The Issue of “Non-Indemnifiable Loss”[dagger]

Directors’ & Officers’ Liability Insurance: The Issue of “Non-Indemnifiable Loss”[dagger]

Ferrara, Donna

I.

INTRODUCTION

For anyone who has been living on a desert island, there is a crisis in Directors’ & Officers’ Liability Insurance (“D&O”).’ It was a long time coming. One carrier’s website reports dismally that in 2001, rates had dropped to half of their level in 1996, while D&O exposure had grown by one thousand percent.2 After ten years of increasing claims frequency and severity, resulting in dismal profitability, D&O insurers decided to raise prices and narrow coverage.

In an effort to return sagging lines of coverage to profitability, carriers have raised premium levels considerably, a fact that no insurance professional has missed. In addition, insurers are limiting coverage. Certain policy amendments, such as the elimination of entity coverage and the imposition of co-insurance are obvious. Others, such as the use of “Non-Indemnifiable Loss” in conjunction with presumptive indemnification, are less so.

II.

WHAT EXACTLY is A “NON-INDEMNIFIABLE Loss”?

A number of policy forms use the term non-indemnifiable loss, either to set a trigger of coverage or to define its scope. The term is most often defined as any loss that is not indemnifiable. “Indemnifiable” is defined as “[l]oss for which an Organization has indemnified or is permitted or required to indemnify an Insured Person pursuant to law or contract or the charter, bylaws, operating agreement or similar documents of an Organization.”3

To this point, the language is similar to that found in D&O policies for years. The section continues as follows:

For the purposes of determining whether Loss constitutes Indemnifiable Loss, the Organizations shall be conclusively deemed to have indemnified the Insured Persons to the to the maximum extent that an Organization is permitted or required to provide such indemnification pursuant to law, common or statutory, or contract or by the charter, bylaws, operating agreement or similar documents of an Organization, which are hereby deemed to incorporate, for the purposes of this policy, the broadest provisions of the law which determines or defines such rights of indemnity.

The Organization hereby agrees to indemnify the Insured Persons to the fullest extent permitted by law, including the making in good faith of any required application for court approval.’1′

III.

ISSUES

First, the term “non-indemnifiable” is not a statutory term. It has been used by some courts, though not in the same context as insurers have defined it. Whenever a term has a meaning in one arena that does not comport with its definition in another, there is potential for grave misunderstanding.5

Second, while the concept of insuring loss that has not been indemnified by the corporation is not new to D&O, the foregoing wording provides that regardless of whether a director6 actually has been indemnified, the insurer will presume that he or she has been.7

The third leg on the stool is the use of differential retentions: Claims that are “non-indemnifiable” – and therefore will be paid by individuals rather than corporations – will often be subject to a lower retention than others, on the theory that an individual will be less able to absorb a larger share of the risk.

Over the past two or three years, retention levels of more than a million dollars have become common. For a director facing years of protracted litigation, this presents a grim picture.

In sum, to trigger coverage, the loss in question must fall under one of the following exceptions:

* It must not be indemnified already, so there is no chance of double payment; or,

* It must be something that the corporation cannot indemnify, even if the corporation has asked a court’s permission to do so.

This returns us to the first question: What exactly is a loss that the corporation cannot indemnify?

If one asks a number of D&O underwriters to give an example of a “non-indemnifiable loss,” as I did, the answers were remarkably consistent: derivative actions and bankruptcy claims are two examples of non-indemnifiable loss. The answers were, in fact, so consistent that it appeared “non-indemnifiable” had become insurance shorthand for “derivative and bankruptcy.” These are consistent answers, but wrong.

The simple issue first. The federal Bankruptcy Code governs bankruptcies. Only in instances in which the Code does not specifically address a subject will the court apply other state or federal law.8

The Code does not forbid indemnification of officers and directors, although such claims may have a low priority. State law does not forbid the indemnification of claims in bankruptcy.

