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21 September 2021

Shareholders increasingly targeting D&Os of foreign companies in New York derivative actions

21 September 2021 Insurance & Reinsurance Americas, UK & Europe

1. Introduction

U.S. shareholder derivative actions have long been a concern for directors and officers (“D&Os”) of U.S. companies and their insurers due to their consistent claims frequency. With respect to companies based outside of the U.S., for many years the more significant concern with respect to U.S. shareholder litigation has been the steadily rising number of securities class actions targeting foreign companies.

Over the past year, however, shareholders have filed a number of derivative actions in New York courts on behalf of non-U.S. companies. In these cases, which are in their early stages, the plaintiffs seek to pursue their foreign corporate law claims with the benefits of U.S. litigation.

If the New York actions are allowed to proceed, shareholders may pursue more derivative claims against D&Os of non-U.S. companies in U.S. courts. Such actions could create additional liability and unexpected exposure for D&Os of foreign companies. Risk managers and D&O insurers should closely monitor these cases and consider the potential risks from this type of litigation.

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