New Podcast Looks at D&O Litigation

ACE USA, the U.S.-based retail operating division of the ACE Group of Companies, has launched a new audio podcast (or Internet-distributed program), discussing the broader issues connected with securities, derivative and regulatory litigation against today’s executives.

In the podcast, Carol Zacharias, senior vice president and chief counsel, ACE Professional Risk, discusses her white paper, “The Return of D&O Litigation: Trends Driving Increasing Costs and Frequency of Litigation Against Corporate Directors and Officers,” and provides an informative overview of the trends and factors behind the escalation of case filings against directors and officers and the rising severity of settlements and judgments.

“Declining securities class action filings in recent years have raised the question of whether the strictures of the Sarbanes-Oxley Act of 2002 have worked, heralding a new era of greater transparency, less fraud, and hence fewer cases—particularly those against directors and officers,” said Zacharias. “On the contrary, we’re seeing a marked increase in securities class action litigation and a significant increase in case values. For instance, 2007 securities class action settlements exceeded those in previous years by 15 percent to 46 percent, depending upon the measurement.” She explains that median settlements increased by 30 percent, from $6.9 million to $9 million and average settlements increased by 15 percent, from $54.7 million in the years prior to 2007 to $62.7 million in 2007.

Zacharias commented further on her findings, “There are some common characteristics and elements in these cases, but certainly the most important driver is increasing investor losses, and a significant driver of those losses today are the credit and subprime problems.” She explained that median investor losses for cases settled in 2007 were $310 million, whereas median investor losses for cases filed in 2007 were $355 million, a 15 percent increase and the highest in the past three years. “It appears that recently filed cases seek greater damages than those filed in prior years, which may translate into even more expensive settlements and judgments in the future.”

Zacharias commented on the typical plaintiff in a securities case, noting, “Years ago, the shareholder was the typical plaintiff in a securities case. Today, the adversaries are much more varied and resourceful, making the cases more complex to litigate and settle.”

To access the ACE Professional Risk audio podcast program (approximately 26 minutes in length), visit www.aceusa.com/News/Pages/Podcasts.aspx. To access the white paper, visit www.aceusa.com/News/Pages/ArticlesSpeeches.aspx.