I have litigated, arbitrated and advised on coverage and bad faith disputes from the U.K. to Guam and in every or practically every American jurisdiction in-between. (If you add in reinsurance claims I have worked on, you can add a couple more continents to the list).

Coverage itself, because it’s basically at heart a contract based inquiry, is reasonably consistent – to at least some extent – from one jurisdiction to the next.  But bad faith, when an insurer has to settle and what are the penalties for failing to settle when it was required vary greatly from one state to the next.  And so I am not surprised when I get, as I often do, inquiries from insurers and lawyers located elsewhere concerning exactly what an insurer’s duty is in Massachusetts with regard to the obligation to settle claims.

I thought, as sort of a public service, I would share my sort of “cheat sheet” that I often pass along on the basic outlines of these obligations in Massachusetts. It basically sums up, without cites and in more neutral terms, what I typically describe as the law on these issues in requests for conclusions of law, motions for summary judgment or other court filings.

So with that introduction, here are the key highlights of the duty of an insurer to settle claims in Massachusetts, and the liabilities that can run with breaching it:

• Massachusetts General Laws Chapter 93A, applied in tandem with Chapter 176D (which bars unfair insurance practices) requires insurers to act reasonably with regard to settlement of claims.

• An insurance company commits an unfair claim settlement practice if it “[f]ail[s] to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.” Chapter 176D, § 3(9) (f). Someone who is injured by a violation of that provision is entitled to bring an action to recover for the violation under Massachusetts General Laws Chapter 93A, § 9.  If there is a finding in such an action that the insurer failed to effectuate a prompt, fair, and equitable settlement causing injury, the plaintiff is entitled to the greater of actual damages or statutory damages of twenty-five dollars. However, if the judge finds the insurer’s action was willful or knowing, the judge must grant double or treble damages.

• When an insured’s liability becomes reasonably clear, an insurer has a duty to settle a case. 

• An insurer’s duty to settle arises only once liability has become reasonably clear, and the term liability, for these purposes, encompasses both fault and damages. As long as either the insured’s responsibility for the accident at issue or the claimant’s damages remains in dispute, an insurer has no duty to settle or to even make a settlement offer.

• Liability is not reasonably clear where a tort defendant possesses a valid defense; where an insurer has a plausible legal or factual position that there is no covered liability, even one that ultimately turns out to be mistaken or unsuccessful; or where an insurer relies on independent advice from an expert witness suggesting a reasonable prospect of success at trial.  When an insurer sincerely, reasonably and legitimately views the question of liability as a toss of the coin, liability is not reasonably clear. 

• Under these standards, technically, an insurer is not obligated to settle a claim, and cannot be liable under Chapter 93A for failing to settle a claim, unless liability has become reasonably clear. If liability is not reasonably clear, an insurer is not required to settle the case

• Technically, even after liability becomes reasonably clear and a duty to settle arises, the insurer is still allowed to negotiate reasonably and will not violate Chapter 93A if it does so but the case still does not settle.  An insurer’s obligation to exercise good faith does not require it to roll over and play dead vis-a-vis the claimants; nor does the looming of an excess judgment debar an insurer from employing conventional negotiating stratagems in good faith. Massachusetts law recognizes that negotiation is an art, not a science. In practice, however, if the court ruling on a Chapter 93A action believes the insurer’s offers were too low, too slow or otherwise unreasonable in comparison to the demands or the claim itself, a court will likely find a violation of Chapter 93A, if liability had in fact become reasonably clear.

• Generally, damages imposed for a violation of Chapter 93A are actual damages, or either double or treble actual damages if a court determines that the violation was willful or knowing. Where a judgment has been entered against the insured, however, the damages awarded under Chapter 93A can be significantly higher. Under Massachusetts law, if an insurer commits a willful or knowing Chapter 93A violation that finds its roots in an event or a transaction that has given rise to a judgment in favor of a claimant, then the damages for the Chapter 93A violation are calculated by multiplying the amount of that judgment.

• After a verdict has entered against the insured, an insurer must reasonably consider the likelihood of success on appeal in deciding whether to pay the verdict or instead appeal.  The reasonableness of the insurer’s settlement offers at that point must be evaluated in comparison to the strength or weakness of the appeal.  An insurer’s duty to settle a case does not end with the judgment, unless the insurer promptly pays the judgment. When the insurer causes a notice of appeal to be filed, the insurer continues to have a duty to settle what is now the appellate litigation. While the standard under Chapter 176D, § 3(9)(f) still applies after judgment-the insurer must still provide a prompt and fair offer of settlement once liability has become reasonably clear-the existence of the judgment should change the insurer’s evaluation of what constitutes a fair offer and whether liability has become reasonably clear.

