Directors and officers are facing a continuing crisis in D&O liability insurance, and many may lack the coverage they thought they had to protect their personal assets. The factors threatening the availability of adequate D&O coverage are growing in number and severity. They include the soaring cost of settling class action suits; the increase in such suits; new trends in securities litigation that the industry is hesitating to address appropriately; the dilution of coverage because many D&O contracts are trying to do too much; and the uncertainty injected into the market by the Sarbanes‐Oxley Act of 2002. Because many insurers are ailing financially, some are trying to rescind policies just when a company and its directors and officers need the policy most. Also, in efforts to attract new business, some are offering superficially attractive contracts and allowing misperceptions of how the contracts actually work, leading to the possibility of deep disappointments for insureds.
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