Resources & Insights

Insurance Coverage for Corporate Whistleblower Claims

March 23, 2017

The two founders of the law firm at the center of the explosive 2016 Panama Papers scandal were arrested earlier this year.

CCIG’s Andrew Mahoney.

Ramón Fonseca and Jürgen Mossack claim they are innocent. But they now both face charges of money laundering after authorities raided the firm’s Panama City headquarters. The raid and their arrests stemmed from one of the biggest whistleblower cases in history.

The whistleblower in the case cited “income inequality” as his motivation for leaking millions of documents. Whatever their motivation, whistleblowers in the U.S. have been taking advantage of a provision of the Dodd-Frank Act that awards 10 to 30 percent of the proceeds recovered from companies that violate U.S. securities laws.

According to the Whistleblower News Review, America’s whistleblowers filed over 700 of what are known as qui tam suits in fiscal 2016 and received $519 million in awards for their tips and assistance in fighting various types of fraud.

Whether they work at large private companies or publicly traded firms, corporate directors and officers have, of course, taken notice, not only because there are more whistleblower cases but also because of a corresponding increase in securities class-action claims.

The good news in all this? Directors and officers liability policies can help, at least to a point.

No insurance policy will cover acts of fraud, but D&O will help pay the significant costs of defending against such claims. It can also pay the whistleblower reward.

Related: Directors and Officers Insurance: Your Last Line of Defense

The leading cause of D&O claims is non-compliance with laws and regulations. The other top causes of D&O loss are negligence; maladministration/lack of controls; breach of trust/fiduciary duty; and inadequate/inaccurate disclosure.

A general liability policy will help cover claims such as personal and advertising injury. Other insurance policies – say a commercial crime or errors and omissions policy – might cover other claims. But D&O insurance offers the broadest coverage for fraud cases naming board members as individuals. It also will kick in to cover False Claim Act claims against a company or a combination of its board, its executives and the corporation itself.

Under D&O policies, a covered claim could include civil, criminal, regulatory and administrative investigations. This can especially ease the financial pain in cases of an FCA claim, where a company can incur substantial costs merely responding to inquiries during an investigation.

With a D&O policy in place, your insurer will not only pay your defense costs, it will help defend you. That means having experienced lawyers at the ready and at your side, pushing for prompt resolution and the best possible claim outcome.

With whistleblowers, plaintiffs firms and the government all looking to qui tam actions as a source of revenue, the wave of whistleblower litigation is unlikely to ease at any point soon. Worse still, the litigation can last years and run up substantial defense costs. That’s why it’s hardly any exaggeration to suggest that a D&O policy can save your company.

Andrew Mahoney is a CCIG Insurance Advisor. Reach him at or 720-330-7925.

Share this:
Back to Resources

Contact Us

Call us at 303-799-0110 or reach out by filling out a short form.

Get In Touch