Professional Liability Protection
Your company enters into an agreement with a pension fund. After several years of double-digit returns the account performs significantly below the benchmark. The trustee of the pension fund sues the company and the portfolio manager for making numerous investments in companies that are not socially conscious, an alleged violation of the investment guidelines.
A client of your company makes a request to liquidate his account effective immediately. One week later the client calls to check on the status of the liquidation and the client representative finds no record of the request. During that week the market value of the account dropped by 20 percent. The client sues, alleging the company was negligent and, as a result, the client was unable to close on a real estate property due to insufficient funds.
A portfolio manager employed by your company buys a block of stock and distributes it evenly among your clients’ accounts. Although the stock is traded on the New York Stock Exchange, the issuer is Canadian-based. Six months after the stock is issued, it drops in value by 30 percent. One of your clients sues, alleging a breach of investment guidelines and mismanagement of funds. The client claims he specifically requested that his money not be invested in stocks of foreign-based issuers.
Directors & Officers Liability Protection
Selling the Company
Your board of directors has entered into an agreement to sell the company. A group of shareholders is unhappy with the decision and brings action against the board, alleging that the board breached its fiduciary duties by not making enough of an effort or investigation to determine if the selling price was adequate.
Majority Shareholder Fiduciary Duties
Your company is controlled by a majority shareholder who is a director of the company. Minority shareholders, who are not directors or officers, believe their interests are not being represented and bring an action on behalf of the company, alleging the majority shareholder director has breached his fiduciary duty to the minority shareholders, committed acts of mismanagement and wasted company assets.
Investors Filing Suit
Your company raises capital through a private placement of equity securities. After the private placement, the company’s financial condition and performance decline, lowering its value and, thereby, the value of its securities. The investors bring an action against your directors and officers, alleging negligent misrepresentation of your company’s business, earnings, expansion plans and future business prospects. and Optional Bond Coverage.
Employment Practices Liability Protection
Your company’s vice president is terminated. The former vice president sues, alleging that his termination was in retaliation for failing to support a proposed acquisition of a company owned by a majority shareholder. The vice president’s objection to the proposed acquisition was based on a questionable valuation of the company and the majority shareholder’s potential conflict of interest.
A 43-year-old female security analyst of your company brings suit against your company, alleging that, despite excellent job performance
evaluations, the company negligently failed to promote her for 17 years. She further contends that the company retaliated against her after she filed a complaint with the human resources department and that she has suffered emotional distress and sexual discrimination.
An employee alleges that he was repeatedly denied promotions while younger employees outside his department were promoted. The employee points to a memorandum by the company’s chairman and CEO, which was geared toward hiring, identifying and developing “young people” for future management positions.
Fiduciary Liability Protection
Profit Sharing and Savings Plans
Your company sponsors a profit sharing and savings plan. The value of the plan assets deteriorates to the point where benefits are adversely affected. Plan participants bring suit, alleging that the plan wrongfully invested plan funds in high-risk investments in violation of the terms of the plan.
Your company establishes a 401(k) plan that has a limited number of investment options. Plan participants allege that the plan’s investment
options were under performing and that your company breached its fiduciary duty because it did not offer investment options with higher returns.
Wrongful Denial of Disability Benefits
A former employee sues your company and the plan administrator under ERISA, seeking review of a denial of long- and short-term disability benefits stemming from a disability.
Mutual Fund Professional Liability and Directors & Officers Liability Protection
The independent directors of the mutual fund vote to let their investment adviser’s contract expire and hire a new adviser due to poor performance and violations of investment restrictions. The adviser, who is also the sponsor of the mutual fund, sues the independent directors for breach of fiduciary duty and wrongful termination of the contract.
The share price of a bond fund plummets 30 percent in one day. The fund announced that the reason for the drop was because the value of the bonds in its portfolio had to be drastically reduced to reflect their current market value. A class action suit is brought against the fund’s board of directors, alleging negligent oversight and breach of fiduciary duty. The claim alleges the fund directors failed to ensure that proper procedures were in place to value its holdings.
A mutual fund’s performance for the year was 20 percent below that of its peer group. Shareholders of the fund file a class action lawsuit, alleging the board of directors breached its fiduciary duties by allowing the investment adviser to violate an investment restriction stated in the Statement of Additional Information (“SAI”). The shareholders claim that more than 5 percent of fund assets were invested in one issuer, whose poor performance materially affected the fund’s overall return. The shareholders also claim the board of directors should have been aware of the investment restriction and failed to take action to ensure the fund was in compliance.