Heightened Risks for Energy Directors and Officers
The energy and power sector is under immense pressure as widespread measures to stem the spread of the COVID-19 pandemic led to an unprecedented collapse in oil demand at the same time the price of oil tumbled. As a result, some energy businesses could face bankruptcy or require restructuring.
As the risk landscape continues to evolve, the directors and officers of distressed energy companies will be tasked with making difficult decisions to protect their organization. This puts them at heightened exposure of litigation and financial loss.
Times of corporate distress are likely to heighten the risk of claims for the energy sector; up to 10% of energy sector bankruptcies over the past five years also experienced directors and officers (D&O) claims, leading to increased concern for the personal exposure of directors and officers of companies in corporate distress.
Energy and power companies can take steps to protect their directors and officers during times of distress, primarily through the purchase of a robust D&O liability insurance program that specifically addresses bankruptcy liability. And directors and officers themselves should pay close attention to their fiduciary duties during times of distress, including by thoroughly evaluating organizational documents, focusing on fairness, solvency, and/or reasonably equivalent value opinions, understanding the need for special committees, and ensuring adequate investor disclosures.
Download to learn more about how energy companies can take steps to protect their directors and officers during times of distress, including insights on D&O renewals, D&O insurance coverage focus areas, and what to share during underwriting presentations.