Law and Insurance

House Takes a Giant Step Toward Creating Federal Insurance Office

On December 2, 2009, the House Financial Services Committee passed H.R. 2609 that would create the Federal Insurance Office (hence the name: Federal Insurance Office Act - see Bill ).  We all know that the Federal government knows next to nothing about insurance.  It also seems likely that Federal regulation of insurance is looming (see my discussion, If Federal Charters Issued).  So the the logical first step is the Feds must get up to speed on all things insurance. 

Rep. Paul Kanjorski introduced H.B. 2609 (see his press release here) to create the Federal Insurance Office that will serve as a sort of national insurance commission, gathering what information it needs to recommend policy to the Secretary of the Treasury, hobnobing with state insurance commissioners to coordinate the flow of insurance information, identify policy inconsistencies among the states, and basically establish an modicum of expertise before Congress wades into the fray with optional Federal chartering.

As with most momemtous changes, the word on the street is mixed.  The American Insurance Association issued a statement of guarded optimism (see AIA Release) applauding the effort but fearing that the new Office might not have sufficient authority to advocate for the insurance industry on the international stage.  An interesting thought.

The Big "I", representing insurance agents and brokers, also applauded the Bill as long as it does not apply to them.  (See Big"I" Release, noting that a saving amendment changes the definition of "insurer" to exclude agents and brokers).

So it goes.

Connecticut AG Announces $1.3 MM Hartford Settlement of Price-Fixing Conspiracy

Two novel developments this week.  First, the House Judiciary Committee approved H.R. 3596, a bill that would remove the antitrust exemption in the McCarran-Ferguson Act of 1945 for health and medical malpractice insurers.  See Health Insurance Industry Antitrust Enforcement Act of 2009.  The Senate Judiciary Committee is considering the same legislation in S. 1691.  Although the politics and emotions roused in the the debate over this legislation is seen as just another wrinkle in the health care reform debate, repeal of McCarran-Feguson has been kicked around for years.  Proponents of the bill argue that the insurance industry, particularly health insurance, is not competitive, in part because insurers have managed under lax state controls to conspire, fix prices, and carve up markets.

Not so, says the Attorney General of Connecticut, Richard Blumenthal, who yesterday announced a $1.3 MM settlement with Hartford Financial Services Group, the first antitrust settlement of its kind in the reinsurance industry.  See Press Release.  The settlement is part of ongoing litigation by Blumenthal against Guy Carpenter & Company LLC, one of the world's largest reinsurance brokers.  The Connecticut AG began the action in 2007 against Guy Carpenter and reinsurers, like Hartford, allegedly part of a market allocation and price-fixing conspiracy.  This action is similar to the other enforcement suits that spun out of Eliot Spitzer's 2006 New York investigation of Marsh McClennan and other brokers.

"The Hartford is making history by this first-in-the-nation settlement --- and drawing back the cloak of secrecy on a series of illegal price-fixing conspiracies that inflated insurance costs by hundreds of millions of dollars nationwide at the expense of 170 insurance companies and their customers," said Blumenthal.

Hartford, one of 20 alleged co-conspirators, cooperated in the investigation, said Blumenthal, hence the light penalty.  Blumenthal also commented:

"Bolstered by backroom deals, insurance industry inertia and an unregulated market, Guy Carpenter's conspiracies continued undetected for almost 50 years.  The Hartford helped Guy Carpenter create an illusion of competition, but now has helped my investigation to break apart business practices that have inflated costs for consumers by as much as 40%."

So which is more compelling, head-cracking, fire-breathing state regulators fully capable and financed to police the insurance industry state-by-state, or the fact that this type of arrangement went on for 50 years before anyone blew the whistle?  A spokesperson for the health insurance industry, Karen Ignagni, said in a letter to the chairman of the House committee that the bills are unnecessary because McCarran-Ferguson doesn't shield insurers from antitrust regulation.  See Repeal of Antitrust Exemption.  "The bills attempt to remedy a problem that does not exist," said Ignagni. 

I'd call that an overstatement.  The problem exists.  Which is the better remedy is the question.  If I had to bet, with or without health care reform, state regulation of insurance is probabaly on its way out.

