1. Your source for professional liability education and networking. When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel Sponsored by PLUS Diamond Sponsors:

2. Professional Liability Underwriting Society The information and opinions expressed by our panelists today are their own, and do not necessarily represent the views of their employers or of PLUS. The contents of these materials may not be relied upon as legal advice. A copy of the presentation slides will be available following this webinar, on the PLUS website at: www.plusweb.org www.plusweb.org 2 When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel

3. Professional Liability Underwriting Society Meet The Presenters 3 Donna J. Ferrara, Esq. Senior Vice President and Managing Director Gallagher Management Liability Practice Chicago, IL John C. Minett, Esq. Senior Vice President and Counsel Endurance Insurance New York, New York H. Stephen Grace, Ph.D. President H.S. Grace & Company, Inc. Houston, Texas Moderator – Joseph P. Monteleone Partner Rivkin Radler LLP Hackensack, New Jersey

4. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel The Beginning of the Claim Process Insured(s) are sued They give notice to their broker Broker notifies insurer(s) Everyone Loves One Another Broker, Insureds, Defense Counsel, and Insurers Everyone is enamored of their defenses to the claim Everyone feeling the love, except for plaintiff’s counsel 4

5. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel But, What Happens When and If The Insurer(s) Deny Coverage? Insureds can sue for declaratory relief then or at a later time No legal obligation to communicate or cooperate with insurers once there is a denial of coverage, but oftentimes communication lines are kept open by mutual agreement and without waiver The same issues we will discuss on the following slides will apply, but they will simply be addressed later and/or in the context of coverage litigation Issues o What can insurer(s) contest retroactively o Do consent to settle and other policy provisions fall by the wayside? 5

6. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel When and how the honeymoon comes to an end o The first defense bills arrive o Who should receive these? o Who should have a say in what gets paid o The curious case of Royal Indemnity Co. v. C.H. Robinson Worldwide, Inc., (Minn. Ct. App., July 21, 2009). The “Balkanization” of Interests Insureds The Corporate Entity The Executive Officers The Independent Directors 6

7. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel The “Balkanization” of Interests (continued) Insurers The Primary Insurer Excess Insurers Side A Only DIC Insurers Other Interests Defense Counsel Insurers Counsel Broker 7

8. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel The Defense Bills Battles Who minds the store? Should the corporate general counsel get involved? Privilege and confidentiality issues Should excess insurers get a “second bite at the apple” beyond payments made by a lower layer or primary insurer? White Hats vs. Black Hats or, perhaps more appropriately, Dopes vs. Crooks What’s the poor broker to do? 8

9. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel Defense Bills Battles – Some Practical Tips Don’t sweat the small stuff Try negotiating percentage discounts, rather than having line by line battles over the invoice Enlist the help of general counsel, broker or other “neutral” Be realistic – you are not going to defend a securities class action at $350 per hour - The “Omaha exception” 9

10. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel Is the primary or other insurer just going through the motions? Outside coverage counsel is suddenly dismissed Participation in insurer-defense counsel calls ceases Insurer declines to attend mediations Has that insurer become the proverbial “toast”? 10

11. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel Excess Insurers Need To Become More Involved Need to be copied on all defense invoices Primary should apprise excess of what has been submitted and what has been paid Need to receive all status reports There should be periodic status updates by teleconference – to the entire tower Broker needs to be proactive Insistence on written reports needs to be carefully considered in light of attorney-client privilege concerns None of this puts an undue burden on insured, defense counsel or primary insurer 11

12. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel The Time to Settle Arrives Says who? When and how o Is a mediator indispensable? o Can a single mediator and mediation proceeding deal with causation, liability, damages and coverage issues? Alternatives to settlement o Continued motion practice o Try the case 12

13. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel Bringing an expert or consultant to the settlement and mediation table o The apocryphal tale of The Disney Company and the Michael Ovitz litigation  Recounting the Disney/Ovitz saga  The Delaware Chancery Court decision of May 28, 2003 o Who retains the expert/consultant  Defendants  Pros and Cons  Insurers  Pros and Cons  When excess insurers have a legitimately different interest 13

14. Professional Liability Underwriting Society When Good People Disagree: Divergent Interests Among D&O Insurers, Insureds and Defense Counsel Role of the Expert Consulting or testifying – In the Disney litigation, the charge was to determine settlement value based on the “business merits” of the case at hand, not a statistical evaluation of settlement ranges in similar cases Who is the client? Should the expert come to the mediation or settlement table? How can the expert bring value and build trust? 14

15. Professional Liability Underwriting Society Questions 15

16. Professional Liability Underwriting Society Panelist Contact Information 16 Donna J. Ferrara, Esq. Senior Vice President and Managing Director Gallagher Management Liability Practice Chicago, IL donna_ferrara@ajg.com John C. Minett, Esq. Senior Vice President and Counsel Endurance Insurance New York, New York jminett@enhinsurance.com H. Stephen Grace, Ph.D. President H.S. Grace & Company, Inc. Houston, Texas hsgrace@hsgraceco.com Moderator – Joseph P. Monteleone Partner Rivkin Radler LLP Hackensack, New Jersey joseph.monteleone@rivkin.com

17. Professional Liability Underwriting Society 17 Thank You Diamond Sponsors

18. Professional Liability Underwriting Society 18 Thank you for your time. A replay of this webinar will be available to PLUS Members at: www.plusweb.orgwww.plusweb.org