Preparing for D&O Renewals in the Era of #MeToo
The rise of the #MeToo movement and the spotlight on sexual misconduct in the workplace has led to an increase in reports and claims of harassment at organizations across America. But #MeToo claims are not limited to equal opportunity and other employment-related actions. They can have a much broader reach, leading to claims against directors, officers, and companies that allegedly enabled, covered up, or failed to prevent purported wrongdoing.
In fact, a number of D&O-related #MeToo claims have already surfaced. The more corporate-focused claims expose companies to enormous costs, including drops in market capitalization and legal expenses for internal investigations, government proceedings, employment lawsuits, securities class actions, and shareholder derivative suits. This reality makes it essential for any organization to have a robust directors and officers (D&O) liability insurance program.
Will Your D&O Coverage Respond to #MeToo-Related Claims?
It is imperative to review your D&O policy with your insurance advisor and understand the potential coverage implications that could come into play should a #MeToo-related D&O claim arise. Ask yourself the following questions:
- What are the coverage triggers under our D&O policy? When and what do we need to report? Is there is any employment-related coverage under our D&O policy or is it limited to D&O coverage?
- What policy exclusions might apply in the case of a D&O claim arising out a #MeToo-related matter? Is our bodily injury exclusion narrowly tailored? Does our insured vs. insured exclusion include a carve-back for EPL-related claims?
- How broad is the investigations coverage in our D&O policy? Does it cover the defense costs that directors and officers could incur when meeting with a regulatory body and/or producing documents prior to a claim? Is there coverage for internal investigation and entity investigation? How broad is the crisis management coverage, and will it provide coverage for the cost of a public relations firm?
- How is our D&O program structured? Is there sufficient Side-A difference-in-conditions coverage — coverage dedicated to directors and officers — in place for non-indemnifiable loss? What is the claims-paying reputation of the insurers on our D&O program?
Will You Need to Address Employment-Related Matters?
The intersection of the #MeToo movement and D&O claims has led to employment-related questions being asked during the D&O renewal process. Ahead of your next meeting with underwriters, be prepared to address topics such as:
- The strength of your anti-harassment and anti-retaliation policies. Underwriters will want to know how often such policies are updated, whether they are supported by senior leaders, and if they are reinforced with mandatory training for all employees.
- Whether your company provides clear guidance and multiple channels for reporting workplace misconduct.
- If you have access to qualified in-house or outside counsel with employment law expertise.
With the number and severity of #MeToo-related D&O claims likely to increase in 2019, now is the time to ensure that your directors, officers, and company have adequate insurance protection in place.