Oregon's Court Of Appeals Considers ERISA Definitions For Undefined Policy Terms
In Employers-Shopmens Local 516 Pension Trust and Western States Health and Welfare Trust Fund of the OPEIU v. Travelers Casualty and Surety Company of America and Hartford Fire Insurance Company, 2010 Or. App. LEXIS 653 (Or. Ct. App. June 16, 2010), the Oregon Court of Appeals affirmed a trial court’s grant of defendant insurers’ summary judgment motions. The central issue of the coverage dispute was the meaning of the term “employee” in both the “Welfare and Pension Plan ERISA Compliance” endorsement to the commercial crime policy that Travelers issued to Local 516 and the materially identical policy that Hartford issued to Western. The issue before the Court of Appeals was whether the principals of a company that provided investment management services to the plaintiffs were “employees” under the definition contained in the policy’s endorsement.
The plaintiffs contended that the principals of the investment management services company were not administrators but rather were employees or officers under the definition of “employee” in the endorsement and that their acts were covered as a matter of law. The appellate court noted that while the policy defined the term “employee” the policy did not define the terms that comprised that definition: trustee, officer, employee, administrator or manager. In this case, the appellate court noted that it did not turn to dictionary definitions to determine the ordinary meanings of the undefined terms as it generally would. Instead, because the appellate court found that the text of the endorsement strongly suggested an intention that the pertinent provisions of the ERISA regulatory scheme provided context for understanding the meaning of the terms, the appellate court turned to the meaning of the terms for the purposes of ERISA’s bonding requirement.
Examining the ERISA definitions for the undefined terms, but ultimately not deciding whether the undefined terms were properly afforded the meanings provided under ERISA or whether the ERISA definitions merely provided highly persuasive context for interpreting the meaning of those terms, the appellate court rejected the plaintiffs’ contention and found that the principals of the company that provided investment management services to plaintiffs were administrators such that, as a matter of law the principals’ acts were not covered. The appellate court also rejected the plaintiffs’ contention that any coverage for administrators and managers in the endorsement was illusory. The appellate court further held that the doctrine of statutory incorporation did not compel coverage in this case. As a result, the appellate court held that the trial court properly granted the defendants’ summary judgment motions and denied those of the plaintiffs.
