I gave my first directors and officers (D&O) liability insurance presentation to a board of directors in 1996. The CFO of this publicly traded company asked me to discuss the highlights of its recently renewed D&O insurance program. The presentation lasted less than five minutes—and not one question was asked by any of the board members present. In fact, most of them were engaged in other conversations that they must have deemed more important or more interesting than insurance. My presentation was a mere formality: the board essentially rubber-stamped the CFO’s insurance
decisions.

Since then, a board’s involvement in insurance decisions, like D&O coverage, has changed dramatically. Now our firm presents to its client public company boards and audit committees at least once a year. Board members are no longer passive and disinterested when it comes to insurance. Instead, most are well informed about the liabilities directors face and want to fully vet their D&O insurance protection—specifically its structure, limits and scope of coverage. Questions often arise about insurance carrier solvency, the importance of differences in conditions A-side coverage, appropriate coverage limits and the terms and conditions of the policy. A decade ago, CFOs generally made all these decisions; in today’s ever-litigious corporate environment, many executives now defer these important decisions to their entire boards for input and formal approval before finalizing major insurance placements.

Risky business

Boards are also becoming more engaged in risk management, specifically enterprise risk management (ERM). Traditional risk management identifies exposures to loss, examines various techniques to address the risk and then selects the most appropriate techniques to control it. Note that risk management focuses only on accidental losses, not all losses. A key technique used in risk management is insurance or risk transfer; however, insurance is only one facet of risk management. It’s been suggested that the paradox of insurance is that it is a good first and last response to managing risk, but is not always the most appropriate response. There are other important risk management tools, such as risk avoidance, self insurance, loss prevention, loss control, contractual risk transfer and alternative forms of risk financing.

All-encompassing risk

In contrast, enterprise risk management deals with all aspects of an organization’s risk, not just accidental loss. The Risk and Insurance Management Society defines ERM as “a strategic business discipline that supports the achievement of an organization’s objectives by addressing the full spectrum of its risks and managing the combined impact of those risks as an interrelated risk portfolio.” The Committee of Sponsoring Organizations of the Treadway Commission defines ERM as a “process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.” Both definitions are mouthfuls, but the point is that ERM is all-encompassing and comprises the spectrum of organizational risk. Note the key takeaway that ERM is a process “effected by an entity’s board of directors.” Since the recent financial and economic meltdown, the board’s involvement in ERM has grown significantly. Boards are expected to more effectively identify and assess risks across the organization, driven in large part by anxious shareholders and other stakeholders who want to ensure that both the balance sheet and shareholder value is properly protected. As such, the board’s role in ERM is one of the hottest topics in corporate governance.

Proposed rules

In July 2009, the Securities and Exchange Commission (SEC) took these responsibilities even further by proposing new disclosure rules regarding board oversight of ERM, which could impact how boards approach and manage risk in the future. The proposed amendments include newly mandated disclosures on the boards’ increasing involvement with ERM. If you thought directors of a public company had a tough enough job fulfilling traditional fiduciary and stewardship duties, imagine how those directors must feel knowing they could be held responsible for not accurately identifying and assessing all entity risks and for not properly planning a response for each one. If the SEC proposal passes, Christmas will come early and often to the plaintiff’s bar.

More responsibility?

The process of identifying and managing traditional and known risks is certainly doable for directors. But should they also be held accountable for the highly improbable “Black Swan”? According to Black Swan author Nassim Nicholas Taleb, “a Black Swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was.” He considers 9/11 the prime example of this phenomenon. Think about being responsible for identifying something that is unpredictable, something that has a huge negative impact, and after the fact, experts assert that you should have predicted it. That is one tough exercise for anyone. Boards need to be well equipped to deal with these increasing responsibilities, relying heavily on outside professional service providers to guide them through the labyrinth that is ERM. Whether or not the proposed SEC risk management oversight rules are enacted, ERM will become a recurring theme in boardrooms across America. In fact, it just moved to the top of the agenda.

by Spence Hoole

- Diversified Insurance Group was a title sponsor of the Summit 2009 Director & Officer Conference –

SALT LAKE CITY – December 11, 2009 –

“Requirements for today’s corporate directors and officers are evolving more quickly than ever before,” said David W. Steuber, partner in Howrey LLP, Los Angeles, Calif. Steuber joined a capacity group of more than 140 leading executives who participated in the 9th Annual Summit Conference for Directors and Officers (www.summitconf.org) at Stein Eriksen Lodge in Park City, Utah last week. SageCreek Partners, Ernst & Young and Diversified Insurance, along with several additional business support organizations, co-hosted the event.

