Open Access. Powered by Scholars. Published by Universities.®
Corporate liability; shareholder rights; shareholder lawsuits; insurers' liability; corporate insurance
Articles 1 - 1 of 1
Full-Text Articles in Securities Law
How Collective Settlements Camouflage The Costs Of Shareholder Lawsuits, Richard Squire
How Collective Settlements Camouflage The Costs Of Shareholder Lawsuits, Richard Squire
Faculty Scholarship
Corporations insure against liability in shareholder lawsuits by buying tiered coverage from multiple insurers who each cover a distinct segment of the potential damages range. Rather than negotiating to settle individually with the plaintiff, the insurers seek to reach a single, collectively binding settlement agreement. This combination of segmented coverage and collective settlements produces a conflict of interests: the corporation’s managers and some insurers are better off if the case settles pre-trial for the expected damages, while other insurers are better off going to trial. To force reluctant insurers to settle, courts have created a duty that can require an …