It’s not just happenstance that this weekly round up section of my blog is called “Five Favorites for Friday.” It’s in honor of Elmo, who did not rap about the number four, or nine, but the number five. Thus, “Five Favorites for Friday.”

And so let’s get right to it, as there is a lot of ground to cover. As is the case most weeks, I could have listed many more items beyond just these five, but that’s not how Elmo rolled.

  1. In my day job as a bad faith lawyer, I have, over the past thirty years, litigated, including trying, the bad faith and coverage cases that inevitably follow on the heels of a nuclear verdict or other unusually large or unexpected jury verdict.  There are commonalities in the cases that give rise to such verdicts, and it is also fair to say that they don’t occur in a vacuum.  Moreover, it’s also not generally fair to just attribute nuclear verdicts to emotion on the part of a jury, because if, as I have done on many occasions, you closely review the record in such cases, you will see that there are always other issues in play. Is this story of the Massachusetts Supreme Judicial Court examining the standards governing punitive damages awards after a $1 billion (yes, that’s right, billion with a “b”) punitive damages award the story of a nuclear verdict? Of course it is. But it may also have been the right number for the jury to grant under the controlling standards, depending on what the evidence was in the case.  And thus the real question may be whether numbers have grown so big, both in terms of the revenue of defendants from whom punis are sought and in the amount that applicable standards allow to be awarded as punitive damages, that it is now necessary to impose additional standards that limit the amount of a punitive damages award to one that doesn’t, as the $1 billion award does, stop readers in their tracks.  But that’s a question of how much we think is the most that a jury should be able to punish a party.  Thought about this way, this case and the issues it raises concern a policy decision as to how much in punitive damages is too much, or in other words whether there should be a cap on recovery, an issue that perhaps more properly belongs to the Massachusetts legislature to decide. It’s not, when thought about that way, really a question about the competency or emotions of those who sit in a jury box and who, in my view, often get an unfair rap in arguments over nuclear verdicts.  In my study of unexpectedly large verdicts, they don’t come about simply because the jury got mad, but because there were elements in the case that made them mad, and which could have been predicted to have had that impact.
  2. As long as you have the Massachusetts Lawyers Weekly open to the article on $1 billion verdicts, take a look at the article surveying in-house counsel on the cost savings to them of having their outside counsel be AI competent. As I have discussed in a number of places, including in this blog post, this article and this article, lawyers in private practice should be becoming more efficient and effective by means of AI tools. I know I am, and can give you hard firm examples of it happening. One real life example was the elimination of time that would have been invested by junior associates in helping me prepare for an oral argument because, instead of asking for a memo on a particular subject while I worked on other aspects of my argument, I could instead sufficiently satisfy myself on the issue by doing my own AI assisted research when I had an open couple of hours late at night (and yes, I did read the cases it came up with, just as I would have read the cases in a memo prepared by a junior associate before I would have walked into an appellate court and cited them). But as this article in the Massachusetts Lawyers Weekly points out, in-house lawyers – otherwise known as clients – don’t believe they are seeing the benefit of that in the bills they are receiving from their lawyers. I have argued before that technological advances in providing legal services lead to bigger and richer law firms, rather than lower bills – and personally, I hope we are not seeing that same dynamic occur with AI. Time will tell, I suppose.
  3. Two things I really like are football and arbitration. One thing they have in common is that an awful lot of freedom of decision is granted to the decisionmaker, i.e., the ref in the former and the arbitrator in the latter. Another thing they have in common is that anyone who has watched a lot of football, and any lawyer who like me, has arbitrated a lot of cases, knows that on the ground and in real time, the outcome of either type of contest can be a little, well, unfair and even arbitrary. This article about overreach in the context of arbitration by the NFL, written by noted reinsurance arbitrator Robert Hall, really illustrates the extent to which arbitration can simply be a tool for the more powerful party in a given transaction to assert itself unfairly, in ways that probably would not be possible in a courtroom under the rules of evidence and the control of a judge. It’s also a story of how the courts themselves occasionally step in to fix that problem. It’s not a long read, but kind of fun – and it gave me an excuse to write this extended metaphor (now mercifully concluded) comparing football and arbitration.
  4. Two of my favorite founders, Jack Newton of Clio and Kevin O’Keefe of LexBlog, in a podcast. What more do I have to say? It’s only twenty minutes so give it a listen. You can watch and listen here.
  5. Finally for this week’s edition, they say that inside every lawyer is a frustrated novelist. (I prefer to say that inside every lawyer is a novelist who got waylaid by familial and societal expectations on his way to the publishing house, or didn’t want to live off of barista wages for years while writing a first novel, but maybe that’s just me). If that’s true, then inside executive compensation lawyers with their endless obsession with minute contractual terms must be novelists who favor a lot of details, like in a Russian novel. That’s a long way of saying my partner, long time executive compensation lawyer Mark Poerio, has just published his first novel, set in Italy and woven around the history of an order of monks. You can find it here.

