It’s All In The Fine Print: Will Your Fiduciary Insurance Cover You When You Need It?

Article by Carol Buckmann

Will that insurer your company has been paying premiums to for all of these years stand behind you if you are sued for ERISA violations?  Have you just been relying on a broker to give you the coverage you need?

I previously wrote about a decision in which CIGNA’s insurer was permitted to deny coverage for fiduciary breach due to a fraud exclusion in its policy.   We have just had another decision from an appeals court in Louisiana in which fiduciaries being sued by the U.S. Department of Labor were denied coverage under each of three separate policies they thought would provide them with legal defense costs and cover any awards assessed against them.  Again, the reason was buried in the policy fine print, which even the brokers didn’t seem to understand, if the facts set out in the decision are any indication.

The facts boil down to the following:  Plaintiffs had three policies: a D&O policy, fiduciary liability insurance and excess fiduciary coverage.  They were sued by the DOL following a formal investigation for selling stock to an ESOP at an inflated price, but the court ruled that the policies didn’t cover the plaintiffs for the following reasons:

  • The policies didn’t cover actions taken before the effective date.
  • The D&O policy didn’t cover ERISA claims at all.
  • Plaintiffs failed to give notice of the claims during the policy period, where the claim was specifically defined as including an investigation by the Department of Labor or the Pension Benefit Guaranty Corporation.
  • The excess coverage didn’t kick in until the policy limits in the basic policies had been reached (which was not possible given the court’s other rulings.)

The plaintiffs were also told that they couldn’t amend their complaint to include the brokers who they claimed were supposed to be providing them with specific coverage, but failed to do so.

No one wants to wade through the details of these policies, but those who fail to have them reviewed by legal counsel may be in for rude surprises later on.  We regularly speak with very competent  employee benefits professionals who confuse the required ERISA bonding coverage (which provides recovery to the plan, not the fiduciaries) with fiduciary liability insurance, or who think D&O policies cover their ERISA plan committee actions (many such policies either don’t cover ERISA claims at all, or don’t cover lower level committee members).  We frequently are told that a plan sponsor maintains fiduciary liability insurance, only to be sent the ERISA bond when we ask to see a copy of the policy.  In many of those cases, we have to deliver the bad news that the fiduciaries have no personal coverage at all.

Clearly, the time to review coverage and obtain any required endorsements is not when the accusations of fiduciary breach are raised.  Just a few among the points to be considered in a thorough review of coverage are the following:

  • Your broker is not a lawyer.  Don’t rely on her to interpret legal clauses in your policy. Get a qualified independent review.
  • Don’t assume that employer indemnification obligations are a substitute for coverage or will cover any gaps in coverage.  There will be legal constraints (for example, under state corporate law) on the company’s ability to provide full indemnification and the commitment may become worthless in the event of bankruptcy or other financial distress.
  • Understand the exclusions in your policy and find out whether endorsements are available to eliminate some of them.
  • Consider whether your policy limits should be increased.  Courts seem to be awarding ever increasing damages in fiduciary breach cases.
  • Understand and follow the notice requirements in your policies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

Storm flooding spurs creation of overland water insurance

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IBC applauds Government of Alberta’s commitment to reduce flood risk

EDMONTON, Oct. 26, 2015 /CNW/ – Today, Insurance Bureau of Canada (IBC) welcomed the Government of Alberta’s announcement that it will invest hundreds of millions of dollars to deal with the risk of flooding in southern Alberta.

“This investment shows the government’s commitment to building resilient communities,” said Bill Adams, Vice-President, Western and Pacific, IBC. “Across Canada, extreme weather damage has cost insurers almost $8 billion since 2010 and governments across the country many tens of billions of dollars more.  We need to take thoughtful and appropriate action to develop strategies that help Canadians protect themselves from the effects of extreme weather. Investment today will pay off in the long term. I applaud the government for taking these steps.”

The government announced new flood protection along the Bow and Elbow Rivers with the aim to defend Calgary and upstream communities against the type of severe flooding that occurred in June 2013. This funding commitment will support a number of flood mitigation projects, including:

  • Building the Springbank Off-stream Reservoir
  • Investing additional funds in the Alberta Community Resilience Program to support City of Calgary mitigation projects
  • Funding local mitigation in Bragg Creek and Redwood Meadows.

