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ARC: A WORLD OF RISK: MANAGING FOREIGN BRIBERY AND CORRUPTION EXPOSURES

International directors and officers liability insurance market growing

SAN DIEGO—The market for international directors and officers liability insurance is growing, but there are some key differences facing companies operating internationally compared with doing business in the United States, experts say.

The United States “may be the mother of it all, but the world has evolved,” and each country has developed its own security action or class action statutes and regulations, said Perry S. Granof, Glencoe, Ill.-based of counsel to law firm Williams Kastner.

Mr. Granof was among the speakers at a panel on “International D&O: Evolving Risks, Exposures and Coverages” at the 24th annual Professional Liability Underwriting Society conference in San Diego on Thursday.

In the U.S., said Mr. Granof, the law is based on the concept “that every person should have his or her day in court.” But that is not the case elsewhere, he said. In England, for instance, the loser pays the legal costs, which has a chilling effect if an individual is suing a corporation.

David B. Williams, Boston-based vp at Chubb Specialty Insurance, a unit of the Chubb Corp., said other countries have enacted legislation comparable to the Sarbanes-Oxley Act dealing with governance rules and procedures in this “post-Enron world.”

Edward Smerdon, a partner with law firm Sedgwick Detert Moran & Arnold L.L.P. in London, said countries including France, Spain and Germany have updated and improved their laws in this area. And England's version of the Foreign Corrupt Practices Act is more stringent than the U.S. law, he said.

Mr. Granof said another difference between the U.S. and other countries is that only in the U.S. is there a viable “opt-out” for class action settlements, where people within the class are included unless they request otherwise.

Ann Longmore, New York-based executive vp at Willis of New York Inc., said in countries including Germany, claims against a public company must be brought by the firm's own supervisory board, akin to derivative claims in the United States.

Mr. Williams noted that few other jurisdictions outside of the U.S. permit contingency fees, but a “new wrinkle” is litigation funding, which is catching on in a couple of countries and is expected to expand.

Mr. Smerdon said certain funding firms in the United Kingdom and Europe have arrangements whereby they will fund plaintiff litigation and, if it is successful, get a cut of the proceeds—but they also may be expected to pay the fees if the plaintiff loses. There is insurance available to these firms if this occurs, said Mr. Smerdon.

But in the United Kingdom, funding firms cannot interfere with the litigation, “so the fund has to step back” once it makes the decision to fund a case. If it does interfere, it is “likely to be found to be unlawful,” he said.

Also speaking at the session was Christopher Magee, London-based managing director with Hartford Financial Products International Ltd., a unit of the Hartford Financial Services Group.

The session was moderated by David K. Bradford, executive vp and editor in chief of Advisen Ltd. in New York.

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