I appreciate being named a Massachusetts Super Lawyer. I happen to know a lot of the lawyers on the list and have litigated against many of them. I know from their presence on the list that it’s the real deal.

But at the same time, I am never really all that comfortable broadcasting it and never really know what to say about it. I am from the generation of high school athletes, after all, who were taught when you scored, to act like you have been there before. Nowadays, if you gain two yards for a first down on second and inches, you strike a Heisman pose!

Anyway, I have in fact been named a Super Lawyer again this year and appreciate the honor. You can find more information on me being named a Super Lawyer here.

My “Five Favorites for Friday” series is quickly becoming one of my favorite undertakings. It’s a terrific opportunity for me to go back over the stories and videos that have crossed my desk during the week, and think about what they mean for my practice, my clients and the readers of my blog. Hopefully, you find it is as useful an exercise as I do.

For those of you who may be new to the series, here is the original post introducing the series. Last week, I noted that I could have covered twice as many topics as the five that I did pick out, and the same is true this week. Nonetheless, I am going to restrain myself and limit it to five items. So here we go:

  1. I am a huge fan of ESOPs. I have seen more employees retire with real wealth, more companies improve their performance, and more founders cash out happily from the use of this tool than from any other business transaction that I have observed or been involved with over the past thirty years. Now granted, as a litigator, there is a certain selection bias in play – for instance, when I see a private equity roll up, it’s usually because the deals have fallen apart and litigation has sprung to life, not because the deal went great and a lot of people who would otherwise be employees ended up with an excellent exit. This article here, by two lawyers at Foley & Lardner, on the ESOP process and structure, is an excellent place to start if you want to understand exactly what an ESOP transaction looks like.
  2. In last week’s “Five Favorites for Friday,” I discussed why insurance is a wildly underrated career field for young professionals. In the same vein, today I am including these excellent short video clips from MS Amlin that explain why underwriting complex risks is similar to being a Hollywood stunt person. I know what you are thinking – I am sure it is similar to my initial response to the premise. But watch the clips and I suspect, like me, you will end up convinced that the comparison is apt.
  3. I love this article by two lawyers at Pillsbury on what insureds should know about triggering insurance coverage for long tail exposures. They draw on the lessons of the old school classics in this genre for their guidance, namely the asbestos and environmental coverage disputes of the 80s to the early part of the 21st century. (The authors note that “as of 2024, insurers had paid $121 billion in asbestos and environmental-related losses under policies they have issued to policyholders.”) My professional and personal experience tells me the authors are absolutely right both in the lessons they draw from that time period and their belief that those lessons resonate today. I was actually the paralegal who, back in the 1980s, spent weeks sitting in the Library of Congress finding old periodicals to be used in deposing underwriters on the question of what they thought asbestosis actually was when they were excluding it from policies, and in the early 1990s I was the junior associate on some of the key Massachusetts pollution exclusion cases. In fact, almost twenty years later, I was still litigating some of the same long tail issues when I tried a reinsurance dispute concerning long tail environmental losses involving occurrence policies from decades ago.
  4. Nothing going on in the news has changed my position and views on the use of alternative investments in 401(k) plans. See here, for instance. I am a lot more sanguine about lifetime income options being added to 401(k) plans, depending on how it is done, if only because I know from my own clients that some participants want them within plans and, further, they can actually solve for participants an actual problem they are concerned about, namely the risk of outliving their money. However, the devil is in the details on this one, and this essay by The CommonSense 401(k) Project on the use of annuities in plans is worth a read in this regard.
  5. I have written many, many posts on the central role that the insurance industry has to play in addressing climate change issues, having first written about work by Lloyd’s on this issue around a decade ago. The unbreakable relationship among the industry, losses from climate change and the necessity of functioning insurance markets in the operation of modern economies makes insurance carriers central to any economic incentive to target the problem. The same, it is increasingly obvious, is true for handling cyber risks to modern economies – as is pointed out by Zurich in this whitepaper addressing the extent of uninsured and uninsurable cyber risk, and the need for public and private coordination to address it. Hat tip, as we used to say in the early days of blogging, to Mark Flippen and broker Lion Specialty, for bringing it to my desktop.

