New York’s Highest Court Addresses Coverage Under Fiduciary Liability Policy

In its recent decision in Federal Ins. Co. v International Bus. Machs. Corp., 2012 NY Slip Op 1320 (N.Y. Feb. 21, 2012), the New York Court of Appeals - New York’s highest court - had occasion to consider whether an underlying ERISA lawsuit fell within the scope of coverage afforded under an excess fiduciary liability policy, and in particular, what it means to be acting in one’s capacity as a fiduciary.

Federal issued to IBM an Executive Protection Excess Insurance Policy, providing follow-form excess coverage over a fiduciary liability policy issued by Zurich.  IBM and the IBM Personal Pension Plan were named as defendants in a class action lawsuit alleging that various amendments made to its employees’ benefit plans violated ERISA laws pertaining to age discrimination.  IBM settled the underlying suit, which settlement included a payment to plaintiffs of their attorneys’ fees in prosecuting the lawsuit.  IBM, in turn, sought coverage for the payment of these fees under the Federal policy, claiming that the primary Zurich policy, with limits of liability of $25 million, had exhausted. 

Federal sought a judicial declaration that coverage was unavailable for the underlying suit as it did not fall within the Zurich policy’s definition of “wrongful act,” which was amended by endorsement to include:

  1. any breach of the responsibilities, obligations or duties by an Insured which are imposed upon a fiduciary of a Benefit Program by the Employee Retirement Income Security Act of 1974, as amended, or by the common or statutory law of the United States, or ERISA equivalent laws in any jurisdiction anywhere in the world;
  2. any other matter claimed against an Insured solely because of such Insured's service as a fiduciary of any Benefit Program;
  3. any negligent act, error or omission in the administration of any Benefit Program.

Please see full article below for more information.

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Published In: Business Torts Updates, General Business Updates, Finance & Banking Updates, Insurance Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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