Abstract

http://ssrn.com/abstract=2260815
 
 

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How Protective is D&O Insurance in Securities Class Actions? — An Update


Michael Klausner


Stanford Law School

Jason Hegland


Stanford Law School

Matthew Goforth


Stanford Law School

April 23, 2013

PLUS Journal, May 2013
Stanford Law and Economics Olin Working Paper No. 446
Rock Center for Corporate Governance at Stanford University Working Paper No. 144

Abstract:     
Nearly all securities class actions that are not dismissed settle. Very few are tried to judgment. Who pays into settlements — the corporation, its directors and officers, or its D&O carrier? Companies buy D&O insurance in order to protect themselves and their directors and officers from liability. But D&O policies have exclusions, limits, retentions, and other terms that might result in the carrier paying less than the full amount of a settlement. So, as an empirical matter, who pays when a company settles? We provide some basic statistics on that question, which reveal that in fact D&O insurance is quite protective. Focusing on individual officers’ contributions to settlements, we find that these are quite rare, even in cases in which the SEC has imposed a serious penalty on the same individuals for the same misconduct.

Number of Pages in PDF File: 8

Keywords: Securities litigation, Securities enforcement, Settlement, Directors and Officers Liability Insurance, Insurance

JEL Classification: G30, G34, K22

Accepted Paper Series


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Date posted: May 5, 2013 ; Last revised: July 26, 2013

Suggested Citation

Klausner, Michael and Hegland, Jason and Goforth, Matthew, How Protective is D&O Insurance in Securities Class Actions? — An Update (April 23, 2013). PLUS Journal, May 2013; Stanford Law and Economics Olin Working Paper No. 446; Rock Center for Corporate Governance at Stanford University Working Paper No. 144. Available at SSRN: http://ssrn.com/abstract=2260815

Contact Information

Michael D. Klausner (Contact Author)
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-6433 (Phone)
650-725-0253 (Fax)
Jason Hegland
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
Matthew Goforth
Stanford Law School
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
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