Canadian Capital RIMS Chapter Meeting March 11, 2009

1. Canadian Capital RIMS Chapter MeetingMarch 11, 2009 Understanding Key E&O, D&O and Fiduciary Liability Insurance Issues

2. Presentation Overview • Liability Coverages in General • Specialty Risk Policies • Professional Liability (“E&O”) • Fiduciary Liability • Issues Common to D&O, E&O and Fiduciary Claims

3. Corporate Liability Policies • General liability / Umbrella Liability Ins. • Endorsements for fiduciary coverage • Directors’ & Officers’ (“D&O”) policies • Errors & Omissions (“E&O”) policies • Fiduciary liability policies • Audit committee liability insurance • Securities issuance liability insurance • Employment liability insurance

4. Professional Liability Policies • Professionals are common targets whenever things go wrong and people lose money • Employers are too now

5. Basic E&O Coverage Concept • Wrongful Act • Professional Service; Omission; Investment; Retirement • Usually Causing Economic Injury • Bodily injury for medical professionals • Property damage for architects, engineers, and others

6. Wrongful Acts & “CAPACITY” • any actual or alleged breach of duty, neglect, error, negligent misstatement, misleading statement or omission unintentionally committed • solely in the conduct of the Insured’s Professional Services as specified in the Declarations

7. Notice • Notice can be required before a claim is made and the policy is triggered • “notice of circumstances” likely to give rise to a claim • Late Notice: claims made vs. occurrence

8. Cooperation Clause • Every Policy Contains, as a Condition of Coverage, a Duty to Cooperate in: • investigation • defense • settlement • authorize carriers to obtain records

9. Defense Coverage • Policyholder might have obligation to defend claim • Insurance company approval of counsel, costs, and settlement • Insurance company pays defense costs, usually within applicable limits • If policy does not specify, insurance company should have to reimburse costs on an ongoing basis

10. Fiduciary Risk Exposures • Claim Risks • Employee / beneficiary suits • choppy equity markets / price fluctuation • Erosion of health care benefits • Defense Costs • Punitive damages? • Government Proceedings/Investigations

11. Basic Fiduciary Coverage Concept • Insurance company promises to pay: • Defense costs; and • Damages: • Compensatory? We’ll see. • Punitive/exemplary/multiplied damages • Defense coverage: • Policyholder picks defense counsel or duty to defend?

12. Scope of Coverage Concerns • Coverage tied to “capacity” as “fiduciary”? • What about more mundane errors and omissions by plan, employer, managers and administrators?

13. Compensatory and Punitive Damages • Exclusion for “benefits due”: • How are plaintiffs measuring the damages they seek in their complaint? By reference to the benefits unrealized? • Punitive damages: • Insurable in jurisdiction in question? • Choice of law provision in policy?

14. Competing Interests in Defense (D&O, E&O and Fiduciary) • Policyholders Want Best Representation: • Often expensive given need for expertise; • Potential conflicts necessitating multiple and separate counsel? • Insurance Companies Want to Control Costs: • May seek to impose their choice of counsel or cap rates of selected counsel. • More Conflicts of interest? • Former management vs. New management; • Ds & Os vs. Entity; • Priority of payments clause.

15. Risk Management Issues • Seamless integration of specialty policies? • Choice of law and arbitration • Choice of counsel provision • Insurance application • Severability (who knew what?): • Non-disclosures in insurance application; • Severability of bad acts exclusions as between Insureds.

16. THANK YOU Marshall Gilinsky(212) 278-1513mgilinsky@andersonkill.com