Targeting the Individual

In many industries, individual executives have been targeted by unhappy stakeholders. That is not as common in insurance, but that situation could change.

The rubric that we should all be aware of actually comes from Warren Buffett, who stated to Berkshire Hathaway shareholders, and I’m quoting: If liabilities of an insurer, correctly stated, would exceed assets, it falls to the insurer to volunteer this morbid information. In other words, the corpse is supposed to fi le the death certifi cate. Under the honor system of mortality the corpse sometimes gives itself the benefi t of the doubt.

R. Mark Keenan, Anderson, Kill & Olick

Litigation against companies and company leaders tends to come in waves that may appear linked to varying economic conditions, Mark Keenan said.

“In terms of this recession and the increase in impairment, you will see the litigation caseload increase three or four years from now,” Keenan said.

Most claims against offi cers will likely stem from an allegation of failure to disclose, or at least whether that disclosure should have come earlier than it eventually was made.

If impairments and insolvencies should continue to mount, strains on state guaranty funds would increase. The natural inclination of regulators and policyholders’ attorneys would be to look closely at company behavior.

“I would defi nitely be giving a call to Bob [Sargent] and Tracy [Forst] to get some Side-A D&O-type coverage,” Keenan said. “It’s a matter

of time before that litigation starts to perhaps dramatically increase because liquidators will need other sources of money and they need the political cover.” Side-A coverage offers additional protections.

Copyright © 2010 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.