I talked briefly about withdrawal liability in my very first “Five Favorites for Friday” post, which you can find here. Because there is often so much money at stake, and because unions are aggressive in pursuing and claiming withdrawal liability payouts from departing employers, and because departing employers so want to not pay withdrawal liability if it can be avoided, there is a steady stream of significant and, if you are at all interested in the subject of union pension obligations, fascinating decisions on the subject of withdrawal liability.

The latest is out of the Seventh Circuit, in the case of SuperValu, Inc. v. United Food & Com. Workers Unions & Emps. Midwest Pension Fund, which is discussed in detail here. The Court focused on applying the literal terms of the statute, and rejected the employer’s arguments that policy concerns required reading the statute in a manner that would have reduced the employer’s withdrawal liability payout.

As I have discussed elsewhere, in my experience, creativity in arguing for a reduction of withdrawal liability, followed with any luck by settlement negotiations, is typically an employer’s best bet for reducing withdrawal liability. As the Seventh Circuit’s new decision reflects, taking on the statute and its requirements directly is typically not all that effective of a tactic.

My final note on this case for today is that if you are interested in reading a good, overall explanation of withdrawal liability, the Seventh Circuit provides a good one in SuperValu, which you can read in full here.

As I discussed in this earlier post just last Friday, I am now running a series of posts, each to be published on Friday, covering five articles of interest that I didn’t have time to write about – or write enough about – during the week just ending. This past week was busy and full of interesting stories to write about, and I could have easily made this post Ten Favorites for Friday, instead of five, but then the alliteration would be missing. So here goes with this week’s Five Favorites for Friday.

  1. Lawyers cannot get enough of writing about and talking about fees, for a lot of reasons. See here, for instance. But for an ERISA lawyer, the topic has particular resonance, because of all the statutes with fee shifting provisions, I suspect fee awards arise more under ERISA than under just about any other statute, because of the ubiquity of benefit disputes. But to someone like me, who also litigates insurance bad faith disputes, fee award issues are particularly salient because in many states, including in my home state of Massachusetts, fee awards can be entered against insurers in bad faith cases. Here’s a great story on whether it’s proper for a trial court to consider the size of a firm seeking an award when determining the hourly rate to apply to a fee request.
  2. It’s cyber insurance all the time, on all channels, as well it should be. Cyber risks are central to many industries, are a primary and prominent insurer exposure, and are the focus of attention with retirement plans in particular. Here’s a great article on the current state of the cyber insurance market.
  3. Speaking of cyber, I am currently litigating a data breach dispute, and the offshoots over shifting the loss among multiple potentially responsible parties. On my usual home turf of ERISA litigation, cyber is the 800 pound elephant of liability staring at plan fiduciaries. They and their lawyers should all be conversant on the subject and if they are not, I cannot think of a better place to start learning about it than this webinar, scheduled for next week.
  4. While I understand the reasons why, subjectively, insurance seems boring to young professionals and recent graduates picking a career, objectively speaking that interpretation is just plain wrong. You want international travel and work? I have mediated and litigated coverage cases in Scotland and London, and litigated in Guam. Want to make an impact on climate change? The industry has been at the heart of the issue since before most, and remains focused on it as an existential crisis. I discussed these points here and here, among other places, for instance. Anyway, that’s a long way of saying it’s a wildly underrated career field, and this article provides a nice discussion of that point.
  5. Not too long ago, a jury awarded nearly $40 million to plaintiffs in an ERISA breach of fiduciary duty case. I prefer the written word, but if you are an auditory learner, this is a pretty good YouTube explainer on the case.

When all the AI hype and AI promoters were insisting that AI would eliminate lawyers and law firms, I said no, over two years ago – I explained in this post here, in June of 2023, that instead the history of technical adoption in lawyering demonstrated the opposite. I did note as well, however, that this same history demonstrated that the adoption of AI in the legal industry would instead drive ever more complex and sophisticated transactions and lawsuits.

In my own field of ERISA litigation, for instance, the superpowers that AI will grant to law firms that prosecute class action cases is going to lead to more, not less, suits, pressing more types of theories against more types of plans and transactions than has ever been the case. With that, will also come more and more class action defense work for firms. If I had to bet, I would say that this is why, if you are paying close attention to the media coverage of law firm investment in mass tort and other class action defense teams, large firms are investing in this space.

