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Presenter: Marshall Gilinsky, Esq. (212) 278-1513 email@example.com Canadian Capital RIMS Chapter Meeting March 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
3 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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
4 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. Professional Liability Policies Professionals are common targets whenever things go wrong and people lose money Employers are too now
5 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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
6 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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
7 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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
8 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. Cooperation Clause Every Policy Contains, as a Condition of Coverage, a Duty to Cooperate in: –investigation –defense –settlement –authorize carriers to obtain records
9 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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
10 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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
11 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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?
12 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. Scope of Coverage Concerns Coverage tied to “capacity” as “fiduciary”? What about more mundane errors and omissions by plan, employer, managers and administrators?
13 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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?
14 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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.
15 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. 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.
16 912023v1 ©2009 Anderson Kill & Olick, P.C. All Rights Reserved. THANK YOU Marshall Gilinsky (212) 278-1513 firstname.lastname@example.org
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