From event-driven litigation to government investigations, 2020 has brought a variety of directors’ and officers’ liability exposures arising from the COVID-19 pandemic. Looking toward the new year, we expect that robust D&O insurance programs will remain of critical importance for companies and their officers and directors in 2021 and beyond.

One such new potential exposure could arise from enactment of the UK’s National Security and Investment Bill, which was introduced in November but remains pending approval heading into 2021. If approved, the bill will change the current framework regulating government scrutiny of and intervention in hostile takeovers and other transactions. As it now stands, the bill would expand the UK government’s ability to intervene in any “trigger event” (defined broadly) that could give rise to national security concerns. The bill also mandates pre-notification for certain transactions. Failure to provide mandatory notice can lead to both criminal and civil liability, including imprisonment, fines up to £10 million, and the forced breakup of firms.

If the bill becomes law, the new regulatory oversight and enforcement authority it provides could present additional D&O exposures for investigation, enforcement, and resolution of notification events, which are expected to number between 1,000 and 1,800 per year (70-95 would require detailed assessments, and eight to ten of which would require enforcement remedies). In light of this, policyholders, particularly multinational companies or any US-based entity doing business in the UK, should reassess and evaluate the adequacy of the insurance they have in place to respond to these potential exposures. Many D&O policies, for example, could respond to investigations and enforcement actions by regulators (both in connection with notification events under the bill or in parallel investigations by other agencies) and cover defense costs in any civil litigation arising from the underlying transaction. Experienced coverage counsel can help review all potentially applicable policies and assess the gaps in coverage due to the UK’s anticipated new law.

Casey L. Coffey contributed to this article.