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Directors' regulatory exposures - a global expansion

  • Press Releases 8 July 2010 8 July 2010

Barlow Lyde & Gilbert LLP (BLG) yesterday hosted a seminar for delegates from across the London insurance market on recent developments in the international regulatory landscape for directors and officers of commercial companies and financial institutions.

One of the main sources of claims on non-North American directors’ & officers’ (D&O) policies relates to regulatory and criminal investigations.  These types of investigation are increasing, both in number and in international scope, and D&O insurers cannot afford to ignore the challenges that these developments pose.

The guest speaker was Derek Adler, partner in US firm Hughes Hubbard & Reed LLP, who specialises in representing firms in white-collar criminal investigations.  Derek gave an overview of the workings of the US Foreign Corrupt Practices Act and its implications for company executives. 

An overview of regulatory exposures for directors and officers in Hong Kong and China was given by BLG senior associate, Antony Sassi.

Turning to the position in the UK, the wide-ranging implications of the Bribery Act 2010 for directors and officers and their insurers was discussed by BLG partner James Cooper. 

BLG partners Roderic McLauchlan and James Roberts considered the coverage issues that are relevant in relation to criminal and regulatory investigation cover.  In particular, James considered the High Court decision which made waves earlier this year in Safeways v Twigger.  The company in this case sought to recover corporate fines imposed for breach of competition law through a claim against its directors and employees bringing the D&O cover into play.  Whether such a claim is legally valid will be considered further by the Court of Appeal later this year.

The event was wrapped up with a panel discussion on topics including: the challenges for insurers posed by the confidentiality of investigations into their insureds; companies “eating their own” - where a new board might turn on past management during an investigation; and how regulators can try to exploit differences in protection for witnesses in different jurisdictions.

BLG partner Roderic McLauchlan, who chaired the seminar, commented: “In the wake of the National Australia Bank decision of the US Supreme Court, the exposure to civil claims for the D&O insurers of non-US companies may have decreased.  But the risks of business practice proceedings, like bribery prosecutions and other investigations by government agencies like the SFO, SEC and US Department of Justice, are growing rapidly.  These are becoming a significant cause of claims on D&O policies for non-US companies.  Moreover, the marked increase in cooperation between agencies from different countries in such investigations raises novel issues, of procedural and insurance coverage, and significantly increases the complexity and expense of such matters.”