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Average litigation cost per D&O claim (1996)

The 1996 Watson Wyatt Directors’ & Officers Liability Survey pulled together some data which even now, if one increased the dollar figures nine years later for inflation, probably provides some boundaries for thinking about D&O claims. According to that report, summarized in the Babcock White Paper Series, the average litigation cost per claim in 1996 was reported at $919,494.

More detailed data showed that average defense costs varied widely by the disposition of claims. Claims closed by litigation averaged $405,165; claims closed by settlement averaged $1,185,410; claims dropped by claimants averaged $347,225.

Open claims awaiting trial averaged $699,215; claims tried but being appealed averaged $2,701,850. This is wonderful analytic data, but it would be more useful if the summary had shown medians and numbers of claims in each category. We cannot assess the representativeness of the global average figures.

The corporation (entity) itself was named as defendant in 80% of the claims reported. As to the source of D&O claims, claimants included shareholders (47%), employees (25%), customers (15%), competitors (6%), government (2%), and third parties (5%).