OPINION OF THE COURT
The question before the Court is whether the disputed language in an insurance policy extends coverage to alleged violations of the Employee Retirement Income Security Act of 1974 (ERISA) by defendant insureds, International Business Machines Corporation and the IBM Personal Pеnsion Plan (collectively, IBM), acting in their capacity as the settlor of their employee benefit plans. We reaffirm fundamental principles of insurance contract interpretation and hold that the plain language of the policy does not cover such acts and, therefore, that the Appellate Division correctly held that plaintiff insurer Federal Insurance Company (Federal) is entitled to summary judgment and a declaration that it is not required to indemnify IBM in the manner requested.
Federal issued an excess insurance policy to IBM for the policy period from April 14, 1999 through April 14, 2000. The underlying policy (Zurich policy) was issued by Zurich American Insurance Company (Zurich) and it is limited to $25,000,000. A class action was filed against IBM, alleging that certain amendments to the benefit plans in 1995 and 1999 violated provisions of ERISA pertaining to age disсrimination
(see Cooper v IBM Personal Pension Plan,
As is relevant to this apрeal, the Federal policy is a “follow form” policy, meaning that it conforms to the terms and endorsements of the underlying Zurich policy
(see e.g. Jefferson Ins. Co. of N.Y. v Travelers Indem. Co.,
The disputed language (“any breach of the responsibilities, obligations or duties by an Insured which are imposed upon a fiduciаry of a Benefit Program by [ERISA]”) appears in the first prong of the Zurich policy’s definition of “Wrongful Act.” The term “Wrongful Act” is defined, in its entirety, in endorsement No. 17 to the Zurich policy as
“1. any breach of the responsibilities, obligations or duties by an Insured which are imposed upon a fiduciary of а Benefit Program by the Employee Retirement Income Security Act of 1974, as *647 amended, or by the common or statutory law of the United States, or ERISA equivalent laws in any jurisdiction anywhere in the world;
“2. any other matter claimed against an Insured solely because of such Insured’s service аs a fiduciary of any Benefit Program; or
“3. any negligent act, error or omission in the Administration of any Benefit Program.”
Contrary to the Supreme Court’s holding in this case in which it granted IBM’s motion for summary judgment, IBM was not alleged to have breached fiduciary duties in the underlying
Cooper
action. There is no dispute in this case that under
Lockheed Corp. v Spink
(
The definition of “Wrongful Act” in the Zurich policy explicitly refers to ERISA and specifically to duties imposed on fiduciaries by ERISA. Therefore the only reasonable approach to determining whether the disputed language in the рolicy requires the coverage demanded by IBM in this action is to determine whether or not IBM was acting in its capacity as an ERISA fiduciary in amending the plans. Under Lockheed, IBM was acting as a plan settlor and not as a fiduciary when it made the changes to the benefit plans that allegedly violated ERISA. The policy language is clear that coverage requires that the insured be acting in its capacity as an ERISA fiduciary in committing the alleged ERISA violation. We conclude that the *648 average insured would reasonably interpret the disputed language in the definition of “Wrоngful Act” to mean that coverage is limited to acts of an insured undertaken in its capacity as an ERISA fiduciary.
We have considered and reject IBM’s contentions to the contrary, certain of which we specifically address as follows. IBM maintains that the term “fiduciary” is undefined in the Zurich policy and therefore must be given its plain, ordinary meaning, which differs from the definition provided in ERISA. This argument appears to stem from the rule that “[t]he language employed in the contract of insurance must be given its ordinary meaning, such as the average policyholder оf ordinary intelligence, as well as the insurer, would attach to it”
(Morgan v Greater NY. Taxpayers Mut. Ins. Assn.,
IBM misapplies a general principle of insurance policy construction—that terms take on their plain, ordinary meaning—and the result is a strained and implausible interpretation of the provision at issue. Contrary to IBM’s argument, this does not amount to a prohibited implied exception to coverage
(see Seaboard Sur. Co. v Gillette Co.,
IBM further argues that if the disputed language is ascribed the meaning which this Court now concludes it has, then it would be unnecessary for the “Wrongful Act” definition to contain both the first and second prongs because each provision would have an identical meaning. This is not the case, as the two provisions clearly serve different functions. The first prong refers to “any breach of the responsibilities, obligations or duties by an Insured which are imposed upon a fiduciary of a Benefit Progrаm by [ERISA] . . . or by the common or statutory law of the United States, or ERISA equivalent laws in any *650 jurisdiction anywhere in the world.” The second prong reads as follows: “any other matter claimed against an Insured solely because of such Insured’s service as a fiduciary of any Benefit Program.” Upon сomparing these two provisions, it becomes apparent that the first requires a breach of a duty imposed by ERISA (or foreign ERISA-equivalent) or by other United States common or statutory law, in order for coverage to be triggered, whereas prong two plainly contains no suсh requirement. Prong two would extend coverage to an insured’s claims arising from liability incurred solely due to the insured’s position as a fiduciary. For instance, if the insured is named in an action solely due to its status as a fiduciary, even where the action does not allege that the insured actually breached any fiduciary duties, and the action results in a settlement or a judgment against the insured, it is possible that Zurich and Federal would be liable for funds spent to settle the suit or pay the judgment.
Finally, IBM makes much of the fact that Federal revised its own policy language in 2002
4
and that certain policies in other cases use language similar to the revised Federal language
(see e.g. Cement & Concrete Workers Dist. Council Pension Fund v Ulico Cas. Co.,
Accordingly, the order of the Appellate Division should be affirmed, with costs.
Judges Ciparick, Graffeo, Read, Smith, Pigott and Jones concur.
Order affirmed, with costs.
Notes
. Under ERISA, a plan sponsor is
“(i) the employer in the case of an employee benefit plan established or maintained by a single employer, (ii) the employee organization in the case of a plan established or maintained by an emplоyee organization, or (iii) in the case of a plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or othеr similar group of representatives of the parties who establish or maintain the plan” (29 USC § 1002 [16] [B]).
. Regarding fiduciaries, the definition section of ERISA explains, in relevant part, that
“a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary аuthority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan” (29 USC § 1002 [21] [A]).
. A fiduciary is “[a] person who is required to act for the benefit of another person on all matters within the scope of their relationship; one who owes to another the duties of good faith, trust, confidence, and candor” or “[o]ne who must exercise a high standard of care in managing another’s money or property” (Black’s Law Dictiоnary [9th ed 2009], fiduciary;
see also Roni LLC v Arfa,
. According to IBM, the relevant language now reads as follows: “any breach of the responsibilities, obligations or duties imposed by ERISA upon fiduciaries of the Sponsored Plan in their capacity as such fiduciaries” (emphasis added).