right of recourse provision
A provision in a fiduciary liability policy giving an insurer the right to
subrogate (i.e., collect monies from a party responsible for causing a loss,
for which an insurer has already made an indemnity payment) against an insured.
Right of recourse provisions are particular to fiduciary liability insurance
policies and represent an exception to the general practice in the insurance
industry whereby insurers do not subrogate against insureds. The rationale for
right of recourse provisions is that Section 410(b)(1) of ERISA allows an insurer
to pursue recourse against a covered fiduciary, if the premium for a fiduciary
policy is paid from the assets of an employee pension or welfare plan. This
is because fiduciaries should not be financially absolved from the consequences
of their wrongful acts when premiums for liability coverage are being paid from
the assets of the benefit plans they are administering-to the detriment of the
beneficiaries of those plans. However, most fiduciary liability policies also
indicate that by payment of a specified additional premium, the insurer will
waive its right of recourse. Accordingly, waiver of recourse endorsements are
beneficial whenever arranging coverage for fiduciaries.
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PLI XII.E