AXIS INSURANCE SERVICES, LLC: D&O Claims Scenarios
Following are several examples of Management Liability claims.
Directors and officers at a company failed to disclose material facts and provided inaccurate and misleading information to their investors. It was alleged that the materials did not disclose the high turnover of management and that the company’s website had not yet been developed. The company later went bankrupt. The complaint included causes of action for: (1) common law fraud; (2) negligent misrepresentation; and (3) breach of fiduciary duties. Settled for over $1 million and defense costs exceeding another $1.4 million.
A creditor filed a complaint against individual directors and officers of a company alleging that its CEO, CFO, and COO conspired to use the plaintiff’s services to furnish, install, and repair the company’s equipment knowing that it was insolvent and was planning to file for bankruptcy protection. Causes of action included: (1) fraud, misrepresentation and non-disclosure; (2) deceptive trade practices; and (3) civil conspiracy. Total settlement and defense of the individually named defendants exceeded $100,000.
Stolen Corporate Secrets
The vice president of a manufacturer determined that diversification into a different product line presented tremendous sales potential for his company. Instead of presenting that opportunity to his employer, the VP shared it with his brother who formed a new company to produce that product. On behalf of the company, a shareholder sued the VP alleging that he wrongfully took advantage of an opportunity belonging to the corporation. The suit eventually settled for $2.5 million.
Recruiting Sales Executives
A company recruited a top sales executive who had an employment contract with a competing company. The competitor sued the company for damages suffered as a result of losing its top sales producer on the grounds that the company interfered with the competitor’s contractual relationship with its employee. Defense expenses were in excess of $250,000 and the competitor was awarded damages of $600,000.
A company signed an investment agreement with a third party, agreeing not to negotiate with other entities regarding a potential acquisition for a two-week period. During that time, the company engaged with another investment group. The third party alleged that the company performed a breach of investment agreement and intentional and negligent misrepresentation. The total amount of settlement and defense costs exceeded $350,000.
These are only claims examples: Minor changes from actual suits have been made to protect the confidentiality of all clients.