With revenues tumbling, companies across many industry sectors confront a heightened risk of bankruptcy, spurring possible class action lawsuits brought by creditors against corporate directors and officers. In expectation of this growing threat, the D&O market is hardening like quick-setting concrete.

Executive Summary

Six securities class action lawsuits referencing the coronavirus had been filed, but it is the prospect of bankruptcy-related litigation brought by creditors that has set the D&O insurance market on edge, experts say, noting that insolvencies and bankruptcy proceedings may progress slowly but they are nonetheless inevitable.

Depending on the industry, D&O liability insurance premiums have increased 40 percent or more, in some cases doubling in price. Some carriers also are trying—and mostly failing—to exclude bankruptcy and pandemic coverage. No other insurance market, including workers compensation, employment practices liability and property/business interruption, is experiencing this price upheaval.

Battered both directly and indirectly by COVID-19 and the business repercussions it set in motion, D&O liability looks to be the most problematic insurance market for businesses going forward. Six securities class action lawsuits referencing the coronavirus had been filed (as of the date this article was written in late May), but it is the prospect of bankruptcy-related litigation brought by creditors that has set the market on edge.

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