Summary
The United States District Court for the District of Rhode Island granted insurers’ motion for judgment on the pleadings in an action seeking a declaration that they had no duty to defend or indemnify defendants in an underlying ERISA dispute. The court held that the Employee Benefits Liability Endorsement did not cover alleged failures to distribute plan benefits, and alternatively that the endorsement’s ERISA exclusion applied. The court limited its duty-to-defend analysis to the allegations in the underlying complaint under Rhode Island’s pleadings test.
Topics
Practice areas
Questions Presented
- Whether the allegations in the underlying ERISA complaint triggered the insurers' duty to defend under the Employee Benefits Liability Coverage Endorsement.
- Whether the court could consider extrinsic documents submitted by the insureds in deciding the Rule 12(c) motion in a duty-to-defend action.
- Whether the policy's ERISA exclusion independently precluded coverage even if the allegations otherwise triggered the Employee Benefits Liability Coverage Endorsement.
Holdings
- In a duty-to-defend action governed by Rhode Island's pleadings test, the court's inquiry is limited to the factual allegations in the underlying complaint and the insurance policy; the court will not consider extrinsic documents submitted by the insureds.
- The underlying complaint did not trigger the insurers' duty to defend because the alleged loss arose from the Burman Defendants' contractual obligations under the profit-sharing plan, not from damages caused by a negligently committed act, error, or omission within the endorsement's coverage.
- Even if the underlying allegations triggered the Employee Benefits Liability Coverage Endorsement, the policy's ERISA exclusion independently barred coverage because the alleged damages arose from liability imposed on fiduciaries under ERISA.
Key quotations
“In general, the duty to defend an insured in this jurisdiction is determined by applying the ‘pleadings test.’” (at 4)
“[The pleadings] test limits this Court’s review to the factual allegations contained in the underlying [] complaint.” (at 7)
“At this stage, even when “the Court ‘view[s] the facts contained in the pleadings in the light most flattering to the nonmovant[] . . . and draw[s] all reasonable inferences therefrom in [its] favor,’”” (at 12)
Factual background
Carl Angus worked for E.W. Burman for 38 years and retired in July 2023. He alleged that the Burman Defendants reported his retirement as occurring on December 31, 2022 and distributed his profit-sharing-plan account without including investment earnings through his actual retirement date, allegedly reducing his distribution by hundreds of thousands of dollars. Angus asserted ERISA claims for benefits and breach of fiduciary duty, and the Burman Defendants sought coverage and a defense under an Employee Benefits Liability Coverage Endorsement.
Procedural history
Carl Angus sued Edward Burman, Paul Burman, and E.W. Burman, Inc. in an underlying ERISA action concerning the calculation and distribution of his profit-sharing-plan benefits. The Burman Defendants sought a defense under a general liability policy and its Employee Benefits Liability Coverage Endorsement. The insurers filed this action, and the court granted their Rule 12(c) motion, concluding that the policy did not trigger a duty to defend and that the ERISA exclusion independently barred coverage.