Advisen Ltd. Report Analyzes 2008 Securities Class Actions, Predicts Spread Beyond Financial Services Area in 2009

A new report released Wednesday by New York-based Advisen Ltd. finds that the number of securities class action suits filed in 2008 changed little from 2007.  However, the report also find that changes in the industry and the economy may have other types of impact.  Business Insurance reports that among other things, the report finds that:

• the fall of two major law firms that specialized in representing plaintiffs in securities class actions created “intense competition among new law firms advocating novel theories of liability.”
• “Traditional securities class action suits accounted for less than half of new securities litigation, while suits alleging common law torts, contract law violations, breach of fiduciary duty and violations of rarely cited securities laws became more common. Defense costs rose relentlessly.”
• Although a small number of insurers suffered from the financial services-related D&O litigation,  “other D&O underwriters were comparatively unscathed. Thus far, 2009 is following a similar pattern with financial institutions continuing to bear the brunt of not only subprime/credit crisis suits, but also of suits triggered by the alleged $50 billion Bernard Madoff Ponzi scheme and other alleged investor frauds.”
• If the economy continues to deteriorate in 2009, “securities litigation will undoubtedly spread beyond the financial services sector, driven substantially by mounting bankruptcies and corporate debt defaults…. In 2007 and 2008, more than three-quarters of large public companies filing for bankruptcy were also named in securities class action suits.”
• The “commercial D&O market continues to see rate levels steadily erode. Nonetheless, deteriorating underwriting and investment results throughout the commercial lines insurance industry probably will lead to a firmer market by late 2009 for all lines, including D&O.”

Read the Business Insurance article