Of course, there are many reasons a bankrupt corporation does not indemnify its officers and directors. Most can be reduced to the simple fact that the corporation does not have enough money. That situation can make claims in bankruptcy unindemnified, but not “non-indemnifiable.” Using the policy definition, however, because the corporation could have indemnified the director, it will be presumed to have indemnified the director, even if it had not.9

What about the second consistent answer: derivative claims. Are claims brought on behalf of the corporation non-indemnifiable? This is a more complicated answer, requiring analysis of laws governing corporations. As with many subjects, corporate governance is a matter of state law and every state has placed it own gloss on the subject. For ease of reference, I’ll refer primarily to Delaware law.

Like many states, Delaware’s main indemnification statute, whether addressing claims brought by third parties or those brought on behalf of the corporation, is “permissive” for the most part.10 The [aw permits the corporation wide latitude in indemnification matters, but requires indemnification in only one instance.11 Further, the statute is not exclusive, meaning that methods of indemnification other than corporate by-laws or charters, including contractual provisions, are permitted.12

Section 145(b) of the Delaware Code specifically addresses derivative actions, permitting indemnification of the expenses of defending a derivative action if the person requesting indemnification “acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation.”13

For purposes of determining the scope of “indemnifiable,” therefore, indemnification of expenses is explicitly permitted, even if the person has been found liable, as long as the requirements of good faith and loyalty are met, except:

[N]o indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine. . . .14

In other words, if a court allows it a person who loses a derivative action may still be indemnified, if a court allows.15 This appears to be the type of provision that insurers had in mind when drafting the presumptive indemnification language.

If our inquiry ended here, the presumptive indemnification language would be harsh enough. The insured could have purchased coverage in reliance upon the underwriters’ statement that “bankruptcy and derivative claims” will trigger coverage, yet after slogging through the statute, find the issue at best ambiguous.

Reading the presumptive indemnification provision literally, it will do an individual no good to petition a court for indemnification. Unless the insured organization applies to the court and is refused, the presumptive indemnification is not rebutted. It is highly unlikely that a corporation not voluntarily indemnifying a director will apply to a court for permission to do so.

Additionally, a Delaware statute allows a corporation to protect directors from financial liability arising from breach of care in service to the corporation.16 This protection is broader in scope than section 145, though available only to directors, rather than any “director, officer, employee or agent.”

Delaware courts have held that an exculpatory provision adopted in accordance with section 102(b)(7) can operate to bar claims for money damages against the board members caused by the alleged breach of their duty of care.17

In theory then, a director may be protected from any liability arising from a breach of the duty of care by the corporate charter, the by-laws, and an employment contract, as long as those vehicles comport with the statutes. The primary statutory restriction on indemnification is that the director’s actions must have been undertaken in good faith and in a manner reasonably believed to be in the best interests of the corporation.18

Specifically turning to derivative claims, a director can be indemnified by the corporation for the expenses of defending such an action, even if found liable, as long as the requirements of good faith and loyalty are met.

Further, while it appears that the settlement of a derivative action may not be indemnifiable under section 145(c), Delaware courts have not explicitly ruled on the subject,19 nor have they carved out derivative claims from the exculpatory provisions of section 102(b)(7).

Recently, the opportunity for such a decision arose – and the court declined. In the case of In re Walt Disney Co. Derivative Litigation,20 the court did not hold derivative claims were unindemnifiable. It merely found that section 102(b)(7) did not mandate dismissal of such claims when there was an issue of fact as to whether the directors acted in good faith and with a reasonable belief that their actions were in the best interest of the corporation.

While our discussion has focused on Delaware law, other states, including New York and California, specifically allow indemnification of settlements when the person seeking indemnification can show “success” (including advantageous settlement) in the matter.21 This is not to say that a corporation or a court would necessarily find indemnification of a derivative action to be appropriate, even when the law specifically permits. It is, nevertheless, an example of how a crucial term can have one meaning during the sales process and quite another when a claim arises.

