The recent U.S. Supreme Court ruling making it easier to get securities litigation dismissed at an earlier stage is only a partial victory for directors and officers and is likely to increase legal costs in the initial defense of such lawsuits.

In Halliburton Co. v. Erica P. John Fund Inc., the nation's highest court decided in a 9-0 vote that corporate defendants must be given the opportunity to show their actions did not affect the stock price of a publicly traded company before a class is certified, rather than have to wait until later at the merits stage of the litigation.

While the decision last month sided with Halliburton in overturning an April 2013 ruling by the 5th U.S. Circuit Court of Appeals, it failed to overturn a 26-year-old Supreme Court decision in Basic Inc. et al. v. Max L. Levinson et al. that spurred an increase in securities class actions.

Halliburton “had the potential to completely reshape the securities class action landscape,” but it “only went halfway to where it could have gone,” said Allison Barrett, senior vice president and FINEX Financial Services industry leader at Willis North America Inc. in New York.

As a result, legal experts recommend that companies make sure their directors and officers liability insurance covers expert fees and event studies, which assess how an event has or has not affected a company's stock price.

“There's going to be a bit of a wait-and-see attitude by both the plaintiff and defense bar to see how courts are going to take this decision and interpret it and apply it,” said Edward M. Larkin, a partner at law firm Edwards Wildman Palmer L.L.P. in New York.

In Halliburton, plaintiffs alleged that the Dallas-based oil field services company understated its asbestos liabilities. The case centered on the Supreme Court's 1988 ruling in Basic, in which the court endorsed the fraud-on-the-market presumption theory. Under that theory, plaintiffs do not have to demonstrate that each member of a class action relied on a company's alleged misrepresentation of information.

It is based on the presumption that in an efficient marketplace, a company's share price reacts to all publicly available information about the company. Experts have said Basic made it much easier for plaintiffs to file class action lawsuits.

While companies had hoped the Supreme Court would overturn Basic, which it left intact, the high court did give defendants a partial victory.

“Defendants must be afforded an opportunity before class certification to defeat the presumption through evidence that an alleged misrepresentation did not actually affect the market price of the stock,” Chief Justice John Roberts wrote for the court.

Permitting defendants to challenge the effect of alleged fraudulent misstatements at the class certification stage will enable defendants to “shorten the litigation considerably,” although “discovery will get more complicated” to produce evidence that misstatements had no effect on stock prices, Mr. Larkin said.

“Once plaintiffs get past certification, more often than not the case is settled, so I think what you're going to see is (plaintiff attorneys) working harder at the class certification stage in order to get the class certified,” he said. That will be more difficult “because now defendants can offer evidence to rebut the presumption.”

While two-thirds to three-quarters of securities suits never get to the class certification stage, Halliburton means at least some class certifications “that might have been granted” previously now will be denied, said Kevin LaCroix., an attorney and executive vice president at RT ProExec, a division of R-T Specialty L.L.C. in Beachwood, Ohio..

Heidi A. Lawson, a member of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo P.C. in Boston, recommended that buyers examine their D&O policies to be sure they cover expert fees and event studies, since some provide only narrow coverage of “legal costs incurred.”

“They really should double-check their definitions and make sure that they do have coverage for expert fees and the kind of fees that would be involved to do an event study, and it's broad enough to cover these kinds of defense costs,” Ms. Lawson said.

In anticipation of Halliburton, American International Group Inc. last month introduced a D&O policy endorsement that will provide funds immediately to clients named as defendants in securities litigation to prepare event studies.

As for the ruling's effect on the D&O liability market, Mark Weintraub, insurance and claims counsel at Lockton Cos. L.L.C. in Atlanta, said it's unlikely to be significant. While defense costs could go up marginally, spending a few hundred thousand dollars to defeat class certification could avoid an even larger settlement, he said.