I have been meaning to return to this point for the last several days, but the crush of business has kept me from it. I discussed in a recent post a case that I think has the potential to be very influential on the subject of proving or disproving top hat status, involving surgeons and top hat plans that were created to deal with caps on compensation at the hospital. The focus of this blog is on the law on ERISA and insurance issues, naturally enough as I am a lawyer and the blog is, after all, called the ERISA and Insurance Litigation blog. But sometimes the technical aspects of a particular type of benefit plan could use more discussion than one can often find in the case law, and it can be helpful to place them in the context of the benefits field as a whole. Maybe no one does that better than Jerry Kalish, who at the end of last week had this terrific post providing further details on the nature of top hat plans.

One of the more unwieldy of legal fictions is the so-called tripartite relationship among the insured, the insurer, and the defense counsel defending the insured against the claim. Duties run every which way in the relationship, and this beast is at its most cantankerous when one gets into the question of how the attorney client privilege fits in. In particular, if the insured and the insurer end up in a coverage dispute, the question of who has access to the communications between the insured and the defense counsel – just the insured, or also the insurer – quickly becomes a bone of contention.

I have talked before about the difficulty presented by this issue, and how it impacts insurance coverage and bad faith litigation. How exactly is an insurer to get at all the evidence of what happened in the underlying case, or at all of the facts that might shed light on whether or not the loss, in truth, is within the scope of coverage, if much of the evidence on that is laid out in the communications of the party who was actually on the scene – the lawyer litigating the case? A quick example highlights the problem. Suppose, for example, the issue presented is whether a settlement entered into by the insured was actually for losses within the scope of the coverage rather than just having been styled in that manner to try to place the loss within the coverage, and was actually paid for uncovered parts of the lawsuit. What more telling evidence could there be than the information communicated, orally and in writing, to the insured from the defense lawyer negotiating the settlement? After all, she is giving the advice on the settlement and structuring its terms – so if there is a question of whether the settlement is actually covered, shouldn’t that evidence both be admissible and discoverable?

Would seem so, but that isn’t necessarily the law. Which leads me to the real point of today’s post, which is to recommend Marc Mayerson’s review of the case law on this question.

One of the things that makes practicing in and blogging about ERISA interesting is the fact that the subject area is never static. Other areas of the law can literally evolve at a near glacial pace (see, for example, this post here, involving the law of malicious prosecution and a change, for the first time in the modern era, to one of the elements of the tort), but not ERISA. And so there is always something new to talk about in a blog, and some new interesting development to keep track of for purposes of cases I am litigating.

Which brings me to today’s ERISA news you can use, courtesy of the estimable Russ Runkel and his LawMemo, Inc., who reports that the Supreme Court will be addressing the question of the scope of fiduciary duties, if any, that attach to the decision to terminate benefit plans. The Supreme Court is taking up a Ninth Circuit decision, in which, borrowing liberally from Russ, a company went into bankruptcy, after which the administrator of its 18 defined benefit pension plans decided to terminate the plans by purchasing annuities, rather than merge the plans with a different existing plan.

To quote Russ, the Ninth Circuit held that: “The decision to terminate the plan was a business decision not subject to ERISA fiduciary obligations[;] the implementation of the decision was discretionary in nature and subject to ERISA fiduciary obligations[; and the administrator] breached its fiduciary duty by failing to adequately investigate” the alternative plan of merging the terminated plan with another plan.

You can find a little bit more information on the appeal to the Supreme Court, along with links to the petition and related filings with the Supreme Court on this case, here at SCOTUSBLOG.

One of the most interesting and potentially influential of the ERISA decisions rendered by the courts in the First Circuit during the holiday season that just closed is Eben Alexander v Brigham and Women’s Physician Organization, in which the court issued its findings, after a trial, on whether two particular deferred compensation plans for highly compensated surgeons qualified as top hat plans which are exempt from certain restrictions and controls imposed by ERISA. The plaintiff, a neurosurgeon, had his balance in the plans reduced to account for certain practice expenses, as allowed under the terms of the two plans, but which could only be appropriate if the plans were top hat plans; otherwise, the reductions would violate ERISA. After a trial, the court explained in detail why the evidence added up to a finding that the plans were top hat plans, thus defeating the plaintiff’s claims. What is particularly noteworthy, and which puts the case in position to influence other courts’ decisions concerning top hat plans in the future, is the court’s detailed analysis of the case law and statutory provisions governing the issue and of how that law should be applied to the type of detailed fact finding relied upon by the court.

And as an added bonus, if you are of any sort of a voyeur, the case has the added benefit of opening up a window into just how much money is earned by so called “highly compensated” (for purposes of analyzing whether or not a plan is a top hat plan) surgeons at prominent Boston medical institutions.

