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NY High Court Holds Fiduciary Insurance Coverage Doesn?ÇÖt Cover Claims Against Employer as Settlor

March 16, 2012
The Court of Appeals of New York, New York?ÇÖs highest court, dismissed the claim IBM made against the carrier of its excess insurance coverage (an excess policy that covered claims in excess of its ERISA fiduciary insurance policy). A class of participants had sued IBM claiming that amendments IBM made to its pension plan were age discriminatory. Participants filed no ERISA fiduciary claims. IBM settled for $319 million. After exhausting the $25 million limit in its underlying policy, IBM turned to its excess policy with Federal which was a ?Ç£follow form?Ç¥ policy that conformed to the terms and endorsements of the underlying Zurich Policy. The excess policy covered ?Ç£any breach of the responsibilities, obligations or duties by an Insured which are imposed upon a fiduciary of [a plan by ERISA, other U.S. law or] ERISA equivalent laws in any jurisdiction, [ ] any other matter claimed against an Insured solely because of such Insured?ÇÖs service as a fiduciary of any Benefit Program [, and] any negligent act, error or omission in the administration of any Benefit Program.?Ç¥ The court held that when IBM had amended the plan, it was acting as a settlor rather than a fiduciary, and therefore the claims related to IBM?ÇÖs amendment of the plan were not covered under the policy. Federal Insurance Co. v. Int?ÇÖl Business Machines Corp., No. 20, 2012 NY Slip Op 01320 (N.Y. Feb. 21, 2012).
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