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ICI Mutual Releases Trends on D&O Claims, Expenditures

Industry insurer ICI Mutual in its 2018-2019 Claims Trends reported a year-on-year decrease in the overall number of claims submitted by insured fund groups under their D&O/E&O policies. Over the five-year period 2014-2018, approximately half of ICI Mutual’s insured fund groups submitted at least one claim notice, indicating that claims frequency remains an issue for the fund industry. With regard to Section 36(b) litigation, ICI Mutual noted that over the nine years since the Jones v. Harris decision, 29 new section 36(b) lawsuits have been initiated, including one filed in 2018, involving a total of 26 fund groups. However, “2018 and early 2019 saw continued positive developments in the fund industry’s ongoing defense efforts in this area,” ICI Mutual noted. Currently, nine of the 29 lawsuits still remain active. ICI Mutual also highlighted prospectus liability cases, including new lawsuits alleging misrepresentation of market volatility risk and inadequate disclosure regarding market conditions. ICI Mutual’s Claims Trends also highlights SEC enforcement actions, lawsuits filed under state law, and other regulatory actions. ICI Mutual notes that for fund groups faced with civil litigation and/orregulatory investigations and proceedings, legaldefense costs remain substantial and can quickly reach seven figures for affected fund groups and, in significant shareholder litigation, can in some cases climb into eight figures.

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