The Rise of Class Actions – Be Aware Of The Blind Side

Does the Directors’ & Officers’ liability (D&O) cover purchased by your employer leave you exposed?

The “blind side” is the gap created through the growing trend for D&O to include cover for claims made against the company. Claims against the company can very quickly erode the cover that should be preserved for you as an executive of the company.

Directors should be concerned about shareholder actions in Australia, given the profile of recent cases. Scrutiny on company disclosure has never been so prominent. Plaintiff law firms and litigation funders have identified that every sharemarket release is a source of opportunity.

Some high profile class actions relating to disclosures made to shareholders include:

As a result, many D&O policies have been amended to include cover for class actions against the entity (known as D&O Side C cover). The downside of this approach is the major intent of the policy is to protect the personal assets of the executives. Don’t be blind-sided!