Tesla, Harvey Weinstein, and Board Composition for California Companies – A Review of News that Could Impact the D&O Market

There is a lot of news recently that relates to D&O insurance recently and I thought I would do a quick run-down for you.

First we have Tesla and Elon Musk.  If you haven’t seen or heard, Musk and Tesla were each fined $20 million for Musk’s tweet saying they were going private and that funding was secured.  It turns out that neither of this statements were accurate.  In addition, Musk was forced to relinquish his seat as chairman of Tesla.  This penalty made clear that comments made on social media will have repercussions for companies.  I doubt this is the end of this saga as there will most likely be shareholder litigation.

Will this cause D&O underwriters to greater examine the Twitter, Facebook and Instagram accounts of public company leaders?  Typically, a D&O underwriter is most concerned about the finances of a company and the direction they are going in but could this change over time?  We will see have to wait and see.

In other news from California, the legislator passed a law requiring public companies to have at least 1 woman on their board by the end of 2019.  By 2021 companies with at least 5 board members must have two women and boards with six or more members must have at least three women on their board.  Right now 25% of public companies based in California have no women on their board.  Companies that fail to meet these requirements will face penalties.  You can learn more about this here.

Finally, in probably the least surprising news, the insurance companies that were affiliated with Harvey Weinstein have declined coverage and have argued they do not need pay for his defense.  A number of carriers have declined coverage so far with Travelers and Chubb being the most noteworthy.  There are a number of policy provisions cited in their reasoning to decline coverage, including the sexual abuse & molestation exclusion and that Mr. Weinstein’s actions were outside his duties as a director and/or officer.

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