Presenter: Marshall Gilinsky, Esq. (212) 278-1513 [email protected] Canadian Capital RIMS Chapter Meeting March 11, 2009 Understanding Key E&O,

Marshall Gilinsky, Esq.(212) 278-1513

[email protected]

Presenter:

Canadian Capital RIMS Chapter MeetingMarch 11, 2009

Understanding Key E&O, D&O and Fiduciary Liability

Insurance Issues

2 912023v1©2009 Anderson Kill & Olick, P.C.

All Rights Reserved.

Presentation Overview

• Liability Coverages in General

• Specialty Risk Policies– Professional Liability (“E&O”)– Fiduciary Liability

• Issues Common to D&O, E&O and Fiduciary Claims



Corporate Liability Policies

• General liability / Umbrella Liability Ins.– Endorsements for fiduciary coverage

• Directors’ & Officers’ (“D&O”) policies• Errors & Omissions (“E&O”) policies• Fiduciary liability policies• Audit committee liability insurance• Securities issuance liability insurance• Employment liability insurance



Professional Liability Policies

• Professionals are common targets whenever things go wrong and people lose money

• Employers are too now



Basic E&O Coverage Concept

• Wrongful Act

• Professional Service; Omission; Investment; Retirement

• Usually Causing Economic Injury– Bodily injury for medical professionals– Property damage for architects, engineers,

and others



Wrongful Acts & “CAPACITY”

• any actual or alleged breach of duty, neglect, error, negligent misstatement, misleading statement or omission unintentionally committed

• solely in the conduct of the Insured’s Professional Services as specified in the Declarations



Notice

• Notice can be required before a claim is made and the policy is triggered

• “notice of circumstances” likely to give rise to a claim

• Late Notice: claims made vs. occurrence



Cooperation Clause

• Every Policy Contains, as a Condition of Coverage, a Duty to Cooperate in:– investigation– defense– settlement– authorize carriers

to obtain records



Defense Coverage

• Policyholder might have obligation to defend claim

• Insurance company approval of counsel, costs, and settlement

• Insurance company pays defense costs, usually within applicable limits

• If policy does not specify, insurance company should have to reimburse costs on an ongoing basis



Fiduciary Risk Exposures

• Claim Risks– Employee / beneficiary suits– choppy equity markets / price fluctuation

• Erosion of health care benefits

• Defense Costs

• Punitive damages?

• Government Proceedings/Investigations



Basic Fiduciary Coverage Concept

• Insurance company promises to pay:– Defense costs; and – Damages:

• Compensatory? We’ll see.• Punitive/exemplary/multiplied damages

• Defense coverage:– Policyholder picks defense counsel or duty

to defend?



Scope of Coverage Concerns

• Coverage tied to “capacity” as “fiduciary”?

• What about more mundane errors and omissions by plan, employer, managers and administrators?



Compensatory and Punitive Damages

• Exclusion for “benefits due”:– How are plaintiffs measuring the damages

they seek in their complaint? By reference to the benefits unrealized?

• Punitive damages:– Insurable in jurisdiction in question?– Choice of law provision in policy?



Competing Interests in Defense (D&O, E&O and Fiduciary)

• Policyholders Want Best Representation: – Often expensive given need for expertise;– Potential conflicts necessitating multiple and

separate counsel?• Insurance Companies Want to Control Costs:

– May seek to impose their choice of counsel or cap rates of selected counsel.

• More Conflicts of interest?– Former management vs. New management;– Ds & Os vs. Entity;– Priority of payments clause.



Risk Management Issues

• Seamless integration of specialty policies?• Choice of law and arbitration• Choice of counsel provision • Insurance application• Severability (who knew what?):

– Non-disclosures in insurance application;– Severability of bad acts exclusions as between

Insureds.



THANK YOU

Marshall Gilinsky(212) 278-1513

[email protected]

Documents

Presenter: Marshall Gilinsky, Esq. (212) 278-1513 [email protected] Canadian Capital RIMS Chapter Meeting March 11, 2009 Understanding Key E&O,