It would appear, then, that the blanket statement positing all derivative actions are non-indemnifiable is unsupported.22 Apply the converse to the policy language: when a bankruptcy action or derivative claim meets the good faith and loyalty requirements, it is at least potentially indemnifiable.

The policy, however,presumes that the director has been indemnified, even when he or she has not. In fact, the policy presumes that the corporation has gone to court for permission to do so – a situation only necessary after an individual has been found liable in a derivative action.

Taking the argument further, the policy presumes indemnification when any vehicle law, corporate documents, or contract – allows it. As noted above, the statutory framework in Delaware and many other states is permissive. A corporation could offer, through an employment contract for example, indemnification that is far broader than the permissive standards.23

If the corporation offers such contractual indemnification to one director or a group of directors such as an audit committee, will it be presumed to have offered it for all? If it is offered to directors of a subsidiary corporation, will it be imputed to the directors of the parent company, or vice versa?

IV.

WHOSE JOB is IT, ANYWAY?

A fair question from the insurer’s point of view would be, “if permissible under the law, why didn’t the corporation indemnify the individual?”

There are many answers to that question. A corporation may fail to indemnify individuals for any of the following reasons:

* It has adopted a more restrictive indemnification scheme in its corporate by-laws;

* It doesn’t have the money;

* The person seeking indemnification is unable to persuade management to grant it; or,

* The corporation purchased insurance to fulfill its indemnification obligation.

What is the result? A director may face a loss that is neither insured nor indemnified, de- spite the fact that the actions were in good faith and were not contrary to the best interests of the corporation.

There are, of course, claims that a corporation simply may not indemnify. Most fall within the ambit of breach of the duty of loyalty. For example, corporate law in most, if not all, states forbids a director from usurping (taking personal advantage of) an opportunity that belongs more appropriately to the corporation. Further, a loss may not be indemnified because the individual was not acting in a capacity in which indemnification was available.

Many truly non-indemnifiable claims will not be covered because of other policy exclusions. Usurping a corporate opportunity, a classic breach of the duty of loyalty, will almost certainly be excluded by the “personal gain” exclusion, except possibly for defense costs. Likewise, if an act is not indemnifiable because it was performed in a capacity other than as a director or officer of a particular corporation, it will fall outside the coverage of that corporation’s D&O policy.

V.

THE GOOD NEWS

While this is a complicated issue, it is not an insoluble one. Several carriers have addressed the issue of the potential gap in coverage by either offering alternative coverage with more favorable terms or rejecting the concept of presumptive indemnification completely.

The first round of policy forms styled as “Side-? Coverage” or “Individual Director Protection” have been supplanted, or at least supplemented, by policy forms that offer better coverage, although no insurance policy is a complete risk management solution. Unfortunately, the cost of this improved coverage is high.

Some insureds, aware of the shortcomings in their D&O, have opted for alternative risk transfer methods. There may even be instances in which an insured is willing to accept a policy whose coverage is limited to non-indemnifiable loss, despite the issues raised.

Whatever the outcome, it is essential that insureds and their advisors be proactive in dealing with the subject and that the individual insureds be appraised of potential issues.

VI.

CONCLUSION

This analysis is not intended to point an accusatory finger at D&O insurers, but rather to demonstrate the difficulties that can ensue when industry jargon is assumed to have a common and consistent meaning that does not conform to statutes, case law, or even dictionary definitions.

Unfortunately, relationships among insurers, insureds, and other insurance professionals have grown strained over the years. The result is an erosion of trust. The fact that many insureds are actively seeking alternatives to the conventional insurance market highlights this fact. In their customers’ eyes, insurers tout partnership, safety, and reliability, while at the same time drafting policy forms that offer less coverage for more money. In addition, a number of carriers and brokers have chosen to advertise new coverage forms by implying that traditional D&O policies can easily be rescinded.24 Worse, the prevailing culture encourages insurers to keep payments secret, engendering a belief that carriers refuse to pay legitimate claims, or at best, honor contracts only after litigation. The highly public rash of rescission actions by carriers exacerbates the situation. Faced with the potential of paying billions, the mantra of D&O insurers is that the insured must have “more skin in the game.”

