The opinion of the court was delivered by: STERN
Maryland Casualty asks in the present motion for summary judgment. Defendants Davanzo and Zecca bring cross-motions for summary judgment that Maryland Casualty is obligated to defend and indemnify them under the policy. (Davanzo and Zecca are represented by separate counsel and have filed and served independent motions and papers, but as the issues as to them are identical, they will be treated together in this opinion.)
There are seven separate claims brought against the defendants in the underlying Rapisardi suit. Summary judgment is granted Maryland on four claims and for defendants on one claim, and is denied on two claims, as explained below.
Defendants Davanzo and Zecca, formerly President and Vice-President of Economy Bookbinding, were trustees of Economy's Pension Plan. Economy is in Chapter 7 bankruptcy and is currently being liquidated. Davanzo is also in bankruptcy.
As trustees of the Plan, Davanzo and Zecca are defendants in the Rapisardi lawsuit. That suit charges that they and other defendants violated their fiduciary and statutory (ERISA) duties to the Pension Plan, resulting in damages to the beneficiaries in the amount of $358,787.30 plus additional sums to be determined. As described in the Rapisardi plaintiffs' status conference memorandum of February 29, 1984, there are seven separate claims, with damages broken down as follows:
1. Investment of plan funds in Economy's own securities, a violation of fiduciary duty and ERISA ($117,924.26).
2. Embezzlement by a third officer-defendant and failure of Davanzo and Zecca to detect the embezzlement ($28,963.70).
3. Failure to collect interest due on returned real estate investment funds ($ 18,000 plus some additional interest).
4. Disappearance of loans taken out against life insurance on employee-plaintiffs ($128,721.27).
5. Improper calculation of benefits, with resultant underfunding of the plan (to be determined by plan's actuaries).
6. Attorney's fees under ERISA (to be determined).
7. Statutory penalty for refusal to reveal information to beneficiaries as required by ERISA ($12,100).
Maryland Casualty's standard employee benefits liability policy includes a specific disclaimer concerning suits brought under ERISA. Through an oversight, however, Economy Bookbinding was issued an older version of the policy, drawn up before ERISA had been enacted. Maryland admits that ERISA violations may be covered under the actual policy in force, but denies that it covers the above seven claims. The operative portions of the policy read as follows:
COVERAGE. To pay on behalf of the insured, all sums which the insured shall become legally obligated to pay on account of any claim made against the insured. . . caused by any negligent act, error or omission of the insured . . . in the administration of the Insured's Employee Benefits Programs, and the company shall have the right and duty to defend any suit against the insured seeking damages on account thereof . . . (Emphasis in original.)
" Administration " - The unqualified word "administration", wherever used, shall mean:
(1) Giving counsel to employees with respect to the Employee ...