With the U.S. Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, overturning Roe v. Wade, companies across industries and geographies are exploring and, in some cases, already implementing protocols to assist their employees in gaining access to health care services they may not be able to obtain in their own states. Organizations’ decisions to develop these protocols are voluntary but, in a politically charged environment, could present management liability risks relative to program design and execution.
Directors’ and officers’ (D&O) liability and management risks include the potential for government investigations and proceedings, even criminal proceedings. On the heels of Dobbs, several states enacted laws to prohibit providing assistance to individuals seeking to circumvent criminal statutes in their own states. With this in mind, it is conceivable that companies and company officials could become the subjects or targets of state investigations and/or proceedings, as well as proceedings brought by private citizens suing to enforce statutes like the ones in Texas and Oklahoma which purport to grant them standing.
Foreseeable claim scenarios might also include shareholder allegations that a company’s purported violation of state law in implementing an assistance program may constitute a breach of fiduciary duty or a waste of corporate assets. Such claims could take the form of shareholder derivative suits.
Conversely, derivative lawsuits are possible to the extent that shareholders assert companies issued statements, whether to public shareholders or private investors, regarding their programs that turned out to be false or misleading, perhaps not as comprehensive or equitable as disclosed. If, and likely only if, the company sustains a substantial stock-price drop close in time to disclosures relating to their policies, the company might face securities class-action lawsuits arising from alleged misrepresentations.
D&O liability insurance policies cover the indemnified and non-indemnified management liability exposures of directors and officers, as well as certain corporate liabilities. Anticipated litigation would appear to fall within most policies’ definitions of “claim.” In such matters, defense fees and compensatory forms of relief may be covered.
Coverage limitations, however, are likely to surface to the extent there are investigations into the company itself (as opposed to investigations into individual insureds). For government proceedings, including criminal proceedings, coverage for defense costs may be available, but coverage for civil fines or penalties, or relief that may be restitutionary in nature, are generally quite limited in scope. Coverage for criminal fines and penalties are more broadly excluded altogether.
It also is important to note that, for public companies, coverage for the company itself is limited to securities claims, so any coverage at all for the company’s defense or resolution of proceedings, criminal or otherwise, would not be afforded to the extent alleged wrongdoing does not involve company securities.
Policy exclusions may also trigger. The policy’s exclusion for deliberate misconduct may trigger if there were a final adjudication that such conduct occurred. Depending on the nature and scope of a plaintiff’s allegations, the policy’s exclusion for bodily injury or illness, or potentially an employment practices liability exclusion, might also give rise to coverage limitations.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
