On September 9, 2015, the U.S. Department of Justice (the “DOJ”) issued a memorandum that was authored by Deputy Attorney General Sally Yates and titled, “Individual Accountability for Corporate Wrongdoing” (the “Yates Memo”) (available here). The Yates Memo outlines the DOJ’s increased commitment to pursue individuals who have committed corporate misdeeds. It further provides guidance for DOJ civil and criminal investigations of corporate wrongdoing. A number of regulators – including the Securities and Exchange Commission, the Financial Crimes Enforcement Network, and the Financial Industry Regulatory Authority – also have voiced renewed interest in investigating and prosecuting individuals. The Yates Memo will impact not only how companies conduct internal investigations and interface with prosecutors, but also the availability of insurance proceeds to fund government investigations.

In the wake of the Yates Memo, companies should take a critical look at their D&O insurance policies. With more individuals targeted in government investigations, historical policy limits may be inadequate to fully cover the anticipated increase in defense costs for government investigations. In addition, severability provisions that clearly limit knowledge to individual insureds for purposes of insurance coverage are even more critical to a company’s insurance program. Finally, with the potential of more individual targets, careful consideration should be given to when the D&O policy’s definition of “Claim” has been satisfied, both for purpose of giving timely notice to insurance carriers and for maximizing the recovery of defense costs associated with any government investigation.