I have pointed out over the past year at least three different themes about change for law firms and lawyers that will be driven by AI, none of which align with the prior, early narrative that AI was the end of law and law firms. They are:

  1. Commodification of routine legal work previously done on a bespoke basis. I discussed this point here, for instance.
  2. Impact on fees. I discussed this point here, among other places. Note that this does not mean universal reduction in fees, but rather wider adoption of fee models other than hourly and, perhaps more importantly, a closer alignment between price and value.
  3. Increased demand for experienced lawyers who can do good work better and faster by making use of AI tools. I discussed this point here and here.

I mention this now not because, as business strategist Jamaal Glenn has noted on LinkedIn, when you make predictions, you should show the receipts later when time has proven you right, but instead because leading general counsels who are charged with adapting to and profiting from the new legal world order being ushered in by AI legal tools are reaching similar conclusions. They are finding that AI is a surgeon’s scalpel they can wield to their benefit, not a bazooka destroying everything it hits.

Most recently and most visibly, Eric Dodson Greenberg, the executive vice president, general counsel, and corporate secretary of Cox Media Group, made essentially these exact same points last week as part of his series on AI on Bloomberg Law, in his column “AI Will Scramble GCs’ Calculus for Hiring Outside Counsel.” He points out the benefits to in-house counsel of the impact of AI on the relationship, including pricing, between companies and their outside lawyers.

For lawyers who sell judgment and expertise, and GC offices that are looking to hire for it and not just for legal bodies to throw en masse and indiscriminately at problems, these are all good things.

I am launching a new series of posts on the blog, starting today, listing five topics from the week just ended that are worth paying attention to, but which any busy person might have missed during the preceding week. For each, I will include a link or two if you want to read more deeply on that particular subject.

It is, if I am being honest, a way to clear off the backlog on my desk of things that caught my attention over the week but that I never had time to write about (or write enough about) here or on LinkedIn.

1. The first is a little (maybe more than a little?) self-referential, but what the heck. I enjoyed it and I think you might enjoy the conversation too. I was a guest on the Real Lawyers podcast, discussing twenty years of writing this blog. If you are interested, you can read more about it in this post on the Real Lawyers Have Blogs blog, which provides links to the podcast and a list of highlights (and where to find them in the podcast). If by now you still haven’t read enough about, well, me, I talked about the podcast on this blog, here.

2. Pension risk transfers are back in the news. The Southern District of New York allowed one lawsuit claiming that terminating a plan and instead providing the participants with annuities was a breach of fiduciary duty to proceed into litigation. Me personally, I am fascinated to see how the case progresses, what evidence the plaintiffs can uncover to show there was allegedly something wrong with the transaction, and what legal standards the court ends up testing the decision against.

What’s even more interesting about this case to me is that I have been counsel to a plan sponsor and plan fiduciaries in a pretty substantial pension risk transfer, and I think we did a good job and the participants will make out just as well as they would have without the transaction. That said, though, I think this is another of many areas of ERISA where the transaction at issue is exactly as good as the good faith of the plan sponsor and/or fiduciaries. ESOPs are one area in particular where I think you get a good result when plan sponsors, fiduciaries and selling employers are acting in good faith, but a lot of litigation when they are not. I am starting to wonder whether the same may be the deciding factor in pension risk transfers, and the dividing line between ones that do no harm and those that just might be a fiduciary breach.

3. No one, including me, can get enough of the discussion of whether, and if so how, to add alternative investments to 401(k) plans. Here’s the story of a major financial institution looking to fold private credit instruments into an electronically traded fund. Somehow, I don’t think it will be long before someone is trying to get that same fund into a 401(k) plan.

I am still standing by my advice to plan sponsors about how best to handle the push to add alternative investments into 401(k) plans.

4. There has long been an overlap between my tech litigation work over the years and my insurance coverage practice. My first IP work involved copyright infringement cases covered by insurers, who retained me to defend those cases, which in turn led to one of those insureds retaining me to try a patent infringement case. Those relationships likewise led to my infringement litigation defense of a knowledge management start up, including in preliminary injunction proceedings, which from there led to my current work litigating a data breach dispute. Some of this drives my interest in, and writing on LinkedIn and here, about AI adoption in the legal field. See here and here for instance.

