Category Archives: D&0

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Maximizing Your D&O Coverage

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In these volatile economic times, solid D&O insurance coverage can be vital to protecting your company’s executives. But a top-notch D&O program has a lot of facets that need to be considered. So to that end, Caroline Spangenberg and Brian Epps of Kilpatrick Stockton have come up with a list of tips to make sure your D&O policy is doing what you need it to do.

Be diligent in the application process and negotiate the language.
Providing complete and accurate disclosures in the policy application is critical because material misrepresentations in many states avoid coverage even without proof of an intent to deceive and without having to show that the misrepresentation was related to the loss. In many states, to demonstrate materiality, the insurer need not prove that it would not have issued the policy at all – merely that it would not have issued it on the same terms and conditions or for the same premium. If the insurer succeeds in rescinding the policy on the basis of misrepresentation, it is void – there is no coverage even for innocent insureds.

Be sure not to miss their informative article, featured exclusively at RMmagazine.com.

D&O Coverage for Investigations

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In the latest online-only column from Anderson Kill & Olick, Joshua Gold discusses how D&O coverage can be complicated by government investigations.

Most D&O insurance policies promise some measure of insurance protection against “regulatory and governmental” investigations, “administrative or regulatory proceedings” and criminal proceedings. However, many insurance companies will argue this coverage is not triggered until certain documents are prepared by the investigating entity and until they are prepared and drafted in a very specific way. For instance, does the investigation start when a subpoena is served or only when a “formal” investigative order is issued under the insurance policy? Insurance companies may argue that they are not on the hook for millions of dollars in “loss” until certain specific aspects of the investigation come to pass.

Considering the importance of D&O coverage for senior management, you won’t want to miss this online exclusive, only on RMmagazine.com.

Super Bowl Risk

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All major sporting events pose some sort of risk — whether it’s unruly fans, unsafe venues, lack of security or all of the above. But there are a few sporting events that pose more risk than others — namely the Olympics, the World Cup and, of course, the Super Bowl. I was fortunate enough to get some feedback on Super Bowl risk from Chris Rogers, director of risk control for National Entertainment Group, a part of Aon Risk Services and Lori Shaw, managing director of sports/leisure for Aon Entertainment Group.

Of all the potential risks facing such a large event as the Super Bowl, what do you feel is the number one biggest risk on February 7th?
Without a doubt, the biggest risk by far is the “lone wolf” with explosives knowledge. It is the very quiet ones, without support from any organization at the time that presents the greatest challenge, simply because there is so little possibility for detection prior to their arrival on the scene. Plus, if they have the ability to put together an IED, this combination could be very catastrophic.
Do you feel there is more potential for risk before, during or after the game?
The highest risk would be during the game, primarily due to the fact that this is when there are the most people present and there is so much going on all over the stadium. The close second would be just prior to the start of the game when there are large crowds lining up waiting to get inside.
Lori Shaw, Managing Director – Sports/Leisure, Aon Entertainment Group
How are corporate sponsors and marketers managing the financial risks related to prizes and promotions?
Many corporations look to events such as the Super Bowl as a way to create impressions with consumers. Besides basic TV, advertising many look to specialized promotions and prize offerings to attract interest and support their marketing goals. This may mean offering product couponing and redemptions offers to drive consumers to their brands, arranging prize trips for consumers, and often times, offering the potential to win large cash prizes such as what Dorito’s is doing with its Dorito’s “Crash the Super Bowl” promotion. Often times, corporations will look to the Contingency Insurance market to provide unique and customized insurance products to protect their balance sheets from the volatility that these promotions can bring. Products such as overredemtion insurance, sponsorship liability, marketers liability, special event and travel accident coverage and prize indemnity policies can be crafted to appropriate transfer this type of potential risk.
How does the Super Bowl manage challenges such as professional liability? What types of insurance can the Super Bowl event managers and organizers obtain to protect themselves from the many potential risks that can occur during such a large event?
Planning for large events, such as the Super Bowl, start way before the “kick off” of the game. Local organizing committees have been working months, sometimes years, ahead of a large event to make all the necessary arrangements. Insurance coverages that are contemplated may include: General Liability, Auto Liability, Property, Directors & Officers, Terrorism, Event Cancellation (which can include weather related perils, communicable disease, and threats of Terrorism), Media Liability, Broadcast and Professional Liability for things like police, EMT’s, physicians, etc.

RMM: Of all the potential risks facing an event as large as the Super Bowl, what do you feel is the number one threat on February 7?

Chris Rogers: Without a doubt, the biggest risk by far is the “lone wolf” with explosives knowledge. It is the very quiet ones, without support from any organization at the time that presents the greatest challenge, simply because there is so little possibility for detection prior to their arrival on the scene. Plus, if they have the ability to put together an IED, this combination could be very catastrophic.

RMM: Do you feel there is more potential for risk before, during or after the game?

Rogers: The highest risk would be during the game, primarily due to the fact that this is when there are the most people present and there is so much going on all over the stadium. The close second would be just prior to the start of the game when there are large crowds lining up waiting to get inside.

RMM: How are corporate sponsors and marketers managing the financial risks related to prizes and promotions?

