The following is not meant to be legal advice.
The Directors and Officers (D & O) insurance industry has been seeing surprises in the options backdating scandal. When renewing policies this past year for 2007, many companies were questioned more thoroughly by their carriers on their option grant policies. Few D & O policies contain provisions specifically addressing options backdating.
However, the scandal may not affect private plaintiff litigation rates. The number of cases filed in the close of 2006 was down. Though, the average settlements were up.
The options grant policies of a company may be an issue in representations and warranties in a merger or acquisition agreement, and affect the escrow amount set aside to address post-closing issues. If a company has issues relating to its policies, it may consider insurance for representations and warranties which may be structured for the benefit of either the seller or buyer.
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