The Critical Role of Defense Counsel in Securities Class Actions
Securities class actions are a significant concern for U.S. public companies of all sizes. When a company and its directors and officers are sued for securities fraud, finding the right defense counsel is crucial. The securities defense bar is a specialized subset of U.S. law firms, making the selection process challenging.
Berkshire Hathaway Specialty Insurance (BHSI) has developed a solution to this problem. In 2024, there were 220 ‘core’ securities class actions filed, alleging violations such as 10b5 and section 11. Claimed damages rose by 23 percent, with 27 lawsuits alleging damages over $5 billion. The total value of all settlements in 2024 exceeded $6 billion, with ten securities class actions settling for $100 million or more.
William Carroll, SVP Public Commercial Insurance and D&O Product Lead at BHSI, explained that the firm launched its Preferred Counsel Program in June 2024. This program offers insureds financial and other benefits for working with one of 25 carefully vetted law firms. “These firms have demonstrated a deep understanding of securities class actions and the unique challenges our customers face,” Carroll said.
The primary goal for defense attorneys in securities class actions is to defeat the case at the pleadings stage on motion to dismiss. However, Peter L. Critchell, VP Public Commercial and Financial Institutions and Technical Claims Lead, noted that roughly half of all securities class actions survive a motion to dismiss and enter the costly discovery phase.
BHSI’s Preferred Counsel Program includes several industry-leading financial incentives. The first is an immediate reduction in the self-insured retention amount, typically by 25 percent. A second retention reduction feature is triggered if the defendants do not prevail on the motion to dismiss, offering up to 100 percent reduction of the remaining SIR.
The program has been successful, with BHSI growing its primary public D&O portfolio by over 20 percent since its rollout. The insurer believes the program benefits all parties involved: insureds, preferred counsel firms, and BHSI itself. By building strong relationships with law firms, BHSI adds value to the legal process, particularly during settlement discussions.
To learn more about BHSI’s Preferred Counsel Program, visit BHSI’s website.