According to the 2001 Tillinghast Survey, the average D&O limit for companies of all sizes was $20.14 million.23 By 2002, the average limit of total coverage had actually dropped to $ 18.87 million.26 In the same period, the average class-action lawsuit settlement increased by sixty-five percent, from $14.7 million to $24.3 million.27 Of all claims against directors and officers (not just securities), sixty-six percent were fully indemnified by the corporation, but only twenty-three percent were reported as “fully covered” by insurance, and only nine percent as partially covered.28

While insurers have been beset by their own losses, they might not have noticed that their insureds have substantially increased their “skin in the game.”

There is more bad news to come: Federal securities class action litigation suits increased by 31 percent between 2001 and 2002, rising from 171 to 224 filings.29 In light of such predictions, it is hardly reassuring for clients to hear that insurers do not believe they have suffered enough. While it is true that insureds have committed fraudulent acts in some cases, those instances are relatively few.

One assumes that the major players in the D&O market wish to remain viable forces. In a market where a dozen companies control eighty-five percent of the business, one or two companies can affect real change. Short-sighted, short-term fixes, however, are no substitute for systemic improvement.

[dagger] Submitted by the author on behalf of the FDCC Management, Economics and Technology of Practice section. The views expressed herein represent my own opinion and not necessarily that of Arthur J. Gallagher Risk Management Services or my colleagues there.

1 It Still Costs Big /o Insure Against Boardroom Scandal, WALL Sr. J., July 31, 2003, at Cl.

2 NIB/National Union: Issues, available at http://www.aig.com/directorsandofficers/html/ nu_issues_box.html#poor_cconomics (as of June 20, 2004). There is no explanation of either “rate” or “exposure,” but the sentiment is clear.

3 The quoted provision itself is derived from a number of policies, including, but not limited to AIG IDL Premier 80808 (3/03), American International Group’s ExecSecure 81776 (3/03), American International Group’s D&O First 80894 (3/03), Chubb Executive Risk Not For Profit C22207 (9/96 ed.), Executive Liability Underwriters General Partners & Limited Partnership Reimbursement GP 71 OO 05 00, Onebeacon Management Liability Form No. Gl 6229 03 02 (12/02 ed.), Travelers DPR-1001 (7/98), Travelers Private Company Director and Officer Liability PLUS DPR-1001 (7-98), United States Fire Platinum Management Protection (Private Companies FM) 124.0.0, and XL Management Liability and Corporate Reimbursement from, DO 71 OO 09 99. In addition, they can be found in Securities claims and other endorsements added to D&O forms.

4 Id.

5 As most insurers know, ambiguity in policy wording can be an unhappy event, even in D&O. See, e.g., Qwest Communications Int’I, Inc. v. Nat’1 Union Fire Ins. Co., 821 A.2d 323 (Del. Ch. 2003) (a sophisticated insured is entitled to have a court construe ambiguities against the insurer); In re Molten Metal Tech., Inc., 271 B.R. 711 (D. Mass. 2003) (insured versus insured provision does not include a trustee in bankruptcy where language is ambiguous).

6 Unless otherwise noted, use of the term “director” also includes “officer.”

7 Presumptive indemnification was proposed in the last D&O crisis, but did not gain wide acceptance foilong. Some carriers kept the provision in their forms, but would remove it for little or no additional premium.

8 see, e.g., Chicago Title & Trust Co. v. Forty-One Thirty-Six Wilcox Bldg. Corp., 302 U.S. 120, 126 (1937) (quoting Stellwagen v. Clum, 245 U.S. 605, 613 (1918)); see also Morton v. Nat’1 Bank of N.Y. (In re Morton), 866 F.2d 561, 563 (2d Cir. 1989) (quoting same); Missouri ex rel. Darr v. A.B. Collins & Co., 34 F. Supp. 550, 554 (W.D. Mo. 1940) (“[FJf a bankruptcy law conflicts with some state procedure, of course the state procedure must give way . . . .”).

