Although in-house risk professionals and corporate lawyers may not relish the opportunity to review their company's directors and officers liability insurance policy, provisions of the Dodd-Frank Act should prompt them to seriously consider the scope of their coverage.
In addition to the passage of the act, formerly known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, an increasingly active regulatory environment is another factor pointing to the urgency of such a review for all public companies—especially smaller ones.
Particularly important is whether—and how—their policies will cover internal corporate investigations prompted by whistleblowers alleging corporate wrongdoing in an effort to recover bounties on potential penalties collected by the Securities and Exchange Commission. Bounties are available under Dodd-Frank for SEC penalties exceeding $1 million.
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