It is likely that if you are interested in the subject of this blog you already know that the Fourth Circuit has now affirmed the District Court decision striking down Maryland’s Fair Share Act.  Workplace prof has a nice post summing up the issue here, and major media accounts can be found here and here.  Workplace prof poses the question of whether this is a decision on its way to the Supreme Court, and expresses some skepticism on that point.  I am skeptical as well, but for a different reason, namely that the decision is essentially a preemption case, and there is nothing really novel going on in that area, either in general or in this particular decision, that would make me think it is obvious grist for the Supreme Court mill.  Rather, the case is in essence a routine application of the law of preemption, only to a politically and socially – rather than legally – charged set of facts.

Here is an excellent article, by way of workplace prof, on the fees charged in 401(k) plans, their impact on performance, and the difficulty of even learning about them. We have talked before about how challenges to excessive fees charged to 401(k) plans is the new growth stock in ERISA litigation, and many people are always skeptical, often with good reason, when the plaintiffs’ bar moves into a new area and starts pressing a particular theory of liability against numerous companies and in many different jurisdictions. Yet articles like this one make clear that the underlying issue, of whether fees are appropriate and how they are arrived at, is a legitimate one with serious implications for the financial well being of the average investor, and for the retirement they can expect to afford. And at the same time, to the extent that excessive fees are a problem or the growth in this type of litigation is worrisome, it is clear that proper management by fiduciaries can eliminate both the problem of excessive fees and the potential liability of fiduciaries for allowing excessive fees.

Probably the most important of the pre-holiday ERISA rulings in the First Circuit is Bard v. Boston Shipping Association, in which the First Circuit provides a detailed explanation of exactly how procedural and regulatory violations in handling ERISA claims will be addressed in this circuit henceforth. Notably, the court rejected the premise that such violations shall strip an administrator of the deference to which its decision making would otherwise be entitled. Instead, in this circuit, the court will examine the violations in light of the specific facts of the case before it, and then will design a remedy that resolves the actual harm, if any, caused by the specific violations in question.

Unlike the postman (neither sleet nor rain, etc.), I am easily diverted from my appointed rounds.  This is another way of saying that contrary to what I said in my last post, I am not returning right away to a run down of a handful of interesting ERISA decisions handed down in the First Circuit just before the holidays.  I am digressing from that topic today for the simple reason that if you have any interest in the Hurricane Katrina related coverage litigation that is swamping – pun intended – the states affected by that hurricane, you’ll find no better analysis and discussion of that subject than that offered today by David Rossmiller on his blog.  I wanted to make sure I passed that along today.

It seems that, running up to the holidays, the First Circuit and the district courts in the circuit chose to issue several particularly interesting, some would say even compelling, ERISA decisions. And why not? What lawyer wouldn’t want to receive a detailed analysis of one issue or another under ERISA for the holidays? I know I would. So over the next few posts, I will try to run these cases down for you. And while I make a certain light of it, the truth of the matter is that these are particularly interesting decisions, often presenting detailed and thorough discussions of particular points of importance in the realm of ERISA litigation and practice.

I thought I would begin with Stamp v. Metropolitan Life Ins. Co., out of the District Court for Rhode Island which, interestingly, took up the exact same issue under ERISA that David Rossmiller raised – only in his case, out of the Fourth Circuit – of whether an intoxicated driver’s death is an accident, and thus covered, under an ERISA governed accidental death and dismemberment policy, or instead is not.

In Stamp, the district court addressed almost the exact same fact pattern, and applied what has come to be known as the Wickman test to determine whether such a death should be deemed an accident. Here, the district court recognized that there is a split in authority on this question, but concluded that the plan participant’s level of intoxication was such that the death was “highly likely” and therefore not an accident. Based on this reasoning, the district court concluded that the administrator’s determination that the “death was not accidental is reasonable and supported by substantial evidence in the record.”

And finally, as a brief and not particularly important aside, the court also provides an entertaining digression as to whether Mark Twain, or instead Benjamin Disraeli, deserves the credit – or perhaps the blame – for one of my favorite quotes, that "there are three kinds of lies: lies, damn lies, and statistics." The District Court judge concluded that Twain remains responsible for it.

At the risk of turning this into blog reader month, I thought today I would pass along this article on the use of intellectual property in growing a business that was passed along to me by blog reader Mike Kraft of Customer Standpoint, who specialize in the analysis of the customer experience. It may not be entirely on point for this blog, but for those of you who may come here looking for information on advertising injury coverages, which, as I have discussed before, can cover some intellectual property claims against insureds, it is a good overview of how any business, including insured companies, put intellectual property assets to use.

Moreover, you can see in the article the range of activities – beyond just inventing technology, which is the popular image of intellectual property development – that businesses engage in involving their intellectual property assets and, if you think about it, you can spot all the different possible points of liability exposure in those actions. Advertising injury coverage can insulate a company against liability on at least some of those fronts, and the question for lawyers and brokers who represent insureds who engage in these types of activities is how to structure an insurance program that protects against all the other liabilities as well.