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More up D&O limits: Survey

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More companies are increasing the amount of directors and officers liability coverage they purchase, although most companies kept their limits the same in 2010, according to research from Towers Watson & Co.

For the report, “Directors and Officers Liability: 2010 Survey of Insurance Purchasing Trends,” the New York-based professional services company last fall surveyed 496 organizations that buy D&O insurance.

Twenty-one percent of respondents said they'd increased their D&O limits compared with their prior D&O policy vs. 12% who did so in 2008, the last time the survey was done.

“Directors and officers have increased concern over the potential for litigation from a broader array of claimants,” said Larry Racioppo, leader of the executive liability group in Towers Watson's brokerage business.

Still, 75% of respondents said their limits had stayed the same, down from 86% in 2008, according to the report, which was released last week. Only 3% of survey respondents said they had decreased their limits.

Mr. Racioppo also noted that some of the growth in increased limits may stem from competition in the D&O market, which leads to reduced pricing. Insurance buyers, he said, may use part of the savings to boost their limits. “It's a buyer's market,” Mr. Racioppo said.

In addition, nearly one-third of respondents said they made a claim against a D&O liability policy during the past 10 years. Nearly half of those respondents said they had made claims for the legal costs of investor lawsuits, 30% for employment-related lawsuits, 21% for fiduciary lawsuits, 16% for regulatory matters and 15% for other issues.

More than half said they were satisfied with the way their insurers handled the claims, while 20% were unsatisfied and nearly a quarter were neutral.

Dave Hennes, director of risk management at Bloomington, Minn.-based Toro Co., said the lawn care product company did not boost its D&O limits last year.

“If I were to prognosticate, I'd expect we'd keep (the limits) the same again” when the policy renews in April, he said.

Mr. Hennes said when he made a presentation to his board of directors, they seemed to feel comfortable with their current limits.

The full survey is available at www.towerswatson.com.