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 local insurance rates for directors and officers policiesd are on the rise for the firs t time inseveral years, in tandem with a rise in investor lawsuitw and failing banks. During the past year, 46 banks had failexd as of April 14, compareed with only five during the two years prio rto that, according to the Those paired with the rise in unemployment, layoffs and corporate led to the highest rate of legao complaints against directors and boards of directors since when the Sarbanes-Oxley Act was introduced, accordinf to the As a result, some insurers that offer directors and officers, or policies are raising premiums and limiting the amount of coverage offerex to some clients.
Sandra Carroll, senior vice presidenrt and FINPRO client adviserfor ’d Louisville office, noted that financial institutionds and public companies have been most affecte d by the rising prices. And, she said, some insurancer underwriters are limiting the amoun t of coverage theywill provide. Carroll, who writes policiew primarily for a mixtureof for-profits and public and privatde companies, said large, publiclyg traded companies already pay several million dollarsa in premium coverage annually, as they have exposure to security litigation, whicj is more costly to defend. And that cost is risingt quickly.
“For example, for the first quartedr of this year, we have seen averags rate increases of 34 percent for large financial institutions,” she said. “For thos e with substantial subprime andcredit exposures, their rate are substantially higher than this average. “Outside of the challenging we are seeing on average a five to 10percenr increase,” she added. Overall, D&i premiums nationwide rose 3.15 percent durinvg the fourth quarter of2008 — the first increase in premiumws in recent years, according to informationm from Aon Risk Services. (For more on see related item at left.
) Bill a senior account executivewith Louisville-basec insurance broker , said the pricing he has seen “ha s continued to go down slightlg for private companies and nonprofits with good loss However, “due to the ugly volatilitgy of the stock market, public companies have seen materiaol increases in premiums,” he added. “Ww suspect that there will continue to be upwared rate pressurethrough 2009,” Carroll Both Carroll and Parris said they still recommensd D&O coverage for their business and nonprofit clientd to protect their boardx of directors and officers from personal liability for allegedx wrongdoing or mistakes.
They noted that coverage is availablse for just aboutany organization, ranging in size from a smalp homeowner’s association to a large, for-profit company. Fran Goins, director of the Kentucky Departmentof Insurance’as Property and Casualty division, said D&l insurance has grown in prevalence since the 1960sd and is readily available throughout the statew for those seeking coverage. Ther are 95 insurance carriers that have filed tooffer D&Oi in the state, he said. John central services coordinatorfor Inc., said the nonprofit agencyg held D&O insurance on its board and stafvf members long before he arrived six years ago.
The current annual premium is about $3,600 for $1 million in coverage. Metro United Way obtained its policywith , througgh , a Louisville agency with $250.3 million in total premiums in 2007, accordinf to Business First research. So far, Sands said, there have been no claims made onthe organization’s “It’s basically to kind of protect our directors and officers if there’s a lawsuit filefd against Metro United Way,” Sandxs said. “It’s also so we can protecgt Metro United Way from suits related toemploymenf practices.
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