You see, everything at the end of the day is about insurance. Risk sharing that allows smaller businesses to move forward with operations, plaintiffs’ decisions over who has enough insurance to warrant suing, even the economic dislocations of climate change – everything comes back to the insurance industry. Here’s a great example, and an amusing one. Remember the lawyer who flew across the Atlantic after being diagnosed with tuberculosis? And who naturally was thereafter sued by other passengers who became quite worried about what they might have picked up from the guy? (Your faithful correspondent here moves three rows away on a commuter train if someone even sniffles, so I certainly have sympathies for those other passengers.) Well, he notified his homeowner’s insurer of those cases and the insurer is paying to defend him, but it has now launched the real battle, namely litigation over whether or not there is coverage for these claims against him; if there isn’t, he’s stuck paying any judgments or settlements. You can find the whole story here. A couple of interesting side points. First, there is no doubt the insurer is, as the article suggests, taking the right tack here; the proper approach is to defend and simultaneously ask a court to declare whether there is any coverage. This is particularly so in this instance because of the second side point, which is that, on first glance, those coverage defenses of the homeowner’s insurer noted in the article aren’t the best; without even knowing the facts beyond what I’ve read in the media in the past or reading the complaint, I can spot the potential holes in their arguments from here. When coverage is particularly debatable, it makes no sense for an insurer to simply deny coverage and leave the insured on its own, because of the potential exposures – a long story, best saved for another day – that can attach to the insurer if it is wrong in deciding that there is no coverage; rather, the best tactical play in that situation is to defend the insured, and to not deny coverage unless and until a court agrees there is no coverage. The downsides to the insurer in that situation are nothing more than the costs of litigating the coverage question and possibly, depending on the jurisdiction, having to pay the insured’s costs in the coverage litigation if the court decides there is coverage; that’s a heck of a lot cheaper than the potential liabilities, including bad faith judgments, that can attach to an insurer that simply denies coverage on its own, and is later found to have been wrong.

Dying is easy, comedy is hard? No, ERISA is hard. I tell people all the time that there is almost no such thing as a simple answer to an ERISA related question, or at least no such thing as a straightforward answer. There are entire chapters in ERISA treatises dedicated to the seemingly, but actually not, question of the proper manner in which to request plan documents so as to invoke the statutory obligations, upon financial penalty, imposed on administrators to produce them. Or take the question of equitable relief in a cause of action brought under ERISA; in almost every other area of the law, we all know what equitable relief is, but in ERISA, we have to engage in a historical inquiry into the development of the law of remedies to know if a particular claim is equitable or not.

Now when you add in on top the fact that ERISA and its imposition of fiduciary obligations is beginning to supplant securities litigation theories as a method for suing corporations and investment banks for subprime, stock drop and other investment losses, as discussed here for instance, you can see just how complicated the topic becomes, as well as how potentially dangerous for fiduciaries and plan sponsors are the issues raised by ERISA. And of course, that’s what makes practicing in this area fun for those of us who handle these types of cases. But it also makes thorough and timely analysis of litigation risks and exposures crucially important, and what looks to be a promising new internet based research tool to help with this is now available. Pension Litigation Data is now up and running on line, and is meant to be a tool that will allow up to the minute research into the numerous pension related lawsuits pending in United States courts. The subscriber based site “debuts with over 1,500 retirement plan legal actions, each classified by nearly 100 fields, including court circuit, type of allegation, plaintiff, defendant and date [and provides a] continuously updated and searchable database” on the subject.  A joint venture of a couple of companies, including fellow blogger Susan Mangiero of Pension Governance LLC, I think it looks promising, and you may want to take a look.

Here’s an interesting little case out of the Fourth Circuit this week concerning what, at this point, must be the world’s most famous long term disability plan, namely the NFL’s Bert Bell/Pete Rozelle NFL Player Retirement Plan. This plan has been the subject of much media commentary over the past few years, as former players have come forward to complain about the benefits available under the plan to long retired players and as stories, like this one here concerning former Pittsburgh Steeler Mike Webster, have come to light involving questionable decision making in denying the claims of long retired players. I recently reviewed the disability benefits terms of the plan for other purposes, and it is frankly a pretty interesting document, with a lot of room for ambiguity in its application. This stems from the fact that the plan provides different types or levels of benefits depending on when a former NFL player became disabled, including how long after ceasing playing in the league the incapacity set in. The plan recognizes that the nature of professional football can result in long term injuries that may not manifest themselves in disability until years, in some instances many, have passed from the time the player retired from the league, and different benefits can kick in depending on when in that time period the player’s disability, originally stemming from injuries incurred while a player, finally arose and disabled him. Deciding when in that long stretch of time the retired player’s long ago on-field injuries finally manifested themselves in an inability to work, i.e., in permanent and total disability, is a difficult undertaking, rife with room for disagreement. And that’s exactly what this new case out of the Fourth Circuit, involving former Bears linebacker Wilber Marshall, is concerned with, the sheer difficulty of making the determination. The Fourth Circuit concluded that the medical evidence did not support the dating of that event given by the board that administers the plan, and pushed the date further back, resulting in an award of additional benefits to the retired player.