Court Applies 8-Corner Rule to Loss-Indemnity Liability Policy

Basic Energy Services, Inc. v. Liberty Mutual Ins. Co., #08-CV-78 (W.D. Tex. September 18, 2009)

This case resolves a liability insurer's duty pay defense costs when the policy imposes no "duty to defend" but instead requires the insurer to "reimburse" what the policy describes as the "Allocated Loss Adjustment Expense."  I think this decision is a potentially significant harbinger of how courts might interpret well-worn CGL concepts, like "occurrence," eight-corners," and "that particular part" of an insured's work, under an "indemnification" or "reimbursement" policy, rather than the more common "duty-to-defend" policy.  I say significant because, more and more, we are seeing reimbursement policies replacing duty-to-defend policies.

Basic Energy Services was hired to replace a pump on an oil well.  In the process, Basic pressure tested the well casing and unfortunately dropped the casing into the well damaging the well bore and the casing itself.  This was not a small dollar deal.  The lawsuit against Basic alleged that the damage forced the operator to abandon the well and risk losing the entire value of the well due to loss of production.  So Basic turned to its insurer to cover the damage, including costs of defending the lawsuit.  Liberty challenged coverage.

In many ways, Basic's policy was like most standard CGL policies, covering basically bodily injury or property damages caused by an occurrence.  Most of the exclusions were also typical, including one for property damage to "that particular part" of property Basic worked on.  But the policy explicitly revoked the insurer's duty to defend and included an "Allocated Loss Adjustment Expenses (ALAE)" Endorsement requiring the insurer to reimburse Basic for any ALAE incurred by the insured for any "occurrence."  So, Liberty Mutual has no duty to defend but must reimburse Basic's defense costs.  What's the difference between this arrangement and the "duty to defend"?

First, argues Liberty, note the word, "Allocated."  This policy does not require the insurer to reimburse all of the defense costs, only that portion allocable to covered loss.  And because this allocation cannot be made until after a trial has sorted out what is covered and what is not, the insurer has no obligation to reimburse ALAE until the lawsuit is over.  Indeed, Liberty is correct that a number of courts have held that pure indemnity policies that impose no duty to defend require indemnity only after the insured has incurred the loss (a judgment or settlement), and, in the absence of an advancement clause, this includes defense costs.

The court, however, disagreed.  The policy is silent both on when reimbursement must be made and on any allocation of ALAE (despite the title).  The court held that the insurer must reimburse defense costs as they are incurred.

Second, Liberty had obtained some depositions that arguably proved that a significant portion of the damages were not covered.  Again. note the allocation idea.  Basic countered by asserting that most
Texas of insurance rules, the "eight-corners" rule, that a court may consider only the pleading and policy and not consider any extrinsic evidence, like affidavits or depositions.

This issue put the court in a pickle.  On the one hand, Texas courts have almost universally discussed the eight-corner rule in connection with the duty to defend.  Much of the rationale for requiring insurers liberally to defend allegations that might fall within coverage without resort to actual facts that might clarify murky or spotty allegations emanates from the distinction between the duty to defend and the duty to indemnify, a distinction that the court acknowledges. 

On the other hand, having held that Liberty is obligated to reimburse defense costs as soon as they are incurred, the court must hold either that all defense costs must be paid, or reverse itself and hold that a trier of fact must first resolve which claims are covered and which are not.  "The Court agrees with [Basic] that this reimbursement of defense costs obligation is most analogous to a duty to defend, even which the duty to defend is explicitly disclaimed." 

Liberty also challenged coverage arguing that the alleged conduct was not an "occurrence," and that the exclusion for damage to "that particular part" of the insured's work was excluded.  However, once the court has started down the path of ruling by analogy to duty-to-defend cases, Liberty's arguments are doomed.  Under the Lamar Homes line of cases (see my discussion Lamar Homes Decision), arguments that a contractor's defective work can't be a covered occurrence have been rejected -- but these are duty-to-defend cases.  Likewise, Liberty's argument that the whole well, including casing, bore, and subsurface space, should be considered Basic's "work" has been rejected by a number of state and federal cases.  Only the casing and the pump comprised Basic's particular work.  Damage to the bore and the loss of well itself is not excluded.

Liberty cannot be blamed for arguing that the analogy should go in the opposite direction, away from duty-to-defend cases and toward pure-indemnity cases.  Arguably, this decision could have gone either way.  If other courts follow suit, this decision may be seen in hindsight as a significant precedent expanding duty-to-defend doctrines to other types of policies.

South Carolina Supreme Court Affirms Bad Faith Punitive Damage Award

Correction: Court calculated actual damages at $1,081,189.40.

