insurance community university insight on executive liability

Insurance Community University

Insight on Executive Liability


Marjorie L. Segale, AFIS, CISC, RPLU, CIC, CRIS, ACSR, CISREducation Director, Insurance Community Center

President, Segale Consulting Services, LLC

Insight on Executive Liability

2


DisclaimerInsurance forms and endorsements vary based on insurance company;

changes in edition dates; regulations; court decisions; and state jurisdiction. These instructional materials provided by Insight is

intended as a general guideline and any interpretations provided by Insight do not modify or revise insurance policy language. The

authors of these materials, Insight Insurance Consultants is a division of Insight Consulting and Management Inc. Insight, the instructor or

Insurance Community Center, LLC do not assume neither liability nor responsibility to any person or business with respect to any loss that

is alleged to be caused directly or indirectly as a result of the instructional materials or instruction provided. Copyright 2010 – 2011 All Rights Reserved

Laurie: 714.803.5830 [email protected] Marjorie: 714.206.9583 [email protected]

www.theinsurancecommunity.com

3


What this class will cover

1. Definition of wrongful act a. D & O, EPLI, EBL and Fiduciary Liability

2. Who is or should be an insured3. Major exclusions and restrictions to

negotiate and remove or modify4. Claim Made v. Claims Made and

Reported Coverage Forms5. P & P date meaning and purpose

4


Executive Liability Basics

5


Executive Liability Basics

6


Executive Liability Coverage Basics

7


D & O Coverage Basics

8


Partnership Liability Coverage Basics

9


Employment Practices Liability Insurance (EPLI) Basics

10


Employee Benefits Liability Coverage Basics

11


Fiduciary Liability Coverage Basics

12


Asset Risk and Protection

13


Covered Loss Sample Language

14


D & O Insuring Agreement

(1) any error, misstatement, misleading statement, act, omission, neglect or breach of duty committed, attempted, or allegedly committed or attempted, by an Insured Person in his or her capacity as an Insured Person; or

(2) any other matter claimed against an Insured Person by reason of his or her serving in such capacity.

15


Policy Coverage Response

16


Definition of Loss

17


EPLI Insuring Agreement

• The Company shall pay, on behalf of the Insureds, Loss on account of any Employment Claim first made against such Insured during the Policy Period or, if exercised, during the Extended Reporting Period, for Employment Practices Wrongful Acts, but only if such Employment Claim is reported to the Company in writing in the manner and within the time provided in Subsection 12 of this coverage section.

18


EPLI Wrongful Act

Wrongful Act means an Employment Practices Wrongful Act and, if Third Party Liability Coverage is purchased, a Third Party Wrongful Act.

19


EPLI Wrongful Act

Wrongful act means:Breach of Employment Contract, Employment Discrimination, Harassment, Retaliation, Workplace Tort, Wrongful Employment Decision or Termination

committed, attempted, or allegedly committed or attempted by any Organization or by any Insured Person in his or her capacity as such.

20



21


Definition of Loss

22


Definition of Loss

23


EBL Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of any act, error or omission, of the insured, or of any other person for whose acts the insured is legally liable, to which this insurance applies.

24


Employee Benefit Liability Definition of Loss

25


EBLI Limit of Insurance

Subject to the Aggregate Limit, the Each Employee Limit is the most we will pay for all damages sustained by any one "employee", including damages sustained by such "employee's" dependents and beneficiaries, as a result of:

(1) An act, error or omission; or(2) A series of related acts, errors or omissionsnegligently committed in the "administration" of your "employee benefit program".

26


EBLI Limit of Insurance

However, the amount paid under this endorsement shall not exceed, and will be subject to, the limits and restrictions that apply to the payment of benefits in any plan included in the "employee benefit program".

27



28


Fiduciary Liability Insuring Agreement• The Company shall pay, on behalf of the Insureds,

Loss on account of any Fiduciary Claim first made against the Insureds during the Policy Period, or, if exercised, during the Extended Reporting Period, for a Wrongful Act committed, attempted or allegedly committed or attempted before or during the Policy Period by such insureds, or by any person for whose Wrongful Acts the Insureds are legally responsible, but only if such Claim is reported to the Company in writing in the manner and within the time provided in Subsection 11 of this coverage section..

