In anticipation of the U.S. Supreme Court's June 23 decision in Halliburton Co. v Erica P. John Fund, Inc., AIG has developed a new endorsement for preparation of “event studies” to clients named as defendants in securities lawsuits.
PRODUCT: Event Study Endorsement
COMPANY: American International Group, Inc. (AIG) insurers
AVAILABILITY: AIG's Event Study endorsement is available on an open brokerage basis to all primary publicly-traded AIG policyholders, subject to any filing restrictions that may apply.
FOCUS: In anticipation of the U.S. Supreme Court's June 23 decision in Halliburton Co. v Erica P. John Fund, Inc.—which adds importance to costly event studies early in the litigation process to determine whether securities actions can be certified as a class—AIG has developed a new endorsement for preparation of “event studies” to clients named as defendants in securities lawsuits.
AIG is first to market with this new D&O policy endorsement. Because the Court upheld “fraud on the market” theory—asserting that the price of shares traded in an "efficient market" reflects all available information, including alleged misrepresentations by defendants, so that investors are presumed to have relied on those alleged misrepresentations when making their investment—parties may want to present evidence showing whether alleged misstatements had "price impact" on share value.
But presenting this evidence, including event studies prepared by expert economists, may lead to significant costs for plaintiffs and defendants early in the litigation process. "We created our endorsement to provide funds to our clients, free of retention requirements, so they could obtain the event studies early in the litigation process—potentially to head off class certification," says Chris Sparro, president, Financial Lines for AIG's Americas Region.
Agents can access the endorsement and additional information about the Halliburton Supreme Court case and its implications online.
UNDERWRITING: No new underwriting requirements as part of this enhancement of coverage. Current underwriting criteria already addresses the applicable claims: securities cases that are seeking class certification. The change in exposure recognizes additional expenses may now be incurred earlier in the defense process, and an insured may hire witnesses recommended by counsel to perform event studies without need for further approval. AIG's D&O underwriters and claims professionals will continue to monitor interpretation of the Halliburton decision to determine whether additional policy endorsements or changes are necessary.
MINIMUM PREMIUM: No additional premium either at policy issuance or mid-term.
TARGET: Publicly traded companies on a United States stock exchange, whether or not they are located in the U.S.
COVERAGE TERRITORY: Available globally to all companies traded on a U.S. stock exchange.
CONTACT: Louis S. Lucullo, chief underwriting officer, Financial Lines Americas Region; AIG Property Casualty, 175 Water Street, 5th Floor, New York, New York 10038; 212-458-1021.
Amy Skidmore is an IA contributor.
