D&O Digest: January 27, 2026

A Nationwide Mutual Insurance Co. unit is seeking to avoid coverage for a shareholder derivative lawsuit alleging a company and its officers engaged in a scheme to dilute stockholders' shares.

Why it matters: This development highlights the challenges D&O insurers can face in determining whether claims for disgorgement or restitution stemming from corporate misconduct are covered under their policies.

The Nationwide unit's argument that the underlying lawsuit does not allege a covered loss reflects the ongoing debate around the insurability of disgorgement and restitution claims.

Key quotes:
• "Nationwide Mutual Insurance Co. unit told a federal court that it doesn't owe coverage to a company and its officers for a shareholder derivative lawsuit alleging the officers schemed to dilute the stockholders' shares, saying the underlying suit doesn't allege a covered loss for disgorgement or restitution."
• "The ongoing debate around the insurability of disgorgement and restitution claims highlights the challenges D&O insurers can face in determining whether such claims are covered under their policies."
• "D&O professionals should closely examine policy language and court precedents to understand how their coverage may apply in similar situations involving alleged shareholder dilution or other corporate wrongdoing."

In 2026, financial institutions will face more stringent cybersecurity legal requirements. These demands will focus on clearer governance, faster incident reporting, and stronger oversight of third-party and AI-driven risks. "It is crucial to understand these issues before they materialize into crises," say attorneys at Sidley.

The new legal requirements will force financial firms to improve their cybersecurity practices. Institutions must address governance, incident response, and third-party/AI risks to avoid potential crises.

Financial sector leaders will need to prioritize compliance with the forthcoming cybersecurity regulations. Failure to do so could result in significant consequences for their organizations.

While not D&O-specific, Travelers has announced a significant investment in AI technology, equipping 10,000 of its engineers and data scientists with AI assistants. This move signals the insurer's strategic focus on leveraging data and technology to drive long-term profitability and is one of the industry's biggest AI investments to date.

Why it matters: This development highlights the growing importance of data-driven decision-making and technological innovation in the insurance industry, which will certainly implicate how policies are written and how claims are handled.

As Travelers' CEO outlined, the company's "differentiating domain expertise" around data and technology is expected to fuel long-term profit growth. This emphasis on data-driven strategies and AI-powered operations could lead to increased operational efficiencies, improved risk assessment, and potentially more robust underwriting processes. However, it also introduces new risks, such as increased reliance on complex algorithms, data privacy concerns, and potential system failures or cyberattacks. D&O professionals should closely monitor how these technological advancements impact their insureds' risk profiles, claims trends, and overall industry dynamics.

Key quotes:
• "We are equipping 10,000 of our engineers and data scientists with AI assistants to drive differentiation and long-term profit growth."
• "Our deep domain expertise around data and technology is a key differentiator that will fuel our success in the years to come."
• "The increased use of AI and data analytics in our operations is transforming how we assess and manage risk, leading to more efficient and profitable underwriting."

The U.S. Court of Appeals for the Fourth Circuit ruled that Under Armour cannot make separate claims on two $100 million D&O liability policies for a shareholder suit and a government investigation, as the allegations were "logically or causally related."

Why it matters: The ruling reinforces that D&O policies are intended to cover distinct, unrelated claims, not to provide "double-dipping" on coverage for closely linked allegations.

The court found the shareholder suit and government investigation were sufficiently intertwined, stemming from the same underlying issues around Under Armour's accounting and sales practices. This aligns with the general D&O insurance principle of avoiding duplicative coverage for related claims, even if they involve different legal actions. At the same time, this decision underscores the value of layered D&O programs, as the ruling did not negate Under Armour's ability to access the full $100 million in coverage, just the ability to "stack" the limits of the two policies.

Key quotes:
• "The district court correctly concluded that the claims in the underlying suits were 'logically or causally related.'"
• "The allegations in the two suits were not distinct and unrelated, but rather stemmed from the same underlying issues around Under Armour's accounting and sales practices."
• "The layered policies were intended to provide separate coverage for distinct claims, not to allow 'double-dipping' on coverage."

Two recent SEC enforcement actions highlight concerns around companies potentially making fraudulent claims about their AI technology capabilities. This development raises questions around whether the SEC should adopt AI-specific disclosure guidelines to curb "AI-washing" and mitigate related D&O liability.

Why it matters: Clearer SEC guidance on AI-related disclosures could help D&O insurers and policyholders better assess and manage the evolving risks of misrepresenting or overstating a company's AI capabilities.

The lack of standardized AI disclosure rules creates uncertainty for both companies and their D&O insurers. Vague or unsubstantiated claims about AI could expose directors and officers to securities fraud allegations, leading to costly litigation and potential coverage disputes. Specific SEC guidelines outlining the type and quality of AI disclosures required could provide much-needed clarity, allowing D&O insurers to more accurately price and underwrite this emerging risk. At the same time, clear disclosure rules would also help companies ensure their public statements about AI align with their actual capabilities, reducing the likelihood of enforcement actions or shareholder lawsuits.

Key quotes:
• "Clearer SEC guidance on AI-related disclosures could help D&O insurers and policyholders better assess and manage the evolving risks of misrepresenting or overstating a company's AI capabilities."
• "Vague or unsubstantiated claims about AI could expose directors and officers to securities fraud allegations, leading to costly litigation and potential coverage disputes."
• "Specific SEC guidelines outlining the type and quality of AI disclosures required could provide much-needed clarity, allowing D&O insurers to more accurately price and underwrite this emerging risk."