The second is this one, about a finding that an insurer had no duty to defend its insured against a class action seeking only economic losses based on the risk of bodily injury, rather than seeking recovery for bodily injury itself actually suffered by the class plaintiffs. The court found that the insurer had no duty to defend because coverage was limited to claims for bodily injury, and the action did not actually seek to recover for identifiable physical injury. This case caught my eye because it reflects a narrow, highly technical reading of the policy language and of the coverage it granted, pursuant to which the court refused to expand the coverage to include a defense obligation simply because the case pled against the insured had some relationship to possible allegations of bodily injury; the duty to defend is often interpreted by courts to be so broad that often courts, and sometimes even insurers, view the duty as triggered if the claim even comes close to fitting the terms of coverage. You can call this kind of a horseshoes approach to determining the duty to defend, as in close is good enough to do it. The court here did not buy it, and in that it is a moral victory for those of us who understand insurance policies as contracts whose terms should be honored and applied as written.

I write of this today, and it is on my mind, because of a press release that crossed my desk this week concerning the decision of a major defined contribution plan to use an index BrightScope created from its data to benchmark the performance of its target date retirement funds. The release notes that:

The BrightScope On Target Index will help [the plan sponsor] measure the performance and risk attributes of their target date portfolios while giving participants the ability to see how accurately their target date portfolio lives up to its stated goals.

At the end of the day, anything and everything plan sponsors can do to put accurate, transparent information in front of fiduciaries as part of their decision making process makes it harder for liability for breach of fiduciary duty to be imposed on those fiduciaries, and this is a perfect example of a plan sponsor doing so.

The article, incidentally, came to my attention through a Linked In group I participate in, and its only fair to note investment advisor Chris Tobe for bringing it to my attention. My comments on Linked In about the article expanded upon my thoughts above a little bit, and to the extent you are interested, were that:

The Reish article is right on point. I have represented smaller plans and their sponsors in similar cases, and relative to the size of the employer, they are every bit as disruptive, expensive and of concern as large cases against larger plans. For the smaller plans in particular, who really cannot afford the distraction from their business of these types of claims, an emphasis on compliance to avoid these types of suits is crucial. Of even more import is a willingness to work cooperatively with a participant who has a legitimate complaint to resolve the matter without litigation; I have done this, and it can save a small fortune in legal fees while ending up with a settlement similar to one that would be on the table at the end of litigation. Finally on this point, I would note one concern with regard to fiduciary liability insurance for these "small plan" claims. Many such policies have a high deductible, meaning that relatively small dollar claims in relatively small plans may not end up covered by the insurance at all or at least not to a significant extent. Small plans should keep in mind when acquiring the coverage that a low deductible is necessary to capture the typical size claim that a small plan will generate.

Its an alluring theory, but one that raises the question of whether it plays out against the backdrop of past case law and the development of fiduciary standards when it comes to employer stock holdings, which would suggest that the claims on their merits have weaknesses, or whether instead they play out against the political backdrop of the Deepwater Horizon event and the economic losses it is strewing across a range of actors, including but not limited to the employee shareholders. If it plays out against that later backdrop - as a, perhaps, unseen or unspoken influence - the question becomes whether this fact pattern could shift the nature of these types of claims in a direction that could give them far more traction than the past history of claims of this nature suggests would otherwise be the case.

You can see the full list here, and thanks to my producer, the director, the guys at UTA, my agent, the academy . . .

I suspect that one of the reasons this issue - of the scope of ERISA preemption - is difficult to handle at times is that there is a language barrier of sorts; as this case shows, relate has a specific meaning in the context of ERISA and ERISA preemption, and an entirely different and broader one when used as part of regular speech, including by lawyers. As a result, analyzing the scope of preemption under ERISA can become one of those areas of the law in which ERISA lawyers and other lawyers become “two peoples separated by a common language,” in the famous formulation.

The case, incidentally, is Stevenson v. Bank of New York, decided this week by the Second Circuit. You can find a copy of it here.

A different species of educational opportunity, however, consists of those that actually provide a detailed level of analysis on a question that is in fact complicated, and that presents nuances that need to be dealt with in the day to day hurly-burly of practice. This webinar here, on the attorney-client privilege in the context of insurance coverage counseling and litigation, looks on its face to fall into that category. The privilege, in this context, is a lot of fun for a litigator, like me, who enjoys working with the rules of evidence, and exploiting - or conversely defending against - gaps in the protection provided by the privilege. Two issues that quickly jump to the forefront of my mind even as I write this post - both of which appear to be covered by the webinar - are the interrelationship of the privilege with bad faith litigation, including in particular the impact on whether and how to use an advice of counsel defense, and the possible risk of disclosure by means of discovery from an expert witness. There are many more, but they seem to fall within the broad categories listed in the webinar’s agenda, so rather than my reciting them, you may just want to take a listen.

A more serious scenario is where a person unilaterally exercises discretionary control or authority over a plan without express authorization. Such a person can become a "functional" 3(21) limited scope/non-named fiduciary--without a written contract--through its mere conduct of providing unauthorized advice or exercising unauthorized control or discretion. Given that no contract is present in this situation, the entity obviously doesn't intend to become a 3(21) limited scope/non-named fiduciary but becomes so anyway through its inadvertent conduct.

From a litigation perspective, this is a far more common circumstance than one might assume, and is a central point in much breach of fiduciary litigation, where a key question is often whether a particular defendant became a fiduciary by its actions concerning the plan and its assets, where it was not intended by the plan’s authors and founders to be a fiduciary.

This is all a preamble to this link, registration required, to a Lawyers USA story on the decision, in which yours truly is quoted:

Stephen D. Rosenberg, a partner at the McCormack Firm in Boston and author of the Boston ERISA and Insurance Litigation blog, said the relaxed standard could result in more cases being filed.

“I can see more cases being brought by plaintiffs’ lawyers because they can file a case with a procedural problem, knowing they don’t have to win the whole case at the end of the day to collect a fee,” he said.

But a remand order to a plan administrator might not be enough by itself to be considered success on the merits, Rosenberg noted. . . .

“The fight that is going to play out in these cases [involves] the question of how much beyond just a failure to dot an “I” on remand does [a claimant] need to have,” Rosenberg said.

I have a lot more thoughts on the case, some of which are actually more subtle than these broad brush thoughts, but an important one to pass along relates to the issue I am quoted on, of the possibility of Hardt opening the door to more cases being filed. Certainly, there is room and motivation now for participants’ lawyers to bring cases where a clear procedural problem is present, thus making recovery of attorneys’ fees more likely and making filing suit more feasible economically from their perspective, in cases where previously the relatively low dollar value of the benefits at issue combined with a reasonably high degree of difficulty in prevailing on the substantive claim to reverse the denial of the benefits itself would have argued against filing suit. But even that dynamic, in terms of its likelihood of producing more lawsuits, is tempered by a dynamic somewhat peculiar to ERISA litigation, namely the relative paucity of participant lawyers who can spot both a procedural error and a strategic path from it to remand; that is not something just any old plaintiff side lawyer or moonlighting personal injury attorney is going to be able to do. As a result, you may see more cases filed by the better ERISA focused participant lawyers on claims that they otherwise would not have seen as financially worth pursuing, but I doubt you are going to see a noticeable or measurably significant increase in the filing of such suits across the legal and participant population as a whole.