The landscape for directors and officers is fraught with risk, with a few exposures seeing an uptick over the past year. This includes an increase in securities class actions and merger-objection suits last year, along with the continuous threat of data privacy claims.
According to a study conducted by Cornerstone Research, U.S. courts approved the highest number of securities class action settlements last year since 2010. Continuing the growth from the prior year, there were 85 approved settlements in 2016 and five more than in 2015. The $6 billion of approved settlements was nearly double the total settlement value in 2015 and was fueled by 10 huge settlements ($100 million or more), which accounted for 81% of all settlement dollars. The number of mega settlements in 2016 was the highest in 10 years and included two settlements over $1 billion. Moreover, according to Cornerstone’s “Securities Class Action Settlements – 2016 Review & Analysis,” both 2015 and 2016 saw a substantial increase over the annual numbers from 2011 through 2014.
Data breach threats continue to grab the attention of boardrooms across all industry sectors for all companies of all sizes. The increase proliferation and expansion of laws and regulations regarding cyber coupled with the patchwork of state breach notification laws ensure that cyber attacks will be an ongoing headache for companies, including the healthcare industry. This will result in greater scrutiny of directors and officers to see if they are doing all they can to mitigate cyber exposures, disclose any breaches, and notify affected parties upon learning of a breach. Cyber exposures are also creating due diligence issues for board members when it comes to mergers and acquisitions.
In fact, according to the National Association of Corporate Directors (NACD), significant knowledge and oversight in cyber gaps still exist at the boardroom level. “In our most recent survey of corporate directors, almost 60% of respondents reported that they find it challenging to oversee cyber risk,” said Peter Gleason, NACD president and CEO-elect. “Directors don’t need to be technologists to play an effective role in cyber-risk oversight—but every board can take the opportunity to improve the effectiveness of their cyber-oversight practices.”
It is critical for director and officers to stay abreast of these and other risks and take the measures necessary to protect their organizations and themselves in the event of a loss. Not only are strong risk management and oversight protocols needed but also an in-depth review of the organization’s insurance program is required, including its D&O coverage and Cyber Liability insurance. Caitlin Morgan provides both insurance solutions to a wide range of businesses, including for nursing homes, assisted living facilities, independent living facilities, and other medical facilities. For more information about our insurance products, please call us at 877.226.1027.