Academic journal article ABA Banking Journal

Consider D&O Legislation Carefully

Academic journal article ABA Banking Journal

Consider D&O Legislation Carefully

Article excerpt

House Banking Committee Chairman Henry Gonzalez will likely introduce a bill this year invalidating the regulatory exclusion found in many directors and officers liability insurance policies--possibly even making the prohibition retroactive.

Under policies with these exclusions, insurers decline to cover the costs of regulatory lawsuits. Is this a good thing for bank directors and officers? Not so good as it might seem, ABA stated in a message to Gonzalez, who sees the exclusion as denying FDIC the ability to more fully recover losses:

"... D&O insurance has helped banks to attract directors and officers in today's volatile and competitive environment. Moreover, the existence of a regulatory exclusion provision is a major reason why such policies remain widely available at reasonable prices. If insurers are prevented by law from using the regulatory exclusion, the availability of D&O insurance will be substantially curtailed and the costs will escalate. Those companies which will continue to underwrite the risk of D&O liability (and some will not) will face significantly greater risk and will be forced to market much more expensive insurance products with higher deductibles."

ABA in the courts

In recent court actions, ABA's Office of the General Counsel has played a role. In brief:

* ACH or UCC? …

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