Mitchell V. Fortis Insurance Company, # 26718 (S.C. September 14, 2009), see Mitchell Decision

This decision out of the South Carolina Supreme Court is remarkable first as a model for intelligent, careful consideration of a difficult legal and factual issue, and second, I have not seen such outrageous conduct by an insurance company since the wild and wooly days before bad faith liability entered American jurisprudence (yes, I am that old). 

Briefly the facts:  Mitchell, 17, applied for health insurance when he left home and went away to school.  The insurance application asked if he had even been diagnosed or treated for any immune deficiency disorder.  He answered no and submitted the application to Fortis on May 15, 2001.  In April 2002, Mitchell's blood was screened by Red Cross and tested positive for HIV.  On May 14, 2002, Mitchell contacted a doctor who confirmed the result and noted in a medical chart that Mitchell tested positive for HIV, was 18 years old, and the date of the confirming test was May 14, 2001 (not 2002). 

Mitchell submitted insurance claims for the tests and subsequent treatment.  Fortis investigated, found the referral note with the erroneous date, and concluded that Mitchell had lied on his May 15, 2001application.  Fortis rescinded the policy and refused payment.  There followed a series of communications to Fortis from Mitchell, his doctor, his lawyer, and his mother's insurance agent, all providing ample proof that Mitchell's first inkling that he was HIV-positive was in 2002 and urging, even begging, that Fortis reconsider its decision. 

All calls to Fortis were routed to one or another customer service representative who invariably said that there "was nothing [the representative] could do."  The Fortis rescission committee that initially made the decision met to consider the appeal and noted only that Mitchell's lawyer had written that Mitchell had not lied because the diagnosis was first made a year after the inception of the policy.  Apparently finding lawyers inherently untrustworthy, the committee refused to budge.  Evidence developed later in the lawsuit showed that Fortis, contrary to its usual practice, either had failed to log telephone calls to its claims manager, or those logs were deleted.  Fortis also twice sent Mitchell altered or illegibile copies of the referral form that contained the wrong date. 

Folks, it gets worse.  At trial, Mitchell produced evidence that it was Fortis' practice to shut down an investigation once a single piece of evidence was discovered that would support rescission.  (Even in Texas, where bad faith is rarely sustained on appeal, this evidence would doom an insurer).  Then, a Fortis manager testified that she was not "able to answer" whether she or any of her employees "had a responsibility to find out the truth" about a policyholder's medical conditions.  Oy vey!

The jury awarded Mitchell $186,000 in compensatory damages, $36,000 on the breach of contract claim, and $15,000,000 in punitive damages.  Fortis appealed the punitive damages award as violative constitutional due process.  The South Carolina High Court got down to business.

Ever since the U.S. Supreme Court recognized due process restrictions on state-imposed punitive damages in BMW of North America v. Gore, 517, U.S. 599 (1996), the courts of the land have struggled to find reasonable criteria for evaluating the amount of punitive damages an incensed jury might award.  The Mitchell Court applied the three basic criteria stated in Gore: (1) the degree of reprehensibility of defendant’s conduct, (2) the disparity between the actual or potential harm and the amount of the punitive damages (ratio), and (3) comparative penalty awards from other cases.

The South Carolina High Court first found that actual damages should have been calculated at $1,081,189.40, but found that the award, almost 14 times actual damages, was excessive under the Gore criteria. Accordingly, the Court determined that an award of approximately 9 times actuals would not offend due process and would comport with South Carolina's "substantial history of upholding punitive damages wards against insurance companies that fraudulently rescind their customer’s heath insurance policies.”   Noting that without the coverage, Mitchell could not afford treatment and would lilkely die of AIDS within a few years, a fact of which Fortis was aware (in fact, Fortis reinstated the policy but only after getting kicked in the slats in court), the Court remitted the award to $10,000,000.

Because the pre-existing exclusion appears to be on everybody's health-care reform list, this case may be among the last of these enormities we will see.  Let's hope so.

