Pandemic‑Era Litigation and Its Long‑Term Effects on Directors and Officers (D&O) Liability Insurance

The COVID‑19 pandemic triggered a surge of corporate disclosures, earnings volatility and rapidly shifting governance priorities that produced a notable spike in securities and derivative litigation. For US public and private companies — especially in hubs like New York City, San Francisco, and Chicago — that litigation reshaped the D&O insurance market, producing immediate pricing pressure and long‑term underwriting changes. This article explains what happened during the pandemic era, quantifies the ongoing impact on D&O pricing and capacity, and outlines the operational and programmatic steps boards and risk managers should take to adapt.

Table of Contents

Executive summary

Pandemic litigation (COVID‑related disclosure suits, earnings restatements, liquidity claims) heightened D&O exposures across US markets.
Underwriting reaction: higher premiums, larger retentions, narrowed wording and reduced insurer capacity — with the biggest impact on US public companies and growth tech firms in Silicon Valley and NYC.
Long term effects: persistent higher pricing for risky sectors, more active claims handling, expanded focus on ESG, cyber and AI exposures as cascading drivers of securities claims.
Action for boards: update disclosures and governance practices, stress‑test D&O limits and layered placements, and align cover with emerging exposures.

Pandemic‑era litigation: what drove the D&O market shock

During 2020–2022, US companies faced multiple litigation drivers:

Rapidly changing guidance and disclosures regarding revenues, supply chains and workforce decisions.
Increased securities class actions alleging failure to disclose pandemic impacts, delayed filings and optimistic statements later deemed misleading.
Derivative suits and shareholder litigation tied to pandemic stimulus, equity raises and M&A activity.

Industry monitoring shows sustained litigation activity and insurer responses. See market summaries from Marsh and industry primers for context: Marsh D&O market trends and Insurance Information Institute D&O overview. For broader securities filing trends, Cornerstone Research provides annual breakdowns of securities class action filings and trends (see sources below).

Sources:

Marsh: https://www.marsh.com/us/insights/research/d-and-o-insurance-market-trends.html
Insurance Information Institute: https://www.iii.org/article/what-is-directors-officers-liability-insurance
Cornerstone Research (Securities filings reports): https://www.cornerstone.com/insights/2024/securities-class-action-filings-2023-year-in-review

Quantifying the market change (US focus)

Below are representative, indicative ranges observed for US firms across key urban markets (New York City, San Francisco Bay Area, Chicago). These are market indicative ranges, not quotes — actual premiums vary by sector, financial performance, claims history and governance factors.

Company type / location	Pre‑pandemic (2018–2019) typical $1M primary premium (USD)	Pandemic peak (2020–2022) typical $1M primary premium (USD)	Typical retention (pre → pandemic)
Small private (revenue <$50M) — Midwest (Chicago)	$3,000 – $15,000	$7,500 – $35,000	$25k → $50k
Mid‑market private (revenue $50M–$500M) — NYC	$20,000 – $60,000	$50,000 – $120,000	$50k → $100k
Public small/mid‑cap — San Francisco	$100,000 – $400,000	$200,000 – $750,000	$100k → $250k
Large public / financial services — NYC	$500,000 – $2,000,000	$1,000,000 – $4,000,000+	$250k → $1M+

Insurers such as AIG, Chubb and Travelers publicly tightened D&O capacity and raised pricing during the pandemic era; many broker reports indicated renewal increases across classes. See Marsh and Cornerstone Research for market trend confirmation.

How insurers changed policy terms

Insurer reactions were not limited to price:

Increased retentions and higher limits pricing — to shift early claim costs back to insureds.
Capacity withdrawal for some sectors — pandemic‑affected industries (hospitality, travel, small biotech) saw fewer lead underwriters or smaller maximum line sizes.
Narrower coverage triggers and exclusions — closer scrutiny of contingent liabilities, predecessor company coverage and certain regulatory risks.
Aggressive underwriting on governance: board composition, disclosure controls and crisis playbooks now materially affect pricing.

Long‑term structural effects on D&O programs

Baseline premiums remain elevated for sectors with recurring litigation risk (technology, life sciences, SPAC and fintech). Renewal pricing normalized from its peak but stayed meaningfully above 2018–2019 levels for many companies.
Sustained focus on ESG & cyber as escalation drivers — misstatements in ESG reporting and cyber incidents that trigger securities suits are now common underwriting concerns. See our deeper piece on How ESG Claims Are Reshaping Directors and Officers (D&O) Liability Insurance Demand.
Activist investor activism and derivative suits have intensified — D&O programs must anticipate campaigns and proxy fights. Read more at Activist Investors and Increased Litigation: D&O Insurance Strategies to Weather Shareholder Campaigns.
Scenario planning now explicitly includes pandemic‑like systemic shocks plus AI, cyber and ESG litigation: see Preparing Your D&O Program for Future Risks: Scenario Planning for Activism, AI and ESG Litigation.

Practical guidance for US boards and risk managers

Reassess limit adequacy: For public companies in NYC and San Francisco, consider layered placements with excess towers beyond $50–100M if investor activism or class action exposure is plausible.
Tighten disclosure controls and audit trails: Underwriters price governance quality — documented disclosure committees and internal sign‑offs reduce both litigation risk and premium pressure.
Negotiate retentions and side A features: For executives, Side A limits, severability and run‑off extensions are negotiable levers; ensure run‑off/extended reporting periods after M&A.
Engage brokers early: Market capacity shifts occur quickly; broking specialists (Aon, Marsh, WTW, Gallagher) can structure multi‑carrier towers that balance price and capacity.
Stress test for cross‑risk triggers: Model scenarios where a cyber breach or ESG restatement triggers a securities suit, evaluating how captive programs, retention and indemnification interact.

Case examples (illustrative)

A Bay Area mid‑cap SaaS company (revenue $300M) renewed its D&O in 2021 with an increase from $250k to $650k for a $1M primary — retention increased from $100k to $250k; lead carriers included Chubb and AIG.
A Northeast private equity‑backed restaurant chain (New York/Chicago) saw private D&O premiums move from ~$40k (2019) to >$90k (2021) with tighter exclusions on employment‑related claims.

These reflect market direction observed in broker reports and insurer commentary (see Marsh market insights).

Regulatory & litigation outlook (US 2024–2026)

Expect more targeted securities litigation tied to ESG disclosures and cyber incidents. Boards should watch evolving SEC guidance on climate and cyber reporting.
SPAC‑related suits and AI‑related disclosures are emerging areas that will continue to test D&O policy language and claim handling.
Market capacity may stabilize but with more segmentation: best risks receive competitive pricing; higher‑risk firms face constrained markets.

For forward‑looking context on securities litigation trends, read Securities Litigation Trends 2026: What Boards Should Expect from Directors and Officers (D&O) Liability Insurance.

Conclusion

Pandemic‑era litigation permanently changed the D&O landscape in the United States: insurers tightened terms, raised prices and reallocated capacity. While pricing pressure has softened from peak levels, the structural shift toward greater scrutiny of governance, ESG and cyber exposures remains. Boards and risk managers in US centers such as New York City, the San Francisco Bay Area and Chicago must proactively reset D&O programs — from limits and retentions to disclosure controls — to manage long‑term exposures and contain total cost of risk.