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Advisen Front Page News - Friday, March 27, 2020

Will D&O insurance respond to coronavirus claims? It "depends," says Gallagher


Will D&O insurance respond to coronavirus claims? It "depends," says Gallagher

By Erin Ayers, Advisen

With two securities class actions relating to coronavirus already filed, public companies should expect to see more directors and officers liability claims arising out of the pandemic and examine how their D&O coverage will respond, according to a report from A.J. Gallagher.

The first two lawsuits filed – one against Norwegian Cruise Lines and one against a pharmaceutical firm working on a COVID-19 vaccine -- relate directly to coronavirus. Most corporations are not that closely involved in the pandemic, but a potential ripple effect may hit others. Broker Gallagher said that it definitely expects D&O litigation to arise from the pandemic, but how coverage responds will depend on individual situations.

“Will companies in other industries see claims due to a stock drop when the entire stock market has plummeted at once? Or will companies see claims for inadequate or inaccurate representations about the impact that COVID-19 will have on their business?” said Gallagher in the report. “The latter seems more likely, and all public companies must be cautious in disclosure content and in making any representations that are connected with COVID-19.”

The Securities and Exchange Commission (SEC) has granted a 45-day grace period for disclosures, the broker noted while advising that any delay in filing must be justified.

With no standard D&O policy in the market, Gallagher warned that coverage response will depend on the varying terms and conditions. With that said, Gallagher advised organizations to be on the lookout for bodily injury exclusions and property damage exclusions in their D&O coverage. The claims usually exclude coverage for claims “for” bodily injury and property damage but might provide cover for securities claims or derivative claims tied to COVID-19.

The D&O insurance market has already seen strife, “plagued with event-driven D&O claims that span many categories (opioids, cyber breaches and #MeToo, among many others),” Gallagher said. COVID-19 could complicate an already hardening market, the broker added.

“A number of insurers have already begun asking COVID-19 underwriting questions that seek details about the company’s business continuity plan, anticipated impact, quality of forward-looking statements, etc. During the next renewal cycle, all D&O insureds should be prepared to answer questions about their corporate response to a pandemic and the business continuity plans in place. It remains to be seen whether we will begin to see specific exclusions for COVID-19,” said Gallagher.

Editor Erin Ayers can be reached at

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