Senate Bill Will Remove Antitrust Exemption for Health Insurance

This week, Senate Judiciary Committee Chairman, Patrick Leahy, introduced legislation ending the federal antitrust exemption for health and medical malpractice insurance under the McCarran-Ferguson Act of 1945 (15 U.S.C. § 1011 et seq.), which basically gives states, not the federal government, the authority to regulate the "business of insurance" unless a federal law specifically provides otherwise.  See Leahy's Statement.  In commenting on the bill, named the Health Insurance Industry Antitrust Enforcement Act, Senator Leahy said:

A few industries have used their influence to obtain a special, statutory exemption from the antitrust laws, and the insurance industry is one of them.  In the markets for health insurance and medical malpractice insurance, patients and doctors are paying the price, as costs continue to increase at an alarming rate.  Insurers should not object to being subject to the same antitrust laws as everyone else.

Many think that state regulation of the insurance industry in general is on the way out.  See my discussion, Drift Toward Federal Regulation.  The near failure last fall of AIG and severe weakness in the economy fuel speculation that federal regulation is not far off. See Insurance Federal Regulation Bill Touted as Answer to AIG-Sized Problems.

Nevertheless, Senator Leahy's bill may have more to do with health care reform than the demise of McCarran-Ferguson per se and may be intended to preempt challenges to any reform legislation, including tort reform, under McCarran-Ferguson.

 

1st Circuit Court Limits "Known-Loss" Defense to Actual Adjudication

Employers Reinsurance Corp. v. Globe Newspaper Co., #08-1733 (1st Cir. March 19, 2009), see Globe Decision.

"Known loss" or "fortuity" is a cornerstone principle of insurance.  The starkest example: a homeowner may not run out and buy fire insurance after the house burns down, or while it is still burning.  Public policy forbids insuring a loss that the insured knows has occurred or is in progress.  However, the fortuity principle has been stretched in the last 20 years, in some instances, beyond reasonable limits.  The Globe Newspaper decision may help puts the brakes on an out-of-control coverage defense.  The facts are these:

Beginning in March 2005, Globe began a series of articles criticizing a cancer treatment facility and one of its doctors for a tragic overdose of two patients with a chemotherapy drug.  One of the patients, a Globe columnist at the time, died.  The paper stated that one of the doctors was a leader of the team administering the drug and countersigned the order for the mistaken overdose.  In fact, however, that doctor had not treated the patient until after the overdose.

A few days after the Globe story, an attorney for the doctor contacted the paper and complained that the named doctor had not countersigned the order or directed treatment before the overdose.  The paper investigated and confirmed the doctor's innocence.  Rather than retract that portion of the story, however, the paper merely reported that a representative for the doctor said she had not been involved.  In May, the attorney wrote again to complain that the correction was inadequate and suggested that it would be "an appropriate time to discuss how the Globe will compensate [the doctor's] damages.

On June 4, the paper ran a correction admitting that the doctor had been incorrectly identified as the one countersigning the order.  However, the request for damages was not withdrawn.  On October 12, the paper applied for insurance coverage without identifying the doctor's demand.  The application identified past and pending litigation and noted that the paper received many threats from people seeking to have more favorable press, and it was difficult to separate the inconsequential threats from the serious ones.  The policy issued on October 20, 2005 with coverage for libel.

The series of articles continued, some still mentioning the same doctor, who sued the paper for libel in February 2006.  The insurer apparently agreed to defend the action subject to a reservation of rights to later deny coverage on a number of grounds, including that the alleged loss was in progress when the policy issued.  The paper suffered a sanction order when it refused to disclose confidential sources and sustained a judgment, upheld on appeal, for over $2 million.  Meanwhile, insurer had filed a coverage action seeking a declaration that it had no duty to defend or indemnify.  To its credit, the insurer paid the judgment subject to its right to reimbursement if coverage did not exist.  (N.B., an insurer could not do this in Texas.  See my discussion, Frank's Casing Decision).

The lower court granted summary judgment in favor of the insurer based on its fortuity defense.  After all, the court reasoned, the paper had received the request for damages by letter months before applying for the policy.  The First Circuit Court of Appeals reversed.

Acknowledging that the Massachusetts Supreme Judicial Court had followed the majority of states in adopting the fortuity defense, the appellate court held that an insurable risk could be eliminated only "in the instance where an insured knows, when it purchases the policy, that there is a substantial probability that it will suffer or has already suffered a loss" (quoting SCA Serv. , Inc. v. Transp. Inc. Co., 646 N.E.2d 394, 397 (Mass. 1995)) Emphasis added.  In the SCA case a court had already ordered the insured city's town dump to be closed as a nuisance, and residents had already made claims.  Thus, the court found that the city knew actual losses had occurred and were substantially certain to continue when it bought the insurance.

