It’s been a fascinating week in insurance and ERISA news, making it a good week to be the author of an ongoing weekly series on hot topics, articles, posts and the like in these areas of law. Interestingly (to me, anyway), the first three stories directly concern cases and issues I have litigated many times in the past, including at the Massachusetts Supreme Judicial Court and in the First Circuit.

1. Probably the most interesting news in the insurance world this week was a Delaware court’s decision that Meta is not entitled to insurance coverage for defense costs incurred from social media addiction claims. As Bloomberg reported, Meta’s liability insurers “are off the hook for its defense costs in litigation alleging the tech giant got kids hooked on its platforms,” finding that the “lawsuits didn’t present an ‘occurrence’ that would trigger coverage because they alleged only intentional conduct by Meta.” I have seen a fair number of articles and posts suggesting that this finding reflects some sort of a broader action by the court than just a focus on the terms of the policies and how they apply. However, there is nothing new about a court finding that a complaint alleging harm to minors cannot trigger a defense obligation because the alleged conduct can only be understood as involving some degree of intentional harm. The first case I briefed to (and won at) the Massachusetts Supreme Judicial Court decades ago involved whether an intent to harm precluding a duty to defend could be inferred simply from allegations of sexual misconduct in the complaint.
2. I don’t usually use one of the five slots in my weekly Five Favorites post to discuss a new judicial decision, but I suppose the rules don’t preclude it. I had expected to write a full-blown blog post on this new decision from the Massachusetts Appeals Court on a dispute over an individual disability policy but time and workload haven’t allowed, so I will talk about it now. The Court reversed a trial court decision to instead find that a limitation on the amount of coverage under an LTD policy was applicable. The decision is interesting for a few reasons. First, the Court decided it as a matter of insurance law principles and not as a matter of ERISA law. As a result, it provides a very nice, step by step summary of what the rules are for interpreting an insurance policy under Massachusetts law. Second, it is interesting because the Court flipped the decision below, ruling in favor of the disability insurer despite applying state law and not the standard of review under ERISA for judging a claim for disability benefits. The federal standard of review under ERISA governing this type of a claim is routinely characterized as overly friendly to defendants, but this case shows that the outcome of a dispute over the meaning of a disability policy may remain the same regardless of whether the ERISA standards or state law insurance tests are applied. That may be a bit of a shock to those who believe that one of the great flaws in ERISA jurisprudence is the establishment by the Supreme Court of a very favorable standard for defendants against these types of claims under ERISA. And finally, I would have liked to have seen the argument, as I know both lawyers, they are among the most experienced benefit litigators in town, and the argument was a bit of clash of titans in that regard. The defense counsel, Joe Hamilton, and I once spoke on a conference panel in Chicago on ethics rules governing ERISA claims, and plaintiff’s counsel, Mala Rafik, was probably the plaintiffs’ counsel on every other LTD claim I defended when I first started handling those types of claims. I have recovered attorneys’ fee awards in more than one ERISA case where I have represented the plaintiffs, but Mala remains the only plaintiff’s counsel in an ERISA action who ever recovered an attorneys’ fee award from my client.
3. I really – and I mean really – like this story about a plan sponsor suing a service provider for problems with a health care plan and the court concluding that, at least for purposes of deciding a motion to dismiss, it was irrelevant that the contract between the parties expressly declared that the provider is not a fiduciary of the plan. As the article puts it, the court held that the “plan sponsor plaintiff has presented a case sufficient to rebuff arguments that a healthcare brokerage/consulting firm wasn’t acting as a fiduciary, despite a service agreement that asserted it wasn’t.” I have litigated and arbitrated this exact same defense in various contexts, including with regard to self-funded health plans, for decades. It can make for some really entertaining arguments at summary judgment, and very interesting discovery tangents, as the parties try to show that the service provider did, or instead did not, have sufficient discretion to qualify as a fiduciary. Thinking about some of the lines of deposition inquiry that were pursued on this point makes me smile even now as I write this.
4. I have been arguing for some time that the question of whether plan sponsors and fiduciaries should allow private equity investments into their 401(k) plans is not clearcut, and that fiduciaries will have to consider an awful lot of subtle points – many of which they may not have the expertise to evaluate – to make this decision. This is not a new piece from Vanguard but it reappeared in my feed this week in response to various discussions of the increasing velocity towards the addition to plans of these investment options. It does an excellent job of explaining how many moving pieces there are that have to be considered in allowing such assets into plans. My concern for plan fiduciaries is that, as the article demonstrates, there are too many moving parts that a plan fiduciary will have to get right to be able to safely or prudently include the investment class in their plans. The article may not be that new, but the topic is still one of my favorites of the past week’s business news cycle.
5. One of the most darkly amusing moments in breach of fiduciary duty litigation is when a corporate officer or company owner discovers – or is told, sometimes by a court – that no matter what they thought, they were actually a fiduciary. Along these lines, I often refer to defendants who find themselves to be fiduciaries without having been named as one in the plan documents and without having meant to take on that role as “accidental fiduciaries,” a term which often more accurately captures their status than their drier and more official title as “deemed” or “functional” fiduciaries. Here’s an excellent article on how they end up in that seat, what kind of conduct can impose that status on them, and what their duties are in that circumstance.