29


Fiduciary Claim means:

30


Fiduciary Claim means:

31


Fiduciary Liability Wrongful Act

• Any breach of the responsibilities, obligations or duties imposed by ERISA upon fiduciaries of the Sponsored Plan in their capacity as such fiduciaries;

• Any negligent act, error or omission in the Administration of any Plan committed, attempted, or allegedly committed or attempted by an Insured in the Insured’s capacity as such

32


Fiduciary Liability Wrongful Act

• Any other matter claimed against an Insured solely by reason of the Insured’s service as a fiduciary of any Sponsored Plan.

33



34


D & O Exclusions

35


Insured v. Insured Exclusion Sample With Exception

Brought or maintained by or on behalf of any Insured in any capacity; provided that this Exclusion 6(c) shall not apply to:(i) a Claim brought or maintained derivatively

on behalf of the Organization by one or more securityholders of the Organization, provided such Claim is brought and maintained without any active assistance or participation of, or solicitation by, any Insured Person;

36


EPLI Exclusions

• Wage and Hour– Current trend in EPLI litigation due to

exempt v. non-exempt employee status– Some forms include very small amount of

coverage for defense and damages– Significant risk exposure for today’s

employers

• Bodily injury

37


Wage and Hour Exclusion Sample Language

For any actual or alleged violation of the responsibilities, obligations or duties imposed by any federal, state, or local statutory law or common law anywhere in the world (including but not limited to the Fair Labor Standards Act) or amendments to or regulations promulgated under any such law that governs wage, hour and payroll policies and practices, except the Equal Pay Act (“Wage and Hour Laws”), including but not limited to:

38


Wage and Hour Exclusion Sample Language(i) the calculation, timing or manner of payment

of minimum wages, prevailing wage rates, overtime pay or other compensation alleged to be due and owing;

(ii) the classification of any organization or person for wage and hour purposes;

39


Bodily Injury Exclusion Sample Language• For bodily injury, mental anguish, emotional

distress, humiliation, sickness, disease or death of any person or damage to or destruction of any tangible property including loss of use thereof whether or not it is damaged or destroyed; provided that this Exclusion 4(h) shall not apply to mental anguish, emotional distress or humiliation resulting from any Wrongful Act;

40


Who Is An Insured (or Should Be) D & O• Typically covers past, present and future

Ds & Os of the listed entity• Should include

– Newly formed or acquired subsidiaries• Time and size limitations will apply

– Spouses and estate– Can include the listed entity (Entity

coverage – sometimes shown as Coverage C)

41


Who Is An Insured (or Should Be) EPLI

42


Who Is An Insured (or Should Be)EBL / Fiduciary

43


On All Policies

44


Claims Made and Reported Forms

45


Sample Language

Except to such extent as may otherwise be provided herein, the coverage of this policy is limited to liability for only those claims that are first made against you and reported in writing to us during the policy period.

46


Possible Coverage Gap

47


Basic Extended Reporting Period Example• If we or the named insured shall cancel or elect

not to renew this policy, you shall have the right following the effective date of such cancellation or nonrenewal to a period of sixty (60) days (herein referred to as the “Automatic Extended Reporting Period”) in which to give written notice to us of claims first made against you during the Automatic Extended Reporting Period for any wrongful act occurring prior to the end of the policy period and otherwise covered by this policy.

48


Solutions

• Place coverage with a company using a claims made form rather than a claims made and reported form

• Modify coverage with incumbent insurance company

• If all else fails, notify the insured in writing – producer needs to meet with client and obtain acknowledgment in writing from client - annually

49


Pending & Prior Litigation

50


P & P Exclusion Example

“We shall not cover claims: N. first made against you prior to, or pending, as of the first inception date, or relating to the essential facts, circumstances or situation underlying such claim.”

51


P & P Exclusion With Proper Exception(b) based upon, arising from or in consequence

of any demand, suit, or other proceeding pending against, or order, decree or judgment entered for or against any Insured, on or prior to the applicable Pending or Prior Date set forth in Item 7 of the Declarations for this coverage section, or the same or substantially the same fact, circumstance or situation underlying or alleged therein;

52


Summary

• Every business client needs some form of business practices liability– D & O – Partnership Liability

• Every business client with employees needs EPLI coverage

• Every business client providing benefits to their employees needs Fiduciary Liability that includes EBLI

53

insurance community university insight on executive liability

Documents