Reed Smith Report: On the Coattails of United States v. Trek Leather, Make Sure You Have Suitable D&O Coverage

In a recent Directors & Officers Liability case, United States v. Trek Leather, a federal appeals court held that the government could hold individual corporate officers liable for a civil penalty based on the gross negligence committed by the officer or his or her agents acting in the scope of their duties to the company, and without the government establishing fraudulent intent or attempting to pierce the corporate veil.

In light of this decision, Reed Smith is advising its clients to review their insurance policy to confirm that there is coverage for fines and penalties:

“For directors and officers facing similar risks, it is important to ensure that the company’s directors’ and officers’ liability (“D&O”) insurance program includes comprehensive coverage for non-indemnifiable Claims against corporate directors and officers (“Side A” coverage), including coverage for civil fines and penalties (to the extent insurable under applicable law), in the event the company is unable or unwilling to pay or indemnify for civil fines and penalties.”

To learn more about Corporate D&O Insurance, please click here.

To learn more about portable Personal Directorship Liability policies, please click here.

To read the Reed Smith Report, please click here