NEW YORK--(BUSINESS WIRE)--Jun. 26, 2014--
American International Group, Inc. (AIG) insurers have introduced a new
policy endorsement that ensures primary D&O policy funds are immediately
available to clients named as defendants in securities lawsuits for the
preparation of “event studies.”
The endorsement was developed in anticipation of the U.S. Supreme
Court’s June 23, 2014 decision in Halliburton Co. v Erica P. John
Fund, Inc., which places added importance on costly event studies early
in the litigation process as a way to determine whether securities
actions can be certified as a class.
AIG, one of the largest D&O carriers in the world, is first to market
with this new D&O policy endorsement. The endorsement has no retention
requirement. Additional premiums are not required.
In Halliburton, the Supreme Court addressed a significant
challenge to the long-standing “fraud on the market” theory in class
action litigation. The theory asserts 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. This presumption effectively allowed plaintiffs to bring
securities suits as class actions.
In the ruling, the Court declined to reject the fraud on the market
theory entirely. It held, however, that defendants were entitled to
rebut plaintiff’s presumption of reliance on the theory with evidence
that alleged misstatements had no ”price impact” on share value.
Presenting this evidence, in the form of event studies prepared by
expert economists, may lead to significant costs for plaintiffs and
defendants early in the litigation process.
“During the Halliburton oral argument, we noted several Justices
mention the event study as a form of expert evidence to assess price
impact. We felt if the Court left fraud on the market standing, it would
probably permit the parties to produce event studies in defense of the
class certification process,” said Chris Sparro, President, Financial
Lines for AIG’s Americas Region. “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.”
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.
AIG offers market-leading primary and excess coverage to directors and
officers of domestic and multinational public and private companies,
non-profit entities, and financial institutions to protect against board
American International Group, Inc. (AIG) is a leading international
insurance organization serving customers in more than 130 countries and
jurisdictions. AIG companies serve commercial, institutional, and
individual customers through one of the most extensive worldwide
property-casualty networks of any insurer. In addition, AIG companies
are leading providers of life insurance and retirement services in the
United States. AIG common stock is listed on the New York Stock Exchange
and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com
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AIG is the marketing name for the worldwide property-casualty, life and
retirement, and general insurance operations of American International
Group, Inc. For additional information, please visit our website at www.aig.com.
All products and services are written or provided by subsidiaries or
affiliates of American International Group, Inc. Products or services
may not be available in all countries, and coverage is subject to actual
policy language. Non-insurance products and services may be provided by
independent third parties. Certain property-casualty coverages may be
provided by a surplus lines insurer. Surplus lines insurers do not
generally participate in state guaranty funds, and insureds are
therefore not protected by such funds.
Source: American International Group, Inc.
American International Group, Inc.
Matt Gallagher (Media):