With climate change resulting in more frequent and severe weather events, IBC has made helping Canadians adapt to this new reality a strategic priority for the insurance industry. Adams added, “These investments will make our province stronger and able to handle weather events that have become more frequent and severe.”

Insurers are working to educate Albertans about steps they can take to protect their properties. For more information, consumers can contact their local insurance representative, or call IBC’s Consumer Information Centre at 1-844-2ask-IBC or visit ibc.ca.

About Insurance Bureau of Canada
Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up 90% of the property and casualty (P&C) insurance market in Canada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians. IBC supports the vision of consumers and governments trusting, valuing and supporting the private P&C insurance industry. It champions key issues and helps educate consumers on how best to protect their homes, cars, businesses and properties.

P&C insurance touches the lives of nearly every Canadian and plays a critical role in keeping businesses safe and the Canadian economy strong. It employs more than 118,000 Canadians, pays $6.7 billion in taxes and has a total premium base of $48 billion.

For media releases and more information, visit IBC’s Media Centre at www.ibc.ca. Follow IBC on Twitter @InsuranceBureau and @IBC_West. If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC.

If you require more information, IBC spokespeople are available to discuss the details in this media release.

SOURCE Insurance Bureau of Canada

Canada’s leading commercial fleet tracking solution is now paired with an insurance offering from Canada’s largest home, auto and business insurance company

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Airbnb introduces a broader insurance coverage policy for Canadians

Airbnb is adding a new level of insurance coverage in Canada as part of wider support for people who list their properties through its service.

The online accommodation provider announced October 22, 2015 that its Host Protection Insurance program, which launched earlier this year in the United States, would be rolled out in 15 more countries.

The expanded coverage will provide compensation if a guest is injured at a property listed on Airbnb and brings a claim against the host.

The insurance could also cover damages a guest causes to the surrounding area of a property – such as accidental water damage if a pipe burst affects a neighbouring apartment.

Coverage, which comes at no additional cost to the host, tops out at $1 million, the company said.

The Host Protection Insurance program, which will be provided through a partnership with a Lloyd’s of London participating insurer, comes after Airbnb spent four years on an agreement that satisfied the insurers, said Airbnb product lead Jonathan Golden.

“The insurance industry is not fast paced, so it has taken time to educate them on these platforms,” he said.

“It has been a challenge to handle products like these (which are) unique and individual solutions.”

Airbnb has been growing in popularity as the so-called “sharing economy” becomes more commonplace with the help of taxi-hailing service Uber and various other apps.

Golden said Airbnb executives wanted to lineup a significant number of countries before it launched the expanded insurance coverage.

Since its U.S. launch in January, less than 50 claims have been filed under the Host Protection program when factoring in all of the 8 million guest bookings, he said.

Airbnb, which offers a substitute to hotels, has about 33,000 host listings across Canada.

Few of those bookings have resulted in major issues for the company, but some of the higher profile problems have raised red flags for insurance companies.

In May, a Calgary family discovered their home was trashed amid a “drug-induced orgy” by hard-partying renters. Property damage was assessed at around $75,000, though Airbnb said it would cover the costs at the time.

Governments across the country have started to voice concerns about the ramifications of an unregulated sharing economy.

In Quebec, Tourism Minister Dominique Vien is pushing for a law which clearly differentiates between legal accommodation web sites like Airbnb and some of the smaller competitors who aren’t necessarily operating within requirements and paying taxes.

 

IBC congratulates the Liberal Party of Canada – Looks forward to collaborating to build resilient communities

On October 20, 2015, the Insurance Bureau of Canada (IBC) welcomed Canada’s Prime Minister-elect, Justin Trudeau, and his colleagues at the Liberal Party of Canada as they form a  new majority government.

“On behalf of IBC and its members, I would like to extend my sincere congratulations to Mr. Trudeau and to all Members of Parliament who prevailed in yesterday’s election,” said Don Forgeron, President and CEO, IBC. “We look forward to working with the government on its election pledge to strengthen communities facing increasingly severe weather events stemming from climate change.”

Prior to 2009, insured damages from natural catastrophes were not notable. Today, however, they sit around $1 billion a year and in 2013 hit a historic high of $3.2 billion. The insurance industry has witnessed first-hand the devastating effects severe weather has had on Canadians, governments and businesses.

IBC has prioritized climate change adaptation and earthquake preparedness. A 2013 report commissioned by IBC from AIR Worldwide showed that Canada is not prepared financially for a severe earthquake that could negatively impact Canada’s economy.

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