This policy provides a Director protection against the following
Investment Advisory Services: Breach of fiduciary duty
With the help of its investment adviser, an investment company purchases stock for its portfolio directly from XYZ Company at a favorable price. Soon after, XYZ company commences a tender offer for its shares at a substantially higher price. XYZ shareholders, in turn, sue XYZ’s directors and officers as well as the investment adviser and investment company. The shareholders argue that the Investment Company and adviser aided and abetted a breach of fiduciary duty by XYZ’s directors and officers. A court refuses to dismiss the claims and allows the suit to proceed. The investment company and its adviser face legal fees in excess of $500,00 and damages of nearly $2,000,000.
Mutual Funds: Breach of fiduciary duty
Mutual fund shareholders sued the fund’s investment adviser and board of directors. The shareholders charge that the board approved excessive fees in violation of its fiduciary duties. Shareholders target the independent directors in particular, whom they claim were uninformed and failed to monitor the fees paid to the adviser. Following a two-week trial, the court finds in favor of the adviser and the directors. However, defense fees and costs for the entire case, which involved protracted discovery and pretrial proceedings, amounted to more than $1.5 million.
Home products: Misrepresentation of facts in the offering documents leading to shareholder claims
A Midwest-domiciled home products company retained an independent research firm to evaluate its new home product. Based on a favorable review by the outside firm, the company raised in excess of $10 million for the production and marketing of the new product. Prior to releasing the product, the company’s internal evaluation team discovered, after extensive testing, that the new product did not work properly. Shareholders have brought suit against the company and the directors and officers for misrepresentation in the offering documents. The plaintiffs assert causes of action for violation of various state securities laws and the Securities and Exchange Act of 1934. Damages alleged in the lawsuit exceeded $15 million.
Sector Not Revealed: Competitor Disputes
The plaintiff filed a complaint against their competitor alleging that a former employee, now working at the competition, engaged in unauthorized use of confidential and proprietary information and committed other acts of unfair competition. As a result, the plaintiff alleged it had suffered irreparable and immediate injury. In addition, the plaintiff alleged that the defendant had possession of its confidential information and intellectual property. The plaintiff asserted causes of action for misappropriation of trade secrets and confidential information, violation of the Computer Fraud and Abuse Act, unlawful access to stored information, and unfair competition. Total defense costs and settlement exceeded $350,000.
Manufacturing: Price fixing
The regulator sued the CEO, the President and other officers of a manufacturing company for price fixing. After an extensive trial, the allegations were dismissed due to lack of circumstantial evidence, but the defense costs and fees incurred were in excess of $750,000.
Note: The scenarios summarized above are offered only as examples. Coverage depends on the actual facts of each case and the terms, conditions, and exclusions in each individual policy. Policy terms may vary based on individual requirements