Fiduciary

  • (p54) – 1:34-1:41 – Eric DINALLO, Superintendent, New York State Insurance Department – Well, I think it’s important for everyone to know there’s a very strong tension between policyholders’ interest and shareholders’ interest in a publicly traded company.
    • The board and management has a fiduciary interest to shareholders under our law, fiduciary interest to shareholders, but, at the same time, whenever they release capital to satisfy that to get a bigger return on equity, they are necessarily taking incremental protection against policyholders.
  • Bruce BRALEY (D-IA) –  And you also have a fiduciary obligation to policyholders under their contractual obligation with the policyholder.
  • Mr. DINALLO. Sadly, there is some debate, actually, because they’ve been so trained under our law and after Enron, etc., to worry about fiduciary duty to shareholders that there is a good argument that, although it’s in their blood to worry about policyholders, the legal requirements are a little bit gray, actually.

 GOV (House-OGR) – The Causes and Effects of the AIG Bailout- AIG Bailout Oversight Hearing, Henry Waxman (D-CA)  —  [BonkNote]

  • The Proposal is premised upon the Department’s rejection of the dichotomy under the law between a sales recommendation to a consumer on the one hand, and advice provided for a fee on the other.
    • The Department’s Proposal seeks to define the term “investment advice fiduciary” to include anyone who is in the business of making routine sales recommendations by persons engaged in commonplace sales and marketing efforts.
    • The Fifth Circuit disagreed with the Department’s conflation of sales activity and fee-based investment advisory activities back in 2018, observing that “when enacting ERISA, Congress was well aware of the distinction … between investment advisers, who were considered fiduciaries, and stockbrokers and insurance agents, who generally assumed no such status in selling products to their clients.”
  • The court found that the Department’s interpretation of ERISA:
    • conjoins “advice” with a “fee or other compensation, direct or indirect,” but it ignores the preposition “for,” which indicates that the purpose of the fee is not “sales” but “advice.”
    • Therefore, taken at face value, the provision rejects “any advice” in favor of the activity of “render[ing] investment advice for a fee.”
    • Stockbrokers and insurance agents are compensated only for completed sales (“directly or indirectly”), not on the basis of their pitch to the client. Investment advisers, on the other hand, are paid fees because they “render advice.”
    • The statutory language preserves this important distinction.

2024 0102 – Letter – ACLI to GOV-DOL / EBSA – Subjects: Retirement Security Rule: Definition of an Investment Advice Fiduciary (RIN 1210-AC02); Proposed Amendment to Prohibited Transaction Exemption PTE 84-24 (Application No. D-12060); Proposed Amendment to Prohibited Transaction Exemption PTE 2020-02 (Application No. D-12057)  —  [BonkNote] 

 

  • Plaintiff claims that Defendants breached a fiduciary duty. (See generally Doc. No. 1-2.)
    • However, while the insurer-insured relationship contains many elements of a fiduciary relationship, “‘the [California] courts which have directly addressed the issue … have specifically held that there is no fiduciary duty between an insurer and an insured.'” 
      • General American Life Ins. Co. v. Rana, 769 F. Supp. 1121, 1126 (N.D. Cal. 1991) (quoting Hassard, Bonnington, Roger & Huber v. Home Ins. Co., 740 F. Supp. 789, 792 (S.D. Cal. 1990)).
    • Thus, as no fiduciary duty exits, Plaintiff cannot plead a breach of fiduciary duty.

2019 – LC – Openiano v. Hartford Life and Annuity Insurance Company – 18-cv-0943 – D35 – Order Defendants’ Motion for Judgement on the Pleadings, District Court, Southern District of California – 11p