“The Summit Conference is an event that is well worth attending,” Steuber continued.”It is a practical program for the director and officer who is serious about understanding cutting edge corporate governance issues and implementing measures designed to meet the ever-evolving legal, ethical, and social requirements imposed upon today’s businesses.”

Additional presenters at the event included Reatha Clark King, Ph.D, a member of the board of directors of Exxon Mobil, and Doyle Arnold, the Chief Financial Officer at Zions Bancorp. Working panels and topics included discussions of new SEC regulation, accounting changes and strategies for dealing with risk in organizations and industry. Keynotes included a discussion via satellite with U.S. Senator Bob Bennett. Additional presentations included keynotes by Bob Gay of Huntsman-Gay Capital and Lynn Blodgett, CEO of Affiliated Computer Systems, who spoke about company culture and the importance of being a good human while returning value to shareholders.

The Annual Summit Conference has featured senior management from the SEC, Nasdaq, PCAOB, CALSTERS and ISS, as well as leading industry executives and even a few controversial figures such as now-disbarred plaintiff’s class-action lawyer Bill Lerach. At the Summit, directors and officers of public or nearly public companies meet to receive updates on legal, financial, regulatory and business trends so that they can focus on their responsibilities in their professional roles.

OK, so I didn’t make the list this year. Hmmmmmmmm. . .

However, I do want to share the list with you all because that’s what blogging is all about — right? Sharing information.

I recently found this list on Lexis-Nexis Law Center that has all of these great resources for researching current topics relating to insurance law. Take a look when you have some time because there is a lot of information there.

The Lexis-Nexis Top 50 Blogs for Insurance is the following (follow the link at the end to go directly to the original source):

These blogsites contain some of the best writing out there on coverage, catastrophic loss, regulatory compliance, life insurance, health care and insurance issues in general. They contain a wealth of information for the insurance community with timely news items, practical information, expert analysis, frequent postings and helpful links to other sites.

These blogsites also show us how insurance issues interact with politics and culture. Moreover, they demonstrate how bloggers can impact the world of insurance law and insurance industry issues.

The 2008 Honorees are, in alphabetical order, as follows:

Blog-re.com – Brought to you by the publisher of reinsurance and fac magazine, this is the reinsurance industry’s first dedicated blog, this site provides opinions and thoughts on the issues driving the reinsurance industry. Published by Mark Geoghegan.

Boston ERISA and Insurance Litigation Blog – This blog covers ERISA, insurance coverage, and insurance bad faith. Published by Stephen Rosenberg of the McCormack Firm, LLC. 

California Insurance Lawyer Blog – This blog focuses on California insurance disputes and addresses ERISA, health insurance, insurance bad faith, life insurance, long-term care insurance and long-term disability (LTD) insurance. Published by Kantor & Kantor LLP.

Cal Insurance Regulation – This blog updates and comments on legal and regulatory issues affecting California insurance companies. Published by Steven H. Weinstein, Richard G. De La Mora, and Spencer Y. Kook of Barger & Wolen LLP.

Canadian Insurance Law Blog – This blog addresses issues related to insurance litigation, property damage, personal liability, commercial liability and insurance law affecting Canadian insurance companies in British Columbia and Vancouver. Published by Mike Thomas of Harper Grey LLP.

Cavanagh Williams Update – Provides insurance and litigation notes for LexMonitor, a daily review of law blogs and journals. Published by Cavanagh Williams.

Coverage Counsel – A rolling dialogue of New York insurance coverage cases and issues. Published by Roy Mura of Mura & Storm PLLC.

Coverage News – Provides information about recent developments of interest to those in the insurance and reinsurance community. Published by Thomas M. Bower of the Law Offices of Thomas M. Bower.

Declarations and Exclusions – News and Comments on California Insurance Law, the politics of insurance and other risky business. Published by George Wallace.

Ernie the Attorney – Personal musings on law and politics. Published by Ernest Svenson of the Svenson Law Firm.

Gauntlett on Insurance – This blog updates and comments on global policyholder insurance recovery. Published by David A. Gauntlett.

Gunn Law Blog – Reflections of a Florida legal veteran on insurance issues with a special emphasis on hurricanes, insurance coverage and bad faith, and Tropical Storm Fay. Published by Lee Gunn of the Gunn Law Group.

Health Insurance Blog – One of the most informative internet blogs on health insurance, the site posts commentary on health insurance issues relating to California health insurance and California carriers. Published by Info@healthinsuranceblog.com.

InjuryBoard Regional Blogs – This blog provides the latest injury news from across the country. The site provides visitors with up-to-date safety and injury news, legal analysis by a nationwide network of attorney bloggers, and an encyclopedia of practical information about important life-issues surrounding accidents and injuries that also provides assistance in identifying and connecting with qualified legal counsel. Published by Injury Board.

