As the year turns from 2018 to 2019, a look back at developments in D&O liability insurance and underlying exposure helps put events into perspective.

Elephants don't fit in mouseholes

Increased D&O liability exposure flowed from the opinion in Cyan, Inc. v. Beaver County Employees Retirement Fund [No. 15-1439 (U.S. Supreme Court, March 20, 2018)], which upheld the plaintiffs' right to bring certain securities class actions in state courts. Since the dawn of securities regulation in the U.S., both state courts and federal courts have had jurisdiction over securities cases. Federal securities law had its genesis in two statutes: the Securities Act of 1933 and the Securities Exchange Act of 1934. The Cyan Court noted that "[t] he 1933 Act required companies offering securities to the public to make 'full and fair disclosure' of relevant information." The 1933 Act authorizes both federal and state courts to exercise jurisdiction over suits alleging violation of the Act and bars the removal of such suits from state to federal court. The Cyan Court also observed that the 1934 Act functions differently: The statute "regulated not the original issuance of securities but instead all their subsequent trading, most commonly on national stock exchanges." The 1934 Act also handles jurisdiction differently: "Congress determined that all those suits should fall within the 'exclusive jurisdiction' of the federal courts."