D&O LIABILITY COSTS UP AGAIN

Directors & Officers (D&O) liability insurance cost nearly 30 percent more in 2002, according to Tillinghast Towers Perrin’s 2002 Directors & Officers Liability Survey. The increase followed similar hikes in 2001. Meanwhile, claim frequency and claim severity appeared to stabilize for most types of claims, although shareholder claims severity was up significantly. Among closed claims, U.S. participants paid an average of $5.72 million, up only slightly from $5.65 million last year. However, the average indemnity paid for shareholder claims increased significantly to $23.35 million, compared with $17.18 million last year and $9.62 million two years ago. Other key findings from the survey revealed: Inadequate or inaccurate disclosure, including financial reporting and claims related to stock offerings, was most frequently at issue in U.S. shareholder claims, up from 38.8 percent last year to 46.4 percent this year; Even though some respondents purchased higher limits, the survey found a decrease in average D&O policy limits for the first time in eight years; and Discrimination in employment was the most frequently cited D&O issue among U.S. participants, accounting for 43 percent of employee claims, down slightly from last year (46.1 percent), and 27.1 percent of overall claims. U.S. and Canadian participants indicated the purchase of D&O insurance was common, with 97 percent and 90 percent of businesses, respectively, having secured coverage. The average amount of coverage carried by U.S. participants was $18.9 million in total limits, which was down slightly from last year ($20.1 million). The survey, which included 2,275 participants, is the 25th in a series of studies on D&O liability claims and insurance purchasing patterns.