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Class Action Lawsuit Filed Against IBM

08 Aug
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The Appellate Court in New York reached its ruling just a few months ago.

A class action lawsuit was filed against IBM, Corporation and its personal pension plan (the Plan) in which the plaintiffs alleged that certain amendments to the Plan violated age discrimination provisions of ERISA. Although the parties reached an out of court settlement, the excess Fiduciary Liability insurance company sought a declaratory judgment from the court. In the opinion of the insurance company, they owed no indemnity to the insured as the allegations in the class action suit did not allege a breach of fiduciary duty or otherwise allege a Wrongful Act as defined in the policy.

The Appellate Court in New York reached its ruling just a few months ago.

What are your thoughts? Covered or Not Covered?

Result:
In Federal Ins. Co. v. International Business Machines Corp., 2010 WL 4540585 (N.Y. App. Div. Nov. 9, 2010), the court ruled that the insurer was correct and owed no indemnity for costs or damages. The finding was that the insured was acting in a settlor capacity, not a fiduciary capacity when the alleged age discrimination according to the ERISA provisions. Settlor capacity refers to the plan sponsor responsibilities that include the creation of the plan, amendments to the plan as well as termination of the plan. These functions are not subject to imposition of fiduciary liability, but as the above case illustrates, the plan sponsor can still be held liable under the law, in this case, age discrimination provisions of ERISA.

The insurer issued an excess policy to an insured company that followed the form of an underlying fiduciary liability policy. The underlying policy provided coverage for “all Loss for which the Insured becomes legally obligated to pay on account of any Claim first made against the Insured …for a Wrongful Act.” The underlying policy defined “Wrongful Act,” as “…any breach of the responsibilities, obligations or duties by an Insured which are imposed upon a fiduciary of a Benefit Program by …ERISA.

~Marjorie

http://www.insurancecommunitycenter.com

http://www.insurancecommunityuniversity.com

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