Axis Insurance Services Blog

Litigation Costs Sends D&O Premiums Skyrocketing

Written by Drew Smith | Jan 5, 2021 6:15:00 PM

With COVID related lockdowns continuing , many people are suing their former employers over lost wages and other related concerns. However, the rise in premiums aren’t just tied to pandemic related crises.

The last two years for the Director’s and Officer’s market was some of the hardest markets in the industry and it can be chalked up the rising amount of litigation in the last couple of years. According to the Carlton Fields Action Survey for 2020, “corporations spent $2.46 billion on class action litigation in 2018 and $2.64 billion in 2019. The report projects that for this year, corporations will spend $2.73 billion on class action suits, and that in-house legal spend will continue to climb in the coming years because of the coronavirus and new data privacy laws.”[1]

Ligations ranged from a variety of sources from COVID related exposures, to exposures caused by events such as #Metoo, to the changing data privacy laws such as the California Consumer Privacy Act. Heather Fon-Quade, head of Development for Financial Lines at Allianz stated “More and more insureds are looking at D&O as defense cost coverage, because a lot of times these cases are not going all the way to court, but the defense costs themselves are increasing as litigation increases. It’s also becoming a lot more complex, especially now that we have e-vendors and all sorts of data mining that has to be done in terms of discovery on cases, and that has increased the cost of litigation.” [2]

As with many insurances, COVID has created a much different environment for D&O insurance than people expected. But as the market hardens up, companies are going to have to make choices on what they need for this coverage.

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[1] https://www.insurancebusinessmag.com/us/news/professional-liability/incredible-increase-in-litigation-and-related-costs-puts-pressure-on-dando-242467.aspx