The speakers in this RIMS 2016 session were:
- Jimmy Kirtland, VP, Corporate Risk Management, Voya Financial
- Aloysius Tan, Data Analyst, Advisen
Four directors and officers (D&O) claim trends have grown in significance. Drivers of these trends include regulatory changes – the most major trend, shift in the focus in terms of prosecution, plaintiff’s bar identifying new sources of revenue and response by corporate defense bar.
The four claims trends that are emerging and were presented include:
- Patent infringement – prohibits the unauthorized use of a patented invention and is covered by title 35 of the US code. Here D&Os are usually not liable unless there is evidence of deliberate acts by a director or officer leading to the alleged infringement. The claims resolution process is fact-based and the majority of cases settle through mediation or negotiation.
- Violation of the Foreign Corrupt Practices Act (FCPA) – prohibits business based in or operating in the U.S. from gaining an unfair advantage through bribes and can extend to companies and their directors, employees and agents. Losses can be significant and the majority comes from investigation costs.
- Violation of the Video Privacy Protection Act (VPPA) – prevents the wrongful disclosure of video tape rental or sales record and remains one of the strongest protections of consumer privacy against data collection. Violations occur when an organization shares its customers PII without consent. Losses can include statutory damages, attorney fees punitive damages among others.
- Violation of the False Claims Act – has been government’s most effective and successful tool in fighting waste, fraud and abuse in federal spending. The largest recoveries are related to healthcare fraud. Anti-kickback statutes protect federal healthcare programs and patients from fraud and abuse. Potential losses can include fines and civil penalties, incarceration and exclusion from future participation in federal healthcare programs.
The speakers briefly spoke about other concerns of directors and officers currently. The most major concern currently revolves around cyber and IT privacy issues. Here there may be various policies that will likely have to respond, including cyber and D&O policies. It is important to make sure all policies are reviewed and coverage is adequate and it must be a collaborative effort with the involvement of Risk Managers, IT, Legal, Compliance and HR.