A colleague – who, to protect the innocent, shall remain nameless (sort of a blog witness protection program) – passed along this remarkable decision out of the Fourth Circuit this month, Evans v. Eaton Corporation Long Term Disability Plan. The decision is an elegant and sustained defense of the granting of discretion to administrators and the application of the arbitrary and capricious standard of review under ERISA. The opinion reads almost as though the court set out to answer, and perhaps even to throw down a gauntlet to, critics who complain that the Supreme Court should not have established discretionary authority and the corresponding level of review, explaining, among other points, that such review is instead entirely consistent with the purposes and operation of ERISA, as well as with congressional intent. It’s a fine decision, whether you agree or disagree with the court’s analysis and conclusions. I would go beyond that, and suggest that critics of arbitrary and capricious review need to confront and provide a persuasive response to the court’s analysis of these issues, if they are going to criticize, with any credibility, the arbitrary and capricious review standards applied by the courts.

Earlier in the week, I promised to pass along over the course of the week some interesting articles on insurance coverage issues that I had been reading, and here we are, the end of the week already, and I haven’t done so, having been waylaid along the way by breaking news like the Ninth Circuit’s stay of the ruling that San Francisco’s health insurance ordinance was preempted. So in this post, I will pass along two more of the articles, both having to do with directors and officers insurance, a topic that I have mentioned in the past often raises problems for practitioners and clients, particularly in terms of understanding the scope of the coverage it grants and the nature of its exclusions. The first is this outstanding article here, laying out a road map for in-house counsel at publicly traded corporations over how to protect themselves from the various liability traps that have appeared for such corporate lawyers by navigating them through the ins and outs of the insurance coverage that may be available to them in that role. The article explains that many corporate counsel faced with problems from backdating inquiries and similar exposures will not in fact be protected by the directors and officers insurance purchased by their employers, and instead need to have their companies purchase a stand alone policy directed at covering the unique risks faced by in-house counsel to protect them against all of the investigations and lawsuits written up on the front pages of the business pages.

The second is this terrific interview here, in the Metropolitan Corporate Counsel, that really breaks down the structure of directors and officers insurance and the variables at play in obtaining it. One of the things I liked best about the article is that it reinforces the same point I often make when discussing directors and officers coverage and protection for people serving in that role, as I did here in this post, which is that directors and officers need to protect themselves by creating two separate lines of protection: first, they need to be guaranteed indemnification under the company’s by-laws against claims filed against them in their role as directors and officers, and then second they need to be protected as well by directors and officers insurance purchased by the company. In that way, the indemnification agreement can protect them against claims that might fall into exclusions or other gaps in the directors and officers coverage, thus keeping them free from personal exposure, and the insurance can protect them should the company go belly up or otherwise fall down on its obligation to indemnify them.

And this last point leads me to another topic that has crossed my path recently, namely the need to make sure that former directors and officers of public companies can rest their heads comfortably at night, without tossing and turning worrying about the possibility that their prior service as corporate officers might come back to haunt them, in the form of being named as a defendant in suits based on events that took place while they served on a board. Given the headlines in the papers and the increased risks of such service, one can understand how former board members may be concerned about personal liability after leaving a board. One answer to their concern is policies targeted directly at the risks and exposures of retired or former directors and officers, written for the express purpose of insuring them against claims instituted after they stop serving in that role. In much the same way that, as noted above, directors and officers insurance for current board members provides an additional level of shielding from potential personal liability, this product does the same thing for board members after they stop serving; one company providing the product, and more information on this type of insurance product, is here.

Workplace Prof has the story here of a three judge panel out of the Ninth Circuit staying the district court ruling that the San Francisco ordinance mandating the provision of health insurance by employers was preempted, and provides a link to the ruling. I second the surprise he describes in his post over the conclusion that the ordinance could legally be found to not be preempted, but in light of the media coverage of the appeal over the last week or so that I have been seeing indicating that the particular three judge panel hearing the action for a stay appeared critical of the lower court ruling, the fact that the stay itself was imposed doesn’t stun me.

