With lawsuits on the rise, directors and officers premiums see first increases in years - Business First of Louisville:

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According to industry data and locaolinsurance professionals, rates for directors and officers policiees are on the rise for the first time in severao years, in tandem with a rise in investord lawsuits and failing banks. During the past 46 banks had failedf as ofApril 14, compared with only five duringy the two years prior to that, accordint to the Those failures, paireds with the rise in unemployment, layoffsx and corporate scandals, led to the highes rate of legal complaints against directorsx and boards of directors since 2002, when the Sarbanes-Oxley Act was according to the As a result, some insurerxs that offer directors and officers, or D&O, policiesz are raising premiums and limiting the amount of coverags offered to some Sandra Carroll, senior vice president and FINPRO client advised for ’s Louisville office, noted that financiapl institutions and public companies have been m ost affectedd by the rising prices.
And, she some insurance underwriters are limiting the amountr of coverage theywill Carroll, who writes policies primarilgy for a mixture of for-profits and public and privatew companies, said large, publicly traded companiez already pay several million dollarz in premium coverage annually, as they have exposurse to security litigation, which is more costlyt to defend. And that cost is risingb quickly. “For example, for the first quarterd of this year, we have seen average rate increasesx of 34 percent for largfinancial institutions,” she “For those with substantia subprime and credit exposures, their rates are substantiallu higher than this average.
“Outsides of the challenging industries, we are seeintg on average a five to 10 percent she added. Overall, D&O premiums nationwide rose 3.15 percentg during the fourth quarter of2008 — the first increasee in premiums in recent years, according to information from Aon Risk Services. (For more on see related item at left.) Bill a senior account executivewith Louisville-based insuranc e broker , said the pricinhg he has seen “has continueed to go down slightly for private companiex and nonprofits with good loss However, “due to the ugly volatilityy of the stock market, public companies have seen materia l increases in premiums,” he added.
“Wew suspect that there will continue to be upward rate pressurethrough 2009,” Carroll Both Carroll and Parris said they still recommend D&O coverage for their business and nonprofitt clients to protect their boards of directors and officerw from personal liability for alleger wrongdoing or mistakes. They notedc that coverage is available for just abourtany organization, ranging in size from a smalol homeowner’s association to a for-profit company.
Frank Goins, director of the Kentucky Departmenof Insurance’s Property and Casualth division, said D&O insurance has grown in prevalenc e since the 1960s and is readily available throughout the state for those seekiny coverage. There are 95 insurance carriers that have filed tooffer D&l in the state, he John Sands, central services coordinator for said the nonprofit agency held D&O insurance on its board and staft members long before he arrived six years ago. The currentf annual premium isabout $3,600 for $1 million in coverage. Metrol United Way obtained its policywith , through , a Louisville agency with $250.
35 millionm in total premiums in 2007, according to Businesd First research. So far, Sands said, theres have been no claims made onthe organization’se policy. “It’s basically to kind of protecft our directors and officersif there’s a lawsuit fileds against Metro United Way,” Sand said. “It’s also so we can protecy Metro United Way from suits related toemploymentg practices.
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