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HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION

HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION. The Round-Up…. MODERATOR: Timothy W. Burns, Esq., Partner, Perkins Coie LLP PANELISTS: Tom Baker Ph.D., William Maul Measey Professor of Law and Health Sciences, University of Pennsylvania and the Wharton School

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HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION

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  1. HOW D&O INSURANCE TRANSFORMS SHAREHOLDER LITIGATION

  2. The Round-Up… MODERATOR: • Timothy W. Burns, Esq., Partner, Perkins Coie LLP PANELISTS: • Tom Baker Ph.D., William Maul Measey Professor of Law and Health Sciences, University of Pennsylvania and the Wharton School • Sean M. Fitzpatrick, Esq., Lecturer, University of Connecticut School of Law • Stuart M. Grant, Esq., Managing Partner, Grant & Eisenhofer P.A. • Kim D. Hogrefe, Esq., Senior Vice President, Senior Specialty Claims Officer, Chubb & Son • Anne R. Myers, Esq., Partner, Kaufman Dolowich Voluck &Gonzo LLP

  3. 8% 7% 6% 5% 4% 3% 2% 1% 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Median Ratio of Settlement to Investor Losses January 1, 1996–June 30, 2010 And such small Portions! It’s really just pocket shifting! Settlement Year

  4. Insurance Undermines Deterrence Thanks, but gotta go … NetJet is waiting Premium differences are too small to change behavior. Underwriters don’t (can’t?) prevent bad acts.

  5. INSURING • CORPORATE MISCONDUCT

  6. Now the Good News! • D&O insurance is priced to risk • The merits matter • We have a deterrence fix Uh, oh!

  7. Our Reform Proposal • DISCLOSURE: D&O program details and who pays what in settlement • MAGNIFY the pricing signal • IDENTIFY the insurance effect on settlement • COINSURANCE: Sides B &C • Keep the corporation’s skin in the game • Control costs and reduce collusion

  8. How D&O Insurance Transforms Shareholder Litigation Typical Shareholder Litigation How it works: Derivative Litigation Securities Litigation

  9. How D&O Insurance Transforms Shareholder Litigation The Purpose of Shareholder Litigation Victim Compensation? Deterrence?

  10. How D&O Insurance Transforms Shareholder Litigation Does D&O Insurance Impact Deterrence?

  11. How D&O Insurance Transforms Shareholder Litigation Do D&O Insurers Deter Wrongful Conduct?

  12. How D&O Insurance Transforms Shareholder Litigation Reform SEC Mandated Disclosure of D&O Insurance Details Mitigating Moral Hazard by Reducing Corporate Coverage Making Merits Matter Through Settlement Disclosures

  13. Questions&Answers

  14. Many Thanks To… • Tim Burns • Sean Fitzpatrick • Stuart Grant • Tom Baker • Kim Hogrefe • Anne Myers

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