Directors and Officers: Whose, How Attorney's Fees Are Funded ...

... May Just Determine the Outcome of the Cases Against Them.

   This idea was explored in a post here on August 3, 2011, "Director's and Officer's Liability Coverage:  Exhausted or No Coverage, Results?"  In that post, the idea was particularly exposed in the context of exhaustion of D&O Coverage vs. No D&O Coverage Available.  The Insurance Coverage context provided the question in that post, what results flowed from either the exhaustion or the total unavailability of D&O Coverage for Defense Expenses.

   As if on cue, a newspaper column on Saturday, August 6, 2011 was published around the question of what happens when a private corporation either does not fund or stops funding the Defense Expenses of Corporate Officers and Directors -- and, in at least one situation, stops funding the Defense Expenses of a private eye hired by the corporation.  See  James B. Stewart, "Common Sense / A Murdoch's Missed Opportunity"  p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, August 6, 2011).

   Here is the columnist's answer to that question:

   However controversial in Britain, the practice of companies' paying their officers and employees' legal expenses in criminal investigations is not only routine in America but has been elevated by some to the status of a constitutional right.  A little-discussed but open secret among defense lawyers and prosecutors alike is that who pays the legal fees often decides the outcome of an investigation.

Id.

   Now back to the idea of observing results of underlying liability claims against Directors and Officers, when their Defense Expenses have either exhausted the available D&O Coverage, or D&O Coverage is simply not available from the outset.  Time -- and the results -- will tell.

On related Insurance Coverage Issues under D&O Coverages, see Guest Post by Richard Bortwick and Micah Knapp, Introduction by Blog Host Kevin M. LaCroix, "2nd Circ. Holds D&O Policies Cover Voluntary Compliance Expenses and Special Litigation Committee Costs" posted July 29, 2011 on "The D&O Diary" Blog.

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