United States: Panama Papers Takeaway for Financial Institutions: Check Your D&O and E&O Insurance

Originally published by Anderson Kill's Policyholder Alert, April 27, 2016

This month, The International Consortium of Investigative Journalists began reporting on their review of over 11.5 million documents, the private client files of a Panamanian law firm that specialized in trust services, covering a 40-year span.1 Among other things, the ICIJ "Panama Papers" documents reveal:

  • Offshore holdings of 140 politicians and public officials from around the world, including the (now former) prime minister of Iceland, the president of Ukraine, and the king of Saudi Arabia.
  • More than 214,000 offshore entities connected to people in more than 200 countries and territories.
  • Major banks' central role in the creation of hard-to-trace companies in offshore havens.

The outrage generated by the release of the Panama Papers has caught on with regulators. On April 20, 2016, Preet Bharara, U.S. Attorney for the Southern District of New York, wrote to the ICIJ to seek assistance, as his office is investigating "matters to which the Panama Papers are relevant."2 This is on the heels of inquiries started by regulatory authorities including those in Britain, France, Australia, New Zealand, Austria, Sweden and the Netherlands.3 French Finance Minister Michel Sapin is on record saying he questioned the head of Societe Generale about its record creating shell companies and opening client accounts in Panama.

Although U.S. Attorney Bharara was not specific as to the target of his investigation, reports suggest that regulators may pursue financial institutions for aiding and abetting tax evasion and other tax crimes, aiding and abetting money laundering, or even facilitating criminal activity.

Given the coming regulatory scrutiny, it is important for financial institutions affected by the Panama Papers to carefully review their existing insurance policies, particularly D&O and E&O, for potential coverage.

D&O policies typically cover directors and officers of corporations against claims arising out of their status or conduct as directors or officers. Some D&O policies also provide coverage for the corporate entity with respect to claims alleging violations of securities law. D&O policies therefore will likely provide financial institutions and their individual directors and officers with coverage in the event of securities-related claims or shareholder derivative suits.

E&O policies generally cover companies and individuals against loss resulting from acts, errors or omissions in their performance of professional duties. These policies may provide coverage for regulatory investigations.

Policyholders should carefully review the timing and trigger of coverage under such policies. Critically, the amount of coverage available to a policyholder in the face of a government investigation may depend on the breadth of the definition of the term "claim" in a given policy.

Government investigations into a company's business and accounting practices are covered under many D&O and E&O policies. Such policies typically include "investigations by a governmental entity into possible violation of law" in the definition of a claim. In addition, the policies normally cover "defense costs" incurred responding to such regulatory inquiries. However, the coverage grants can vary from policy to policy, and insurance companies often argue that an informal document request by government regulators, as compared to a formal investigation with the exercise of subpoena power, will not be considered a claim as defined by their D&O and E&O policies.

Courts have found coverage for informal document requests by government regulators under policy language defining "securities claim" as "a formal or informal administrative or regulatory proceeding or inquiry commenced by the filing of a notice of charges, formal or informal investigative order or similar document. . . ." See MBIA, Inc. v. Federal Ins. Co., No. 08-cv-4313, 2009 WL 6635307 (S.D.N.Y. Dec. 30, 2009), aff'd in part, rev'd in part on other grounds, 652 F.3d 152 (2d Cir. 2011) (reversed denial of Policyholder's claim for costs associated with independent consultant). Indeed, courts throughout the country have found coverage for subpoenas and oral requests for documents. See, e.g., Polychron v. Crum & Forster Ins. Cos., 916 F.2d 461 (8th Cir. 1990) ("The function of a subpoena is to command a party to produce certain documents and therefore constitutes a 'claim' against a party. . . . The documents demanded (not merely requested, as defendants would have it) related to the plaintiff's conduct as a bank official"); ACE Am. Ins. Co. v. Ascend One Corp., 570 F.Supp.2d 789 (D.Md. 2008); Minuteman Int'l, Inc. v. Great Am. Ins. Co., No. 03C6067, 2004 WL 603482 (N.D. Ill. Mar. 22, 2004); Syracuse Univ. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 2012EF63, 2013 N.Y. Misc. LEXIS 2753, at *10 (Sup. Ct. Onondaga Cnty March 7, 2013) ("We reject the insurers' crabbed view of the nature of a subpoena as a 'mere discovery device' that is not even 'similar' to an investigative order."), aff'd, 976 N.Y.S.2d 921 (4th Dep't 2013).

In addition, to the extent a policyholder is incurring costs in conjunction with a government investigation while at the same time defending a civil lawsuit, the costs of investigation may be reasonably related to the defense of those claims and could therefore be covered.

The protection afforded by policies that provide coverage for informal regulatory investigations is exceedingly valuable to any financial institution. Negotiating and working with government regulators when investigations are informal is critical to an early and less public resolution of any changes. It can also be expensive. While the associated defense costs may be significant, the facts developed in responding to such an investigation are commonly used to convince the government that formal charges are not appropriate. Accordingly, coverage for defense costs at the informal stage will not only reduce the direct costs, but will also be critical in heading off a formal investigation and perhaps even significant fines.

Thus, companies that may be subjected to formal or informal investigations should carefully analyze their D&O and E&O coverage. Focusing on this insurance at the earliest scope of a potential problem is critically important to preserve and maximize coverage.

1 https://panamapapers.icij.org/20160403-panama-papers-global-overview.html

2 http://www.theguardian.com/business/2016/apr/19/panama-papers-us-justicedepartment-investigation-tax-avoidance

3 http://www.reuters.com/article/us-panama-tax-idUSKCN0X10C2

Finley Harckham is a senior litigation shareholder in the New York office of Anderson Kill and serves on the firm's Executive Committee. Mr. Harckham regularly represents and advises corporate policyholders in insurance coverage matters. He has successfully litigated, arbitrated and settled hundreds of complex coverage claims. His areas of particular focus include property loss, business interruption, directors and officers liability, construction, professional liability, aviation liability and general liability claims. | fharckham@andersonkill.com

Marshall Gilinsky is a shareholder in the New York office of Anderson Kill and practices in the firm's Insurance Recovery and Commercial Litigation Departments. During his 20-year career representing policyholders, Mr. Gilinsky has recovered hundreds of millions of dollars for his clients, successfully litigating disputed claims under a variety of insurance products, including property and business interruption insurance, commercial general liability insurance, errors and omissions insurance, directors and officers' insurance. |  mgilinsky@andersonkill.com

Peter A. Halprin is an attorney in Anderson Kill's New York office. His practice concentrates in commercial litigation and insurance recovery, exclusively on behalf of policyholders. Mr. Halprin also acts as counsel for U.S. and foreign companies in domestic and international arbitrations. He is a member of the Chartered Institute of Arbitrators and earned a Postgraduate Diploma in International Commercial Arbitration at Queen Mary, University of London. | phalprin@andersonkill.com

About Anderson Kill

Anderson Kill practices law in the areas of Insurance Recovery, Commercial Litigation, Environmental Law, Estate, Trusts and Tax Services, Corporate and Securities, Antitrust, Banking and Lending, Bankruptcy and Restructuring, Real Estate and Construction, Foreign Investment Recovery, Public Law, Government Affairs, Employment and Labor Law, Captive Insurance, Intellectual Property, Corporate Tax, Hospitality, and Health Reform. Recognized nationwide by Chambers USA for Client Service and Commercial Awareness, and best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes - with no ties to insurance companies and has no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Ventura, CA, Philadelphia, PA, Stamford, CT, Washington, DC and Newark, NJ.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.