Lori Shaw: Many corporations look to events such as the Super Bowl as a way to create impressions with consumers. Besides basic TV advertising, many look to specialized promotions and prize offerings to attract interest and support their marketing goals. This may mean offering product couponing and redemption offers to drive consumers to their brands, arranging prize trips for consumers, and oftentimes, offering the potential to win large cash prizes such as what Doritos is doing with its Doritos “Crash the Super Bowl” promotion. Oftentimes, corporations will look to the Contingency Insurance market to provide unique and customized insurance products to protect their balance sheets from the volatility that these promotions can bring. Products such as overredemtion insurance, sponsorship liability, marketer’s liability, special event and travel accident coverage and prize indemnity policies can be crafted to appropriately transfer this type of potential risk.

RMM: How does the Super Bowl manage challenges such as professional liability? What types of insurance can the Super Bowl event managers and organizers obtain to protect themselves from the many potential risks that can occur during such a large event?

Shaw: Planning for large events, such as the Super Bowl, start way before the “kick off” of the game. Local organizing committees have been working months, sometimes years, ahead of a large event to make all the necessary arrangements. Insurance coverages that are contemplated may include: general liability, auto liability, property, directors and officers, terrorism, event cancellation (which can include weather related perils, communicable disease and threats of terrorism), media liability, broadcast and professional liability for things like police, EMTs, physicians, etc.

soccer fans

Risk Management at a Crossroads

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In talking to the risk managers, brokers and insurers populating RIMS 2009, there are two themes that run constant. The first is the unique opportunity that last year’s financial meltdown has presented risk managers to raise their profiles within their organizations and prove their value to senior management. Finally, after the onslaught of calamities of the past decade — September 11 then Enron then Katrina — the economic crisis seems to be the final straw in forcing boards of directors to understand the importance of risk management.

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Conversely, however, is the other reality of the economic crisis: Few companies have the resources to devote to non-revenue generating endeavors. So while many risk managers may be getting heard by the board for the first time and receiving the encouragement they have always desired, they are not always getting that support in the form of resources. 

For insurers, the predicament is different — yet similar.

Given the economic climate, there must be a return to underwriting discipline. Earlier today I spoke with Bob Petrelli, who is a managing director in Swiss Re’s insurance division, and he emphasized this need. “Last year’s crisis has shown us that you can’t put all your faith in your investments,” he said. “You need to have that underwriting discipline.”

But, obviously, this is easier said than done, and even though we’re seeing signs of a return to the hard market, many insurers have been unable to actually stick to their guns and practice what they preach. “If everyone would do what they say they are going to do, we would see a hardening market,” said Petrelli’s colleague at Swiss Re, Nikolaj Beck, who is also a managing director on the company’s insurance side.

But more so than simply tightening prices and limiting exposures, both Swiss Re’s executives as well as those I spoke with at Zurich stressed the need for innovation. Given their market footprints and name brands, neither company likely needs to worry about coming out of the economic crisis in good shape. But each seemed hopeful that when the turnaround does occur, they will not only emerge comfortably, but with a distinct competitive advantage in their markets. 

Zurich, for instance, has recently released a new D&O policy it is promoting at RIMS 2009 that it hopes can set a new standard for coverage. By enhancing some aspects of its Side A coverage for individual directors (including retired directors) as well as including an extension for “environmental mismanagement claims” resulting from climate change retaliation claims, the company is hoping that this type of innovation will differentiate it from a marketplace where many of the players are content to just tread water. The goal, according to  Zurich chief innovation officer Ty Sagalow is “raising the bar in D&O.”

And, thus far, the feedback he’s received is encouraging. “One broker’s response was ‘It kicks ass,'” said Sagalow. Sagalow was particularly committed to such forward thinking in the realms of climate change and globalization-related risks still on the horizon — like those supply chain risks that the recent spike in piracy off the Somali coast are illustrating far too often — and is trying to find a good balance between those things that policyholders are asking for and those things that his team has identified as the emerging risks affecting all organizations.

“Whether it’s a soft market or a hard market, it’s always a market for customer-centric innovation,” said Sagalow. “When we go to [our clients] and tell them we’re responding to their needs, they are very receptive.” 

Swiss Re, too, sees a balance between innovation and underwriting discipline as a cornerstone of its strategic future. And as one of the most technically advanced companies in the market, it believes it has the ability to do both. The company executives are hoping risk managers looking for better coverage at better prices in this tough economic climate will come to them with better information about their specific risks to help the underwriters placing the coverage. “We have the technology and expertise to take that information and use it to better understand and price the risks an individual company faces,” said Nikolaj Beck.

Of course, it may seem easier for giant, multi-billion-dollar insurance companies to find opportunities to increase their profile and market value in this current environment than it is for a solitary risk manager to raise organizational awareness about his discipline and get more authority. But those opportunities do exist. Risk managers need to find them and, more importantly, take advantage of them.

For those still struggling to be heard, Bob Petrelli of Swiss Re at least has a few words that may give some inspiration. “The boards of directors know who their risk managers are now.”

That may not sound overwhelmingly encouraging on the surface, but it’s a start.