Derivative Lawsuits

What is a Derivative Lawsuit, and how does insurance come into play? With derivative action, the claim is the same (eg, inaccurate disclosures), but the suit is brought on behalf of the company against directors and officers, rather than on behalf of shareholders. It is thought that the company has suffered the harm. Since shareholders believe the company should have taken its own action, shareholders act in the company’s place, or take derivative control for the company. Any settlement is made to the company, rather than to shareholders.