AI, however, has now reached the point – as all new industry developments in any field eventually do – where it is raising complications in insurance underwriting and provoking more complex and careful claims resolution. Unsurprisingly, this is leading to more work for lawyers (this provides a certain ironic spin on the claim that AI will actually replace lawyers, when I argue it will actually just increase demand for at least the experienced and better lawyers). I like this article on the subject, and hat tip, as we used to say in the early days of blogging, to Geoffrey Fehling for pointing it out on LinkedIn.

5. Withdrawal liability is just great fun, partly because many employers and companies don’t even realize they are triggering it when they stop using union labor. It’s basically the trailing pension liability that employers owe to union pension plans in that circumstance, and there aren’t a whole heck of a lot of ways for employers to avoid paying it – although there are some. I have litigated the issue before, with some success, and my view is it takes some real substantive and tactical creativity to get a good result for an employer in this type of a dispute. Here’s a great article on an attempt to do just that which was rejected by the Third Circuit.

I was a guest last week on the Real Lawyers Podcast hosted by Kevin O’Keefe, one of if not the founding fathers of legal blogging. As we discuss in the podcast, I had come across a reference to blogging and Kevin (as well as his then new company, LexBlog) in an article and thought blogging sounded like fun, so I reached out to him. Kevin got me set up pretty quickly, and within a few weeks I was a blogger. It’s now twenty years later and I am still posting regularly.

I talk about what I have learned along the way in the podcast. In a blog post, Kevin points out some of the key takeaways from our discussion, including that:

• Blogging remains one of the most effective ways for lawyers to establish credibility and generate work
• Publishing allowed me to break into ERISA litigation despite being an outsider in a closed market
• Referrals often hinge on credibility, and consistent writing makes both referrers and clients confident
• Blogs contribute to secondary law by providing analysis, commentary and frameworks where published case law is limited
• Young lawyers should use publishing to build expertise in niches, especially as AI changes traditional entry-level work

You can watch the podcast on YouTube here, and you can find other links to it here.

Fred Reish has an excellent article out on the technical and substantive aspects of the executive – and soon to be regulatory – efforts to open 401(k) plans to alternative investments, with a particular focus on the targeting (pun intended) of target date funds as the channel for bringing them into the investment holdings of millions of American workers. I have written extensively about various concerns I have about doing so, including with regard to burying them within the range of assets held within a target date fund. I am skeptical, as I have written elsewhere, that this is in the best interest of plan participants; that all plan participants will even know they are holding such assets in their accounts; or that it won’t put plan sponsors and fiduciaries at significant liability risk. I am also skeptical, however, as I have also written elsewhere, that alternative investments won’t end up in target date funds, despite these issues.

One of the central substantive issues with adding alternative investments into 401(k) plans concerns the disjunct between sloganeering and the substantive purpose of 401(k) plans. Plans, and the accompanying costs to the taxpayer from deferral of taxes, do not exist – and ERISA was not enacted – to democratize investing, which seems to be the alleged rationale for the idea of opening plans to such investments. In the article, Fred goes to the question at the heart of whether the regulatory and financial industry push to add such investments to plans aligns with the purpose of such plans and the real justification for the cost to the Treasury of them – which is the goal of protecting and improving retirement outcomes for workers. Fred points out that the real question in the long run for fiduciaries, in deciding whether to grant entrance to plans to such assets, is whether doing so improves, or instead harms, the retirement readiness and outcomes for plan participants. He also points out that it involves far more than just consideration of the returns on the investment, but also numerous issues related to the propriety of the investment for the employee pool. All of this will go into any analysis of the question of whether it was a fiduciary breach for plan sponsors to allow, rather than seek to preclude, their addition into target date funds used in a given plan.

To me, there is one central and absolute starting point – where is the evidence, and what is the data, showing the potential improvement to investment outcomes, and at the cost of what extent of additional volatility, for plan participants? Without that, plan sponsors are just guessing and fiduciaries will never, if and when sued, be able to show that they fully investigated and properly understood the investment option when they approved it for plan participants. Even if and when that data is made available to plan sponsors and fiduciaries, as I have written elsewhere, most are not going to have the sophistication themselves or, within their companies, the internal expertise to interpret the data and information. As a result, plan sponsors are going to have to bring in outside experts with the ability to actually pierce any fog, deliberate or otherwise, created by the data and to project out the likely financial and risk ramifications of the change to the asset mix and the investments.

Anything less will make it impossible for plan fiduciaries to defend, other than on legal and technical grounds rather than on the merits of the decisions, future breach of fiduciary duty claims alleging losses to plan participants from the addition of alternative assets into plans, whether through inclusion in target date funds or otherwise.