The Globe, said the court, may have been aware of the request for damages, but litigation had not been filed.  "The loss here may have been likely, but it was not substantially certain or known by the Globe to be so when the policy was obtained."  In reversing the summary judgment, however, the appellate court observed that the insurer had other defenses, not addressed by the lower court, and victory for the paper was by no means assured.

The reasoning in the Globe decision arguably limits the known loss doctrine to situations in which the loss has been, or is being, actually adjudicated.  While that may be over-reading the court's analysis, this decision should help bring some fair boundaries to the use of this doctrine.  Case in point under Texas law, in RLI Ins. Co. v. Maxxon Southwest, Inc., 265 F. Supp.2d 727 (N.D. Tex. 2003), a cement manufacturer was denied coverage for litigation alleging price-discrimination under the Robinson-Patman Act (don't ask how a company gets antitrust insurance in the first place; we have to take that on trust).  The threat of litigation as well as the subsequent lawsuit occurred after purchase of the policy.  The insurer argued that Maxxon was aware that different prices had been charged for years.  Hence, it was a continuing loss uninsurable under the fortuity doctrine. 

The lower court agreed, even though it acknowledged that that the insured had no independent knowledge of the subject loss, because the company knew different cement dealers paid different prices for their cement, so "the risk of injury was or should have been, readily apparent to the defendants."

The Fifth Circuit upheld the lower court's decision holding that the critical issue was "whether the party knowingly acted in a manner in which it could possibly be found liable."  Folks, companies charge different prices to different customers all the time.  Robinson-Patman liability is subject to numerous exceptions and is notoriously difficult to untangle, except on hindsight.  Maxxon had received no complaints, no cease and desist letter, and had no knowledge of any alleged loss. 

Perhaps Globe's actual pending adjudication is too tight a standard for all circumstances, but being denied coverage for something you know you might be liable for can't be the fortuity standard. Insurers now routinely raise the fortuity defense in just about every case in commercial litigation.  Often, a business may routinely receive customer complaints that are easily resolved or never amount to anything.    To allow an insurer to dig into the insured's complaint file and avoid coverage because a customer later actually filed a suit, should not be the standard. 

Courts should take note of the Globe decision.

Man Sinks Yacht and Files False Insurance Claim - Wave of the Future?

I don't know what attracted me to this story, whether it was the nautical eqivalent of road rage or the the potential trend in this economy of yacht-scuttling insurance fraud.  But there's a lesson in this somewhere.  According to a story in the Seattle Post Intelligence here, while piloting his yacht, the Jubilee, from Bainbridge Island to Seattle, a man succumbed to a fit of rage at the boat's mechanical problem and sunk the craft.  He rowed a borrowed dingy back to the island and reported the loss to his insurer, United Services Automobile Ass'n, out of San Antonio Texas, a few days later.

Things started to unravel when the state's Department of Natural Resources raised the yacht out of concern for potential environmental damage.  Insurance investigators examined the boat and found a 2-inch hole cut into the hull and some evidence of hank-panky with the bilge system.  Confronted with this discovery by federal agents, the man confessed and now faces charges for making a fraudulent insurance claim.

The man confessed in court documents that he sank his yacht because the "financial pressure and frustration" of maintaining the boat "caused him extreme anxiety." 

I don't know if this act of desperation was brought on by economic distress (he had earlier attempted to sell the craft) or just the rage of the moment, but I wouldn't be surprised to see an uptick in insurance fraud as the cost to maintain those luxury jets and yachts overtakes the once-but-no-longer wealthy.

National Insurance Agents Association Fearful of Drift Toward Federal Regulation

In an open letter to President Obama, the Independent Agents & Brokers of America (the "Big I") gingerly nudged the President to leave in place state regulation of the insurance industry even as it pledged to work with the Administration on reforming the financial services industry.  See Big I Urges President.   The Big I has long opposed steps to federalize insurance regulation, which some in the insurance industry would welcome.  The open letter may have been prompted by alarm last week at signs that Congress may be warming up to federal regulation of the insurance industry.

Seven lawmakers urged Treasury Secretary Designate Timothy Geithner to support federal oversight of insurance companies, and Mr. Geithner's remarks at his confirmation hearing last Friday could be taken to imply that the Administration might consider federalizing insurance as part of the larger reform of financial institutions.  See Lawmakers Press Geithner on US Insurance Oversight.   

