By analyzing large shareholder claims under our commercial Directors & Officers (D&O) policies, we’ve found that European collective action lawsuits are rising rapidly. A number of events are converging now to drive this trend. These factors include the rise of shareholder associations that amass claimants and supply funding, increased litigation and law firm funding for class action suits, and new precedents set by several high-profile shareholder class action cases currently working their way through the European courts.
Why are European shareholders bringing class action suits against large companies? According to our European claims statistics, the primary cause of shareholder class action suits is inadequate or untimely disclosure—over a quarter of commercial D&O claims stem from this risk. In a common example, a pharmaceutical company may seek investment for research and development of a new drug, then make inaccurate statements about the status of obtaining U.S. Food and Drug Administration (FDA) approvals for the drug. Other highly common factors driving commercial D&O shareholder class actions include accounting fraud/irregularities (14%) and claims ‘bump up’ in times of mergers and acquisitions.