COMPANIES MAY BE LEFT WITHOUT D&O INSURANCE FOR LITIGATION RELATED TO COVID-19

As the COVID-19 pandemic raged the past few months, many public and private companies fought tooth and nail to stay afloat.  Similarly, shareholders maintained a close eye on these companies heavily relying upon disclosures, press releases, and statements made by corporate directors and officers.  However, as we slowly emerge from this pandemic, some shareholders are unsatisfied and feel that company responses were inadequate or that the disclosures and statements made were misleading.  As a result, companies may expect numerous COVID-19 related lawsuits, including shareholder derivative suits, to emerge. 

If COVID-19 related litigation increases, many companies will turn to their directors and officers insurance coverage (“D&O Insurance”).  D&O Insurance is regularly purchased by publicly traded companies, as well as private companies and non-profit organizations.  D&O Insurance is designed to provide coverage when claims are brought against directors, officers, and other covered employees.  Generally, D&O Insurance is designed to cover a broad range of alleged wrongful acts.  Yet, insurers may attempt to eliminate coverage for COVID-19 related losses by (i) advancing narrow interpretations of specific policy language and/or (ii) seeking to eliminate coverage for COVID-19 related claims during policy renewal.  As such, if COVID-19 related litigation begins to increase, some companies may be left without D&O Insurance coverage.