Fiduciary Liability Exposures and Insurance Coverage Course Outline

Introduction and Overview
Fiduciary Duties under ERISA
1. ERISA: The Basics
  1. The Purpose of ERISA
  2. Fiduciaries as Defined by ERISA
  3. Standards of Care Required by ERISA Fiduciaries
  4. Bonding Requirements under ERISA
  5. Other Important Sections of ERISA
Types of Plans Covered and Exempted by ERISA
1. The Two Types of Covered Benefit Plans
  1. Employee Pension Benefit Plans
  2. Employee Welfare Benefit Plans
2. Basic Requirements of ERISA Plans
  1. Two Key Amendments to ERISA
  2. Retiree Health Care Benefits: Not Subject to ERISA Protections
  3. The ERISA Preemption for Health Care Plans
Liability Exposures Associated with Employee Pension Benefit Plans
1. Types of Employee Pension Benefit Plans
  1. Defined Benefit Pension Plans
  2. Exposures from Defined Benefit Contribution Plans
Underwriting Fiduciary Liability Insurance
1. Factors in Pricing
2. Underwriting Factors
  1. Funding Adequacy
  2. Nature of Plan Investments
  3. Single-Employer versus Multi-Employer Plans
  4. Types of Covered Plans
  5. Legal Counsel’s Opinion
  6. CPA Firm’s Opinion
  7. Profile of Covered Fiduciaries
  8. Loss Control Program
Fiduciary Liability Loss Control
1. Controlling Fiduciary Liability Losses
  1. Conduct Periodic Audits
  2. Use Experts To Design Plans
  3. Fund Plans Adequately
  4. Invest Prudently
  5. Avoid Conflicts of Interest
  6. Avoid Prohibited Transactions
  7. Report and Disclose Plan Information as Required
  8. Select and Evaluate Fiduciaries Carefully
Coordinating Fiduciary Liability Insurance with Other Coverages
1. Fiduciary Liability versus Employee Benefits Coverage
  1. The ISO Employee Benefits Liability Coverage Endorsement
  2. Stand-Alone versus Packaged Approaches to Fiduciary Liability Coverage
Fiduciary Liability Insurance Coverage: Insuring Agreements
1. Insuring Agreements
  1. Fiduciary Liability Coverage
  2. Settlement Programs
  3. Liability for Acts of Third Parties
Fiduciary Liability Insurance Coverage: Covered Persons/Covered Organizations
1. Omnibus “Insured” Wording
2. Important Coverage Extensions
  1. Spousal Coverage
  2. Coverage of Legal Representatives
Fiduciary Liability Insurance Coverage: Coverage for “Status Changes” of Covered Organizations and Plans
1. Coverage for Acquisition of New Benefit Plans
  1. Limitations on Coverage of Newly-Acquired Plans
  2. Coverage for Other Types of “Status” Changes
Key Definitions in Fiduciary Liability Policies
1. Covered Losses
  1. Voluntary Compliance Fees
  2. Certain or Limited Fines, Civil Penalties, Taxes, Uninsurable Matters, Benefits Payable under Plans
  3. Punitive Damages
2. Definition of “Claim”
  1. Written Demand for Monetary or Nonmonetary Relief
  2. Civil Proceeding Commenced by Service of a Complaint
  3. Formal Administrative or Regulatory Proceeding
  4. Arbitration, Mediation, or Alternative Dispute Resolution Proceeding
  5. Written Request to Toll/Waive a Statute of Limitations Relating to a Potential Civil or Administrative Proceeding
3. Covered Territory
4. Covered Defense Costs
  1. Defense within Policy Limits
  2. Duty To Defend Provisions
  3. Drawbacks of Duty To Defend Provisions
5. Claim Settlement Procedures
  1. Coinsurance Hammer Clause: An Illustration
Fiduciary Liability Coverage: Limits and Deductibles/Retentions Provisions
1. Policy Limits
  1. Interrelated Claims Provisions
2. Deductibles/Retentions
  1. Application of Deductibles/Retentions to Defense Coverage
Fiduciary Liability Policy Conditions
1. Subrogation/Recourse
  1. When Is Subrogation Permitted Against Fiduciaries?
2. Severability
  1. Actions of One Insured Do Not Void Coverage as to Other Insureds
  2. False Application Statements Do Not Void Coverage as to Other Insureds
  3. Policy Limits Do Not Increase Based on the Number of Insured Fiduciaries
3. Managed Care Coverage Exception Wording
  1. When the Managed Care Exception Endorsement Applies
  2. Why the Managed Care Exception Endorsement is Necessary
  3. Coverage Subject to a Sublimit
Fiduciary Liability Policy Exclusions
1. Dishonesty
  1. The Practical Effect of the Dishonesty Exclusion
2. Personal Profit
  1. Severability Provisions in Fiduciary Liability Policy Exclusions
3. Contractual Liability
  1. Rationale for the Exclusion
  2. Avoid Holding Other Parties Harmless
  3. Exception Wording
4. Failure To Collect Contributions Owed to an Employee Benefit Plan
  1. Rationale for the Exclusion
5. Claims from a Subsidiary Prior to Acquisition
  1. Rationale for the Exclusion
6. Failure To Fund in Accordance with ERISA
7. Failure To Purchase or Maintain Insurance or Bonds
8. Workers Compensation, Unemployment Insurance, and Social Security Disability Benefits
9. Discrimination Not Related to ERISA Law
  1. Exception and Coverage for Discrimination under Benefit-Related Laws
10. Benefits Payable to a Beneficiary
  1. Rationale for the Exclusion
11. Bodily Injury and Property Damage
12. Exposures Excluded by Other Types of Professional Liability Policies
Fiduciary Liability Policy Coverage Triggers
1. Operation of Claims-Made Coverage Triggers
  1. The Significance of “First Made” Language
  2. Claims-Made and Reported Policies
2. Retroactive Dates
  1. Purpose of Retroactive Dates
3. Discovery Provisions
  1. Use of Discovery Provision: An Example
4. Extended Reporting Provisions
  1. ERPs Do Not Reinstate Remaining Policy Limits
  2. No Coverage for Wrongful Acts during the ERP
  3. Discovery Provisions versus ERPs
  4. Key Variations between ERP Provisions
5. Runoff Policies
  1. Runoff Policies versus ERPs
6. Why Are Claims-Made Coverage Triggers Used for Fiduciary Policies?
  1. More Accurate Prediction of Ultimate Claim Liabilities
  2. Rate Setting under Occurrence versus Claims-Made Policies