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D&O Uh-Oh: Large Class-Action Settlements Down, But Smaller Cases Way Up

The directors & officers liability market is an unpredictable, mispriced and likely under-reserved mess of cases waiting in many courts. And while rates are up in this sector, observers say that isnt enough to tip the scales.

By Chad Hemenway | Updated on April 12, 2012

The Directors and Officers liability market is definitely unpredictable, probably mispriced and very likely an under-reserved mess, sources say—and new federal provisions have many experts expecting a surge of filings.

While the number of securities class-action settlements and settlement amounts were down in 2011 vs. 2010, according to data compiled by Cornerstone Research, that fact alone does not paint a clear picture of the litigation landscape that D&O policyholders and carriers are facing.

Because while severity is down—securities class-actions can generate huge settlements—the frequency of smaller cases is up, leeching policy limits. 

“It has become a death by 1,000 cuts,” says Key Coleman, managing director at advisory service Grant Thornton. “Look out for the small non-class-action suits.”

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