9 I am avoiding the issue of whether the proceeds of a D&O policy belong to the corporation or the individuals. That issue is rightly the subject of its own article.

10 Title 8, section 145 of the Delaware Code reads, in pertinent part:

(a) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.

(b) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (Emphasis added.)

11 Section 145(c) provides:

To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

12 Section 145(f) provides:

The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.

13 Id. § 145(b).

14 Id. (emphasis added).

15 section 145(a) allows the indemnification of third party claims (with the same requirement of good faith and loyalty), even when the person seeking indemnification has been found liable.

16 Title 8, section 102(b) of the current Delaware Code provides:

In addition to the matters required to be set forth in the certificate of incorporation by subsection (a) of this section, the certificate of incorporation may also contain any or all of the following matters

. . . .

(7) A provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director: (i) For any breach of the director’s duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation oflaw; (iii) under § 174 of this title [deals with a director’s liability for unlawful payment of dividends or unlawful stock purchase or redemption]; or (iv) for any transaction from which the director derived an improper personal benefit. . .

See also In Re Baxter Int’l, Inc. Shareholders Litig., 654 A.2d 1268, 1270 (Del. Ch. 1995) (dismissing a derivative action, in part because of a provision drawn form section 102(b)(7)).

17 see Malpiede v. Townson, 780 A.2d 1075 (Del. 2001). see generally Thomas C..Lee, Limiting Corporate Directors ‘Liability: Delaware ‘s section l()2(b)(7) and the Erosion of the Directors ‘Duly oj Care, 136 U. PA. L. REV. 239 (1987) (arguing that section 102(b)(7) does not adequately preserve a director’s duty of care to shareholders).

18 In at least one case, Manley v. Ambase, Corp., 337 F.3d 237 (2d CIr. 2003), a corporation agreed to much broader contractual indemnification than the statutory framework would appear to support. In that case, the indemnification provision (governed by Delaware law) read:

If [the director] has been or is made a party … to any action, suit or proceeding … by reason of the fact that he was a director or officer of AmBase … or by reason of the fact that he was serving at the request of AmBase as a director, officer, member, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise,… he shall be indemnified and held harmless by AmBase . . . against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered… in connection therewith ….

Id. at 242. The corporation honored this provision for the settlement of at least eighteen third party and derivative lawsuits. It drew the line, however, when Manley demanded that Ambase pay his share of the settlement in the bankruptcy of his outside law firm. The second Circuit held the indemnification did not stretch that far, not because of statutory restrictions but because the grant had been to Manley, the individual, while Manley, the Professional Corporation, had been the partner in the law firm.

19 One federal court in New York opined in an unpublished opinion that to allow section 145 to permit the indemnification of settlements of derivative actions would be ‘”circular.” TLC Beatrice Int’l Holdings, Inc. v. Cigna, 1999 WL 33454 (S.D.N.Y. 1999). In this at case, the carrier attempted to avoid coverage under a policy that excluded indemnifiable claims, asserting that the bankrupt estate should indemnify the officers. The judge noted that no Delaware court had decided the same issue. The case is instructive, but not precedent. Further, the “circularity” reasoning noted by the court is not universally accepted. See, generally, Mae Kuykendall, A Neglected Policy Option: Indemnification of Directors For Amounts Paid to Settle Derivative Suits – Looking Past “Circularity” to Context and Reform, 32 SAN DIEGO L. REV. 1063 (1995).

20 825 A.2d 275 (Del. Ch. 2003).

