Peter Gulia Posted September 7, 2018 Share Posted September 7, 2018 ERISA § 411 makes it at least improper for someone convicted of any of a long list of crimes (if the conviction or the end of the imprisonment, whichever is later, is in the past 13 years) from serving in any almost any role regarding an employee-benefit plan. Does an insurance company, before issuing an ERISA § 412 fidelity-bond insurance contract, do anything to check whether a person whose dishonest act the contract would insure lacks a disqualifying conviction? My intuition tells me that the size and probability of an insurer’s potential liability on a typical fidelity bond is so small that an insurer doesn’t bother checking anything. But I’d like to be wrong about that. Can anyone tell us what an insurance company does? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
PensionPro Posted September 7, 2018 Share Posted September 7, 2018 As far as I am aware insurance cos. only inquire about losses or claims in prior years. PensionPro, CPC, TGPC Link to comment Share on other sites More sharing options...
RatherBeGolfing Posted September 7, 2018 Share Posted September 7, 2018 I seriously doubt it. It wouldn't surprise me if the forms included some kind of self-certification though. Check here to certify that you have not been convicted of X or barred from serving as trustee bla bla bla Link to comment Share on other sites More sharing options...
Peter Gulia Posted September 7, 2018 Author Share Posted September 7, 2018 But does an applicant's false statement void the plan's coverage? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
RatherBeGolfing Posted September 7, 2018 Share Posted September 7, 2018 That is a very good question. Probably, since their argument would likely be that they wouldn't have issued the coverage if they had known of the applicants prior bad acts. Link to comment Share on other sites More sharing options...
Larry Starr Posted September 7, 2018 Share Posted September 7, 2018 3 hours ago, Fiduciary Guidance Counsel said: ERISA § 411 makes it at least improper for someone convicted of any of a long list of crimes (if the conviction or the end of the imprisonment, whichever is later, is in the past 13 years) from serving in any almost any role regarding an employee-benefit plan. Does an insurance company, before issuing an ERISA § 412 fidelity-bond insurance contract, do anything to check whether a person whose dishonest act the contract would insure lacks a disqualifying conviction? My intuition tells me that the size and probability of an insurer’s potential liability on a typical fidelity bond is so small that an insurer doesn’t bother checking anything. But I’d like to be wrong about that. Can anyone tell us what an insurance company does? They automatically issue it. The cost of "checking" is greater than the risk of coverage combined with the risk of an actual loss having to be covered (multiply the two together!). It's a business decision, and, sadly, the correct one. Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC President Qualified Plan Consultants, Inc. 46 Daggett Drive West Springfield, MA 01089 413-736-2066 larrystarr@qpc-inc.com Link to comment Share on other sites More sharing options...
Peter Gulia Posted September 7, 2018 Author Share Posted September 7, 2018 PensionPro, RatherBeGolfing, and Larry Starr, thank you for helping me. That an applicant's false statement can void coverage typically applies when the applicant and the insured are the same person. But for ERISA fidelity-bond insurance, the plan is the insured. And a principal might not be imputed with knowledge of an agent who acts adversely to the interest of the principal. I don't know what the courts' answers are. But I can imagine how one might argue that an employee-benefit plan, a person separate from its fiduciary or asset-handler, should not be burdened by a false statement the plan did not make. I also can see how a fidelity-bond insurer might argue that the plan's remedy for a theft that resulted because a fiduciary allowed a disqualified person to serve is the plan's fiduciary-breach claim against that breaching fiduciary. Another good reason for a plan to buy fiduciary liability insurance. Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
Luke Bailey Posted September 10, 2018 Share Posted September 10, 2018 At least some financial firms ask prospective employees under penalties of perjury on the employment application whether they have a conviction. The insurer should require its insureds to screen new hires in this way. I think it's pretty common. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
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