Insurance Claims and Issues – Commentary from a published author, speaker and consultant on the subjects of insurance coverage and insurance bad faith. Published by Dennis J. Wall of Winter Springs, Florida.

Insurance Claims and Bad Faith Law Blog – More commentary from published author, speaker and consultant Dennis J. Wall on the subjects of insurance coverage and insurance bad faith. Published by Dennis J. Wall of Winter Springs, Florida.

Insurance Coverage Law Blog – Insightful, cutting edge and funny, this blog is the go-to source for all matters relating to insurance coverage analysis, with special emphasis on the fallout from Hurricane Katrina. Coverage attorney and prolific blogger David A. Rossmiller is nationally renowned for his work on anti-concurrent cause clauses and his commentary on the downfall of Richard “Dickie” Scruggs. Published by David A. Rossmiller of Dunn Carney Allen Higgins & Tongue LLP.

Insurance Coverage Law in Massachusetts – Features commentary and practice tips on Massachusetts general litigation and insurance coverage issues to assist claimants, insureds and insurers who have disputes over motor vehicle, homeowners, general liability and other insurance policies. Published by Massachusetts attorney Nina E.
Kallen.

Insurance Coverage Lawyer Blog – Features commentary and analysis of cutting edge insurance issues arising from current events. Published by Alan S. Rutkin of Rivkin Radler LLP.

Insurance Defense Blog – Focuses on civil litigation defense in the Washington, D.C. metropolitan area. Published by Dave Stratton of Jordan Coyne & Savits LLP.

Insurance Law Hawaii – A commentary on insurance coverage issues in Hawaii. Published by Robert D. Harris and Tred R. Eyerly of Damon Key Leong Kupchak Hastert.

Insurance Law Notes – Provides insight and analysis of Pennsylvania insurance coverage law, cases and comments. Published by Richard T. Victoria of Meyer, Unkovic & Scott.

Insurance Scrawl – Commentary on the law of insurance, the insurance of business and the business of insurance. Published by Marc Mayerson.

InsureBlog – Commentary from industry professionals on insurance issues, principles and solutions. Published by William Halper, CLU, H.G. Stern, LUTCF, CBC, Bob Vineyard, CLU and Mike Feehan.

InsureReinsure – An insurance and reinsurance blog that provides insight and analysis on a wide range of topics, including arbitration, climate change, D&O liability, excess and surplus lines, insolvency, restructuring and run-off, Katrina and other catastrophes, life insurance and annuities, Lloyd’s, regulatory compliance, subprime/credit crisis, terrorism risk and insurance, and industry developments from various states and Latin America. Published by Brian Green, Carol-Ann Burton, Helen Clark and Jeanne Kohler of Edwards Angell Palmer & Dodge.

Law and Insurance – This blog keeps an eye on what’s developing in insurance law and practice. Published by David S. White of Thompson & Knight LLP.

Life Insurance Blog – Offers ideas, tips and news about life insurance and uses of life insurance. Published by Richard Reich.

Life Insurance Compliance & Regulation Law Blog – Provides updates and discussion on life insurance compliance, annuity compliance and insurance regulation. Published by former New York regulator Cailie A. Currin of The Currin Law Office.

Louisiana Law Blog – Insight and information on Louisiana law, litigation and legal culture brought to you by lawyers serving the legal needs of Louisiana businesses and Fortune 500 companies, with a special insider’s emphasis on catastrophic loss associated with hurricanes. Published by Alan J. Berteau of Kean Miller Hawthorne D’Armound McCowan & Jarman LL.

Managed Care Contracting & Provider Payment – Features commentary for health care providers, practitioners, insurers and managed care companies to address issus that arise in the relationship between them. Published by Robin Fisk and the Fisk Law Office.

Managed Care Matters – A weblog on managed care for group health, workers’ compensation and auto insurance, covering health care cost containment, health policy, health research, and medical news for insurers, employers, and healthcare providers. Published by Joseph Paduda of Health Strategy Associates.

Mark Nation’s Florida Insurance Law Blog – Provides insight into Florida insurance law and litigation. Published by Mark Nation.

Merlin Law Group Blog – Features insights from a policyholders’ perspective on insurance disputes, insurance claim litigation and insurance bad faith. Published by William “Chip” Merlin of the Merlin Law Group.

Mississippi Law Blog – Features Mississippi litigation news, thought-provoking case analysis and commentary about Fifth Circuit opinions. Published by Bradley Arant Rose & White LLP.