The example of AIG's meltdown is often used to support federal reform of the insurance market, but, as Big I's open letter states, the part of AIG that imploded was the company's financial services arm.  AIG's insurance units were largely unaffected and remained adequately captialized.  This, argues Big I, shows that state regulation of insurance companies works. 

Prerhaps, but the drum beat for federal reform seems to be getting stonger and quicker.

Stealth "Classification Limitations" Reported Creeping Into CGL Policies

A report appeared last week of an trend in the commercial general liability market that could spell trouble for many policyholders.  Dave Lenkus reported in Business Insurance magazine that endorsements with "classification limitations" were appearing for the first time in CGL policies issued by admitted insurers.  A "classification limitation" limits coverage only to specifed categories of the insured's operations.  See Curb on CGL Coverage.  More alarming, the policyholder may not know what "classification" the insurer has imposed to limit coverage because the endorsement does not identify covered operations but instead provides a number coding the classification whose description resides in an insurance industry database that is both subject to change and not directly accessible to policyholders and their risk managers.

 What's going on?  Traditionally, a company seeking liability coverage completes an application describing what the business does -- builds house, makes widgets, whatever -- and the insurer decides if it wants to issue the policy.  If the policy issues, then the policyholder is covered for whatever it does subject to the scope of the insuring agreement, the exclusions, and other terms and conditions.  Perhaps the policy states the the general type of operations the policyholder engages in, and the policy may allow the insurer to readjust the premium if the company goes in a different direction or adds new and different operations.

Within the last decade or so, more specific classification restrictions started appearing in policies issued in the surplus lines market, those insurers not admitted to issue insurance in particular states whose policies are not subject to the same regulations imposed on admitted carriers.  For example, polices out of the Lloyds London market are typically issued on a surplus lines basis.  Policyholders purchasing surplus lines insurance are on notice that the polices may have non-standard and unusal provisions which would not pass muster with state's department of insurance.  Policy forms and endorsements issued in Texas by admitted carriers must be approved by the Texas Department of Insurance. 

Enter ISO, the Insurance Service Office, that perfroms a number of functions for the insurance industry, including promulgating standard insurance forms for admission by state regulators.  Some states automatically admit ISO forms.  Some, like Texas, admit forms only after review, but routinely accept ISO forms.  Now, we are seeing classification limitations endorsements appearing in ISO policies issued by admitted carriers.

Why should this be a concern to policyholders?  For one thing, the operations classifications are becoming more specific and narrow.  The company is no longer just in the contsruction industry; it builds only residential buildings, or only single family, or only -- who knows?  The classifications themselves are periodically revised and so become a moving target.  If the company engages in operatons that do not precisely fall within the classification stated in the policy, the insurer may deny the claim.

Add to that, the problem that the policyholder may not know that its classification has changed or even what classification restricts coverage.  The ISO database with the classification matching the number in the endrosement is not available to non-insurance professionals.  Yikes.

Everyone agrees with the principle that insurers are entitled to select what categories of risk they are willing to insure.  But the process should be subject to fuller disclosure than is now apparent.  Policyholders, particularly in certain industries, like construction, need to be vigilant and watch for classification limitations.  The insured's agent should be able to access the database and decode the classification.

D&O Insurance Rates Expected To Hold Steady Except For Financial Institutions

Because shareholder actions are expected to proliferate against finacial institutions caught in the subprime mortgage debacle, it should come as no surprise that premiums for directors and officers insurance for those institutions are beginning to rise.  So says Kristin Gunderson Hunt in an article in "Business Insurance."  See D&O Rates on the Rise.  In the past month, D&O rates have climbed 5% to 10% for fincancial institutions.  For companies in other industries, rates may have stopped declining as in the past three or four years, but they do not appear to be rising.

 The number of such lawsuits and the nature of the allegations asserted by shareholders and investors remains to be seen.  From what is already known, however, the class-action plaintiffs bar will have much to work with: incredibly lax mortgage underwriting procedures, bogus or baseless valuations of impossibly complex securities, overly rosy projections, tardy disclosures, blind-leading-the-blind investment strategies --- it won't be pretty.  Perhaps we will not see as much dirty fraud as in the Enron case, but early indications portend an industry-wide recklessness not seen since the captain of the Exxon Valdez lumbered through Prince William Sound.

However, reports Ms Hunt, companies not subject to these lawsuits should have little trouble obtaining D&O coverage at no worse than expiring rates.