Federal Insurance v. International Business MacHines Corp.
18 N.Y.3d 642
| NY | 2012Background
- Federal issued an excess insurance policy to IBM for 1999–2000, following Zurich’s underlying $25,000,000 policy.
- A class action (Cooper v IBM Personal Pension Plan) alleged ERISA violations from 1995 and 1999 plan amendments.
- IBM paid plaintiffs’ attorneys’ fees under the Cooper settlement and sought reimbursement from Federal.
- Federal filed suit for declaratory relief; IBM sought coverage for the fees under the Federal policy; the Appellate Division ruled for Federal.
- The Court of Appeals held the Zurich policy is follow-form and that ‘Wrongful Act’ coverage requires ERISA fiduciary acts; IBM acted as plan settlor, not fiduciary, thus no coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does 'Wrongful Act' cover ERISA violations by IBM as plan settlor? | IBM argues it falls within fiduciary scope, triggering coverage. | Policy only covers fiduciary acts; settlor actions are not covered. | No coverage; act must be as ERISA fiduciary. |
Key Cases Cited
- Lockheed Corp. v. Spink, 517 U.S. 882 (U.S. 1996) (settlor not a fiduciary; plan terms altered by sponsor do not trigger fiduciary duties)
- Consolidated Edison Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208 (N.Y. 2002) (insurance contract interpretation and ambiguity principles for follow-form policies)
- Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351 (N.Y. 1978) (ambiguities construed against the insurer)
- Greenfield v. Philles Records, 98 N.Y.2d 562 (N.Y. 2002) (determin[ing] reasonable expectations of the average insured)
- Morgan v. Greater N.Y. Taxpayers Mut. Ins. Ass’n, 305 N.Y.243 (N.Y. 1953) (ordinary meaning of policy terms vs. ERISA definitions)