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Spotlight on Fiduciary Liability: Evolving Trends

Spotlight on Fiduciary Liability: Evolving Trends. ∫. What a Client Should Know April 11, 2006. Spotlight from Different Angles. Carrier’s Perspective Matt Shulman, Vice President Hartford Financial Products Claims/Defense Perspective Martin Ween, Esq., Partner

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Spotlight on Fiduciary Liability: Evolving Trends

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  1. Spotlight on Fiduciary Liability: Evolving Trends ∫ What a Client Should Know April 11, 2006 New York City ~ April 10-11, 2006

  2. Spotlight from Different Angles • Carrier’s Perspective Matt Shulman, Vice President Hartford Financial Products • Claims/Defense Perspective Martin Ween, Esq., Partner Wilson Elser Moskowitz Edelman & Dicker LLP • Broker’s Perspective Jenina Schiller, Sr. Vice President & Product Leader Willis of New York

  3. The Focus of Our Session • Coverage Triggers – Who, What is covered • Reporting provisions – Ensuring policy compliance • Corporate Governance – How to differentiate one client from another • Market Options – In a firming marketplace; what is available?

  4. Q. Who Is Covered?A. Not just ERISA plans • All ERISA plans • Health & Welfare Benefit plans • Non-qualified plans in U.S. • Foreign plans • Workers Compensation, Government Mandated programs, Severance Pay plans

  5. Beware of Those Carrier Applications • Not all applications are alike • Some carrier apps on new and renewals require full plan listing! • Omnibus on Health & Welfare Benefit plans • Usual protocol is to provide 5500’s, Financials, & Investment Portfolios on top 5 plans – as approximately 85% of these hold major assets

  6. Beware of Those Carrier Applications • Beware! An incomplete listing can create a gap! • Carrier flexibility required • Potential for denial of coverage

  7. No. 1 Reason for a Coverage Gap: Failure to Report a Claim or NOC • When should I report a claim? Concentrate on the Notice Provision • All policies have basic Claims Reporting & Circumstance Provisions • Designated Individual Risk Mgr. or Gen’l Counsel/Tailor Provisions • Actual hard, bona fide claim easier?

  8. No. 1 Reason for a Coverage Gap: Failure to Report a Claim or NOC • Notice of Circumstance – which may give rise to a claim • When failure to give Notice of Circumstance comes back to bite – Raytheon proof! • ERISA Tag-along filed after D&O claim/Carriers denied claim due to Prior notice provision in policy • Overlapping EBL (under CGL) – duly report under both policies

  9. Other Claims Bubbling • Increased activity in Severance Pay (Hewlett Packer) • Executive Compensation Plans – Straddling D&O/Fiduciary areas – Rising defense costs, legal fees, interest, etc. • Increased actions brought by DOL, PBGC, and IRS

  10. WHAT Is Actually Covered? • Definition of Claim • Formal investigations, audits • Clients typically may not notify as a claim – no allegations • Investigative agencies: correct them or dismiss them • Premise: good companies bring in professionals during audit process • Breach of fiduciary duty

  11. Audits/CAP Programs(Voluntary Compliance Programs Offered by Carriers) • Coverage hurdles for carriers’ defense

  12. The Struggle to Differentiate Our Clients Corporate Governance • No Employer Securities • No freezing of plans • No cash balance conversions • Full funding levels • Premiums still high! • Retentions on the rise!

  13. What Are Clients’ Options Today? • Go bare!(not likely) • Coordinate with D&O limits – No tie-in • Separate Employer Securities retention • Review A-Side policies • Coordinate with EBL • Structure Excess/Umbrella limits (sharing over multi ER lines)

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