908-679-5011
Insurance Coverage for Federal Investigations
Companies have increasingly faced government investigations into potential misconduct in recent years, leading to significant financial and reputational risks. Federal agencies like the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have ramped up enforcement of antitrust laws, while the Environmental Protection Agency (EPA) has also been active in conducting high-profile investigations.
For instance, UnitedHealth, the nation’s largest health insurer, is under investigation for potential antitrust violations. Similarly, Live Nation, the parent company of Ticketmaster, is facing a DOJ lawsuit for allegedly monopolizing concert venues. These investigations can escalate a company’s operational costs, particularly when insurance premiums are affected.
Investigations May Be Covered Under D&O Liability Insurance
Corporations commonly carry a variety of insurance policies to protect against liabilities. However, when allegations of corporate misconduct arise, officers and directors could face personal liability in some cases, especially if they are named in investigations or lawsuits. Directors and Officers (D&O) Liability Insurance is the most common form of coverage in these situations. It helps protect both the company and its executives when accused of wrongdoing. Even if no misconduct is found or a lawsuit results in a favorable outcome, the costs of investigations can still financially strain a business.
The Financial Impact of Investigations
Investigations by government agencies can be financially burdensome. Companies often incur substantial legal fees while dealing with regulators and conducting internal investigations. Costs can quickly escalate into the millions of dollars. To mitigate these risks, businesses should consider extending their D&O Insurance to cover investigation-related expenses. While an insurance provider is not obligated to provide a legal defense, they may contribute to mounting legal costs under the terms of the policy.
Moreover, companies under investigation often face subsequent civil actions. Plaintiffs’ attorneys keep a close watch on high-profile government investigations and are quick to file lawsuits against companies accused of harming consumers. Additionally, shareholders may pursue derivative lawsuits against corporate officers and directors. Defending these actions can result in significant financial exposure.
Whether the costs of a government investigation are covered under a D&O Policy depends on the specific terms and conditions of the policy, including whether the costs meet the definition of a “claim.” Some companies also opt to purchase additional coverage, including protection for investigation-related costs and penalties for non-compliance with laws and regulations.
Higher Insurance Premiums as a Result of Investigations
Insurance providers assess risk when determining policy premiums. When a company is under investigation, its risk profile increases as the likelihood of a claim rises. Consequently, insurance premiums are likely to increase, regardless of the outcome of the investigation. In these cases, even if no wrongdoing is found, the investigation increases the potential for claims against the insurance provider, which may result in higher costs for the company.
Consult with Experienced New Jersey Insurance Lawyers at Herold Law, P.A.
If your company is facing a government investigation or your insurer refuses to cover claims, it is crucial to seek legal guidance. The experienced New Jersey Insurance Lawyers at Herold Law, P.A. can help. Call 908-679-5011 or contact us online for a consultation. Located in Warren, New Jersey, we proudly serve clients in Somerville, Morristown, and throughout the state.
