Litigation filings and enforcement actions tracked by Advisen that could trigger coverage under a D&O policy decreased 9 percent in the first quarter from a year earlier, and 11 percent from the prior quarter. These events include capital regulatory and securities class and individual actions, as well as breach of fiduciary duty, merger objection and derivative lawsuits.
Capital regulatory actions, accounting for 62 percent of total filings, remained the leading source of events in the first quarter. Securities class actions were a distant a second at 14 percent, followed by merger objections, at 11 percent.
Merger objection suits, typically filed by shareholders demanding more favorable terms, have fallen 39 percent in the past three years. Even though M&A activity has begun to pick up, the suits continue to decline–to 33 in the first quarter from 60 a year earlier.
Advisen data also show an escalating frequency of events that trigger D&O coverage when the stock market falls, as it did after the dot-com crash at the turn of the century (blue line) and after the subprime-mortgage crisis that precipitated the broader financial crisis (yellow line). Conversely, lawsuits and enforcement actions recede when markets recover.