The panel’s ruling consists primarily of drawing distinctions among the facts of leading Supreme Court preemption decisions and the details of the San Francisco ordinance, rather than of any sweeping view of preemption that would place mandates and fair share acts outside the scope of preemption, something which would set up a direct conflict with the Fourth Circuit’s ruling in Fielder, which found the Maryland Fair Share Act to be preempted. The distinctions that the panel relies upon are in many ways in the eye of the beholder, and it would be just as easy to argue the opposite, that the similarities of the San Francisco ordinance to the facts of the leading preemption cases mean that the ordinance should be understood to be preempted. The ruling also reflects, although obviously the panel is controlled by Ninth Circuit law in areas not yet passed on by the Supreme Court, a heavy reliance on Ninth Circuit decisions that do not necessarily reflect where this issue will end up if and when the Supreme Court finally weighs in on the preemptive effect of ERISA on state health care mandates and fair share acts, something which one can bet will happen sooner rather than later if the eventual ruling out of the Ninth Circuit on the San Francisco ordinance sets up a direct conflict with the Fourth Circuit’s ruling in Fielder.

Practicing lawyers like things that condense a lot of information accurately into relatively compact but still useful formats. I suspect – or at least hope – that is why many people read this blog, for instance. Along those lines, tucked in among the piles of junk email in my in box for mail order pharmacies and new books the publishers think I should buy, was an excellent little nugget from a company whose email newsletters on electronic discovery I do make a point to open and read. The company is CyberControls, and in the latest newsletter they passed along a Federal Judicial Center publication, “Managing Discovery of Electronic Information: A Pocket Guide for Judges.” I gave it a quick read this morning, and I cannot recommend it more highly. It’s a great starting point for the neophyte first facing electronic discovery issues in the federal courts, and a great standard reference point for the experienced electronic discovery practitioner.

Kevin LaCroix, at his D&O Diary blog, has a tremendous history of the recent filing of subprime litigation, including class actions, many filed under ERISA. While I don’t necessarily agree with each of his interpretations of that history, it’s as good an overview of the subject as a whole that I have seen in any media. Perhaps my primary point of departure from his presentation would concern his view that these cases are very different from other types of class action litigation, such as the stock drop cases, that are often criticized as lawyer-driven suits warranting reform, because these are cases instead being brought by “very large institutions [who are] suing other very large institutions.” Perhaps, and certainly to some extent, but there is also an aspect to at least some of these cases that reflect that the class action bar has, for reasons of legal developments, public sentiment, and the winds of politics, moved towards using ERISA in circumstances where they would have previously used the securities laws, as well as towards the representation of large retirement plans, rather than individuals, as plaintiffs.

We’ve been a little ERISA heavy here for awhile now, somewhat to the detriment of the insurance litigation half of the blog’s title, simply because of the range of interesting events that have taken place under the ERISA rubric lately. While all that was going on, though, a particularly good collection of articles on different insurance coverage topics have crossed my (electronic) desktop, and I want to pass them along as well; I will try to scatter them in with other posts over the next week or so, until I exhaust them.

One I wanted to pass along is this article here, by two prominent policyholder attorneys, on the tripartite relationship, which concerns the potentially conflicting loyalties of defense counsel appointed by an insurer to defend an insured against a lawsuit that may or may not be covered. This problem stems from the fact that insurers are often obligated to provide insureds with a defense against cases that may turn out, upon further development of the facts of the case, to not actually be covered, in which event the insurer will not have to cover any judgment or settlement, and might even be entitled to recoup from the insured the amount paid to defend the case in certain circumstances and jurisdictions.

Although there is much written and said about the tripartite relationship, the whole topic comes close to falling into the much sound and fury signifying nothing realm, although not completely because there is some substance to the issue, only not as much as lawyers like to make it out to be. The whole issue can really be boiled down to three handy rules of thumb. First, the defense counsel appointed by the insurer must focus only on defending the case as though the insured were his or her only client, and cannot muddle about between the insurer and the insured over any coverage issues that remain outstanding. Second, the insurer needs to retain separate lawyers, in the role of so-called coverage counsel, to take the factual information developed by defense counsel in defending the case and evaluate how it affects coverage. And third, an insured must remember that the defense counsel is solely going to defend the case, without regard to coverage disputes and is not looking out for the insured’s interests with regard to whether any recovery in the case will actually be covered; the insured has to instead hire independent coverage counsel of its own to take steps to parlay the evidence developed by the defense counsel into a commitment of coverage by the insurer.

This is a law oriented blog, obviously, and one of the things that is always worth remembering is that the complicated legal issues played out in the cases discussed here have real world implications for plan participants and for businesses trying to provide benefits to their employees. A nice reminder of that is here, in this article on SmartMoney.com, in which I and others are quoted on the question of how business owners should operate 401(k) plans in light of the potential for fiduciary liability being imposed under ERISA.