar year. In states that administer federal standards within state-run programs, employers follow the comparable state requirements. Establishments with 250 or more workers must file electronic summaries by March 2.Read More
Sexual harassment in Canadian workplaces can trigger a variety of laws and regulations:Read More
If you’re contemplating significant changes at a facility that’s regulated as a “major source” under the Clean Air Act (CAA), you’d better figure out whether those changes will “modify” the source enough to trigger significant pre-construction review and permitting by the US Environmental Protection Agency (EPA) or its state or local delegee. The likely answer to questions like yours has changed with CAA amendments and regulations over the decades. EPA has just changed them again, after ending a decade long year delay of a regulatory “interpretation” published in the last week of George W. Bush’s presidency, and stayed by the Obama-era EPA throughout his presidency, and now reaffirmed and activated by the Trump-era EPA.Read More
When someone receives occupational direction and/or compensation from more than one entity, who’s the boss? Sometimes it’s obviously one or the other, sometimes it’s not clear which one is, and sometimes the answer may be “both.” The answer has important implications, not just for who writes a paycheck but for who is subject to legal requirements and prohibitions under applicable laws.Read More
On October 29, a large multi-sector group of organizations announced a major initiative to eliminate plastic waste and pollution - the New Plastics Economy Global Commitment. The group is sponsored by the Ellen MacArthur Foundation, and intends to respond to dire projections of the environmental implications of plastic waste with. Informational materials highlight a projection from the United Nations Environment Program (UNEP) that more than 8 million tons of plastics end up in the world’s oceans annually, and that if present trends continue there will be more plastic than fish in the oceans by 2050.Read More