As Subprime Widens, Costs Rise

Subprime-related lawsuits could cause a rise in Directors' and Officers' (D&O) liability insurance rates for some businesses, according to a report by Financial Week. The lawsuit trend is starting to spread from the usual targets such as brokers appraisers and loan securitizers to those in other industries, such as investment advisers and corporate buyers of debt.

Pamela Hans, an attorney at Anderson Kill & Olick told FW that the number and rate that [lawsuits] are being filed is astonishing. It had been previously reported that financial institutions had been impacted particularly hard by the subprime crisis during the last three months of 2007.

Mortgage banking originators have been under fire by borrowers for inappropriate lending practices, but according to Hans, they are not going to be the only ones sued. Accountants and rating agencies could follow too. "It's hard to think of anyone in the industry not affected by this. A rise in the subprime-related lawsuits could lead to an increase in the cost of directors-and-officers insurance premiums," Hans told FW.

Early estimates of business losses related to subprime mortgages range from $267 billion to $400 billion and the number of subprime-related suits is rapidly approaching 300 according to FW.