21 N.Y. Bus. CORP. LAW § 724 (McKinney 2003); CAL CORP CODE § 317 (2004). Delaware recognizes the concept of “success” as a prerequisite to mandatory indemnification. As with other states, the definition of success is not always simple. In Merrit-Chapman & Scott v. Staub, 321 A.2d 138 (Del. Super. Ct. 1974), the court permitted indemnification of defense costs for criminal charges that were later dropped, though the indemnitee was convicted on others. The court in that case reasoned as follows:

The statute does not require complete success. It provides for indemnification to the extent of success “in defense of any claim, issue or matter” in an action. Claimants are therefore entitled to partial indemnification if successful on a count of an indictment, which is an independent criminal charge, even if unsuccessful on another, related count.

Id. at 141.

22 Perhaps in recognition of the complexity of the corporate law, Delaware, like all other states, allows a corporation to insure risk whether or not it could have indemnified it. DHL. CODI; ANN. tit. 8, § 145(g) (2004).

23 For example, a particular officer of an investment company may he asked to serve on outside boards either formally or as an adviser. The investment company may offer that particular officer broad indemnification for potential liability arising from that service, even if the officer is not “duly elected or appointed” by the outside companies.

24 American International Group, Advertisement, D&O Insurance: 2003-2004 Briefing Paper, (2003) (using the words “rescind” or “rescission” at least twenty-nine times in its effort to sell the company’s Side-A coverage), available at http://www.briefbase.com/pnews/news_553.pdf (as of June 20, 2004); see also, Dan A. Bailey, Directors and Officers. THE ACE REP., available at http://www.acelimited.com/MediaCenter/ DAndOReport/html/daor_30.html (as of June 20, 2004); Laurie B. Smilan, Directors’ and Officers Liability Insurance: The Economics of Fraud, AIG, at http://www.aig.com/directorsandofficers/pdfs/lw.pdf (as of June 20, 2004); Julianna K. Burke, Rescission of Directors’ and Officers’ Liability Insurance Policies, MORRIS, MANNING & MARUN, LLP. REVIEW, Fall 2002, at 3, available at http://www.mmmlaw.com/industry/insurance/Fall_2002_Newsletter.pdf (as of June 20, 2004).

25 Tillinghast-Towers Perrin, 2001 DIRECTORS AND OFFICERS LIABILIIY SURVEY, Table 11c.

26 Tillinghast-Towers Perrin, 2002 DIRECTORS AND OFI-ICERS LIABILITY SURVEY, Table 11c.

27 CORNERSTONE RESEARCH, SECURITIES CEASS ACTION SETTLEMENTS 2002: A YEAR IN REVIEW 2 (2003), available a! http://securities.cornerstone.com/pdfs/LES%20YIR.pdf (as of June 20, 2004); see also LAURA E. SIMMONS & ELLEN M. RYAN, POST -REFORM ACT SECURITIES case SITTLEMENTS caseS REPORTED THROUGH DECEMBER 2002 (Cornerstone Research 2003), available at http://www.cornerstone.com/fram_res.html (as of June 20, 2004).

28 Tillinghast-Towers Perrin, 2002 DIRECTORS AND OFFICERS LIABILITY SURVEY, Tables 71, 72.

29 The Stanford Law School securities Class Action Clearinghouse, available at: http:// securities.stanford.edu/.

Donna Ferrara holds the position of Senior- Vice President and Managing Director of Gallagher Strategic Risk Solutions, the professional liability division of Arthur J. Gallagher, Inc., an international insurance brokerage and risk management services firm. In addition, Ms. Ferrara has spoken and written on numerous subjects, including D & O Liability, International Insurance Issues, Internet Liability, Securities Litigation Reform and Employment Practices Issues. During over 20 years of insurance experience, Ms. Ferrara has represented clients in a wide array of insurance matters, in both corporate and litigation arenas. Her articles on insurance, law and technology have been published in the legal and trade press. Admitted to the New York, New Jersey and federal bars, Ms. Ferrara holds a B. A. from Roger Williams College, a J.D. from New York Law School and an L.L.M. from the New York University School of Law.

Copyright Federation of Defense & Corporate Counsel, Inc. Summer 2004

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