MRB Insurance Law Blog – Focuses on insurance matters relevant to the areas of property and casualty, insurance coverage and subrogation and provides timely and useful updates on these matters for insurance professionals, adjusters, in-house lawyers, risk managers and business. Published by Raj. K. Datt of MacMillan Rooke Boeckle LLP.
National Insurance Law Forum – Provides a public service intended to facilitate discussion and an exchange of ideas and information among insurance industry professionals, risk managers, attorneys, policyholders, students and other with an interest in the development of American insurance law. Members of the Forum are attorneys who concentrate their practice in insurance and bad faith law and litigation. Published by Kevin T. Merriman [counsel to Ward Norris Heller & Reidy], Sara M. Thorpe [manging partner of Gordon & Rees’ San Francisco office], Michael F. Aylward [senior partner in the Boston office of Morrison and Mahoney LLP], Diane L. Polscer [managing partner of the Portland office of Gordon & Polscer, LLC] and Christopher W. Martin [founding partner of Martin, Disiere, Jefferson & Wisdom LLP], the attorneys of the National Insurance Law Forum.

New York Civil Law – Provides a forum for New York appellate law, civil procedure, insurance coverage and defense and other interesting issues. Published by Matthew S. Lerner of Goldberg Segalla.

No-Fault Paradise – A site devoted to New York no fault-news, New York no-fault decisions, New York no-fault resources and some Florida no-fault too. Published by David M. Gottlieb of Baker Sanders Barshay Grossman Fass Muhlstock & Neuwirth.

OverReg’d – Provides insights on arbitration, securities fraud, unsuitable trading, unauthorized trading, excessive markups, churning, conversion, market manipulation, ERISA violations, RICO and NASD. Published by Terrence J. Fleming, Jonathan M. Harris, Kim Ruckdaschel-Haley, Sandra S. Smalley-Fleming, David Flower, Nicole M. Siemens, Christopher A. Grgurich, Mark S. Enslin and Amy Rae Mason of Lindquist & Vennum.

Point of Law Insurance Section – This blog provides information and opinion on the U.S. litigation system. Published by Walter Olson of the Manhattan Institute Center for Legal Policy.

ProSchool Insurance Blog – Provides comprehensive industry news and analysis, and a moderated forum for insurance students and their questions. Published by Gary Sternberg, Director of Insurance Education for ProSchools.
Real Lawyers Have Blogs – Provides insight and analysis on the topic of the law, firm marketing, blogs, Web 2.0 and baseball. Published by Kevin O’Keefe.

Reinsurance Law Blog – Features analysis and commentary related to insurance, reinsurance, insurance coverage issues, complex personal injury cases, including class actions, first and third party claims, bad faith claims, products liability claims and commercial litigation. Published by Jody Nathan of Stauffer, Graves & Nathan.

Reinsurance Focus – Provides new reinsurance-related and arbitration developments, with a unique focus on financial services, high stakes litigation, financial regulation and product counseling. Published by Roland Goss, Lynn Hawkins and Brian Perryman of Jorden Burt LLP.

ReRisk – Features provocative insight on risk, re-/insurance and future thinking with a particular bent toward complex commercial issues, large reinsurance disputes, professional indemnity claims and general liability issues. Published by Jolyon Patton of Halliwells.

RiskProf – Provides a forum for discussions on insurance, liability law and economics, plus occasional other subjects. Published by Martin F. Grace and J. Tyler Leverty of the University of Iowa.

Specialty Insurance Blog – Features news and commentary on specialty insurance, risk management and private equity, with an emphasis on professional liability and entrepreneurship. Published by Bob Sargent of Tennant Risk Services.

The Alan Katz Health Care Reform Blog – Provides insight about reform from one agent’s perspective, with a particular emphasis on California healthcare reform. Published by Alan Katz.

The D&O Diary – Provides a periodic journal containing items of interest from the world of directors & officers liability, with occasional commentary. Published by Kevin M. LaCroix, an attorney and partner in Oakbridge Insurance Services.
Terms & Conditions – An insurance industry blog that aims to provide timely information and discussion on contemporary insurance topics. Categories include climate change, catastrophes, emerging risks, industry financials, flood insurance, technology, market conditions, alternative risk transfer and regulation. Published by Claire Wilkinson, vice president for Global Issues at the Insurance Information Institute.

Terra Extraneus – Provides a discussion of law and the practice of law and offers opinions about the strange legal world in which we live and work. Published by Rod Heggy, an attorney and Terry Hull, a writer and paralegal.

Urban Law Journal – Provides a forum to facilitate discussions on the nexus between the law and urban affairs. Published by recent Seton Hall Law School graduate David Simunovich.

Go here to find the original list.