(Reuters) — News Corp. will receive $139 million worth of insurance proceeds in a rare cash settlement that resolves a lawsuit by shareholders alleging the board failed to investigate the company's phone hacking scandal.

The $139 million, which will be paid by the liability insurance for the board members, is the largest cash settlement in such a derivative case, according to one of the plaintiff's attorneys.

In a derivative lawsuit, shareholders seek to step into the shoes of the company and hold board members and officers responsible for harm caused to the corporation. The cases often settle for changes to corporate governance, and as is the case with News Corp., any payment goes to the company, with shareholders benefiting indirectly.

The original lawsuit, brought by plaintiffs including the labor union-owned Amalgamated Bank and the New Orleans Employees' Retirement System, accused the board of refusing to investigate alleged phone hacking because the directors were more interested in protecting the interests of the Murdoch family.

Rupert Murdoch, who is chairman and CEO of News Corp., controls the company. His sons, Lachlan and James, sit on the News Corp. board.

Since the breadth of the phone hacking and bribery scandal in Great Britain came to light in 2009, scores of News Corp. employees have been arrested and one of its most popular tabloids News of the World was shuttered.

The lawsuit also alleged that Mr. Murdoch used News Corp. funds for political donations to advance his conservative political agenda, which the plaintiffs said showed the board lacked independence and could run afoul of election laws.

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As part of the deal, News Corp. said it would adopt enhanced corporate governance procedures — including a policy to disclose to its shareholders political contributions made directly by the company.

The agreement indicated the settlement is not an admission of wrong doing by News Corp.

"We are pleased to have resolved this matter," News Corp. said in a statement.

The settlement comes as News Corp. prepares to separate into two publicly traded companies later this year: One dedicated to its publishing assets such as The Wall Street Journal and Times of London, and the other, which will operate its entertainment division, and includes the Fox network.

The adopted corporate governance procedures will apply to both companies.

The plaintiffs first sued in March 2011 over News Corp's $670 million acquisition of Shine Group Ltd., a company owned by Chairman Rupert Murdoch's daughter.

Cash settlements of derivative lawsuits became more common with last decade's lawsuits that related to the backdating of options awarded to executives, according to Kevin LaCroix of OakBridge Insurance Services, who runs the D&O Diary blog.

Some big settlements of recent years included a $100 million donation to charity in 2005 by Larry Ellison of Oracle Corp., who was alleged to have traded using nonpublic information.

Independent research firm GovernanceMetrics International, which grades companies' corporate governance, has given News Corp. an 'F' grade in each of the past six years.

Still, investors have driven up News Corp. shares 65% over the past 12 months.

News Corp shares rose 0.5% to $31.37 in afternoon trade.