The term fiduciary is broadly defined as “Law.- a person to whom property or power is entrusted for the benefit of another.” The term fiduciary duty is used regularly throughout directors’ and officers’ liability and professional liability law and insurance, one specific area of professional liability is fiduciary liability. Taken into the insurance context, the term describes an insurance policy focused on pension plans and benefit plans and their trustees, employees, administrators, investment or other committees, and employer representatives. Some insurance companies even have policies dedicated to ‘multi-employer’ sponsored pension plans. Where the relationships within a pension plan or benefit plan quickly assert a fiduciary duty upon the persons above (to the beneficiaries of the plans,) other areas of law create a more grey application of this duty.
Though the GALAMBOS V. PEREZ (2009) case includes an employer – employee relationship, and even a lawyer – client relationship, and a Supreme Court of Canada ruling creates precedent limiting the scope of fiduciary duty, it is based on an unusual set of circumstances and I would suggest that it should not provide a lot of comfort to employers and other potential fiduciaries. The Judgment can be found here
An employee of a law firm sued her boss following the firm’s bankruptcy, because she had lent money to her employer and became an unsecured creditor. She alleged negligence and breach of contract, but went further by attempted to assert the position of solicitor-client relationship alleging failure to provide appropriate advice regarding her loans to the firm, based on the fact that, during her employment, the firm did her legal work on will and mortgage transactions. She was unsuccessful at trial, but this decision was set aside in appeal, based on their “power-dependency relationship” and an ad hoc fiduciary duty. Finally, the Supreme Court found that the Court of Appeal “exceeded the limits of appellate review, violating the principle of non-intervention of a trial decision on appeal, and unduly extended the scope of fiduciary obligations.” Interesting findings by Cromwell J were that the breach of the rules of professional conduct does not always mean breach of the law of negligence or of fiduciary liability, nor does a power-dependency relationship automatically create a fiduciary relationship. Cromwell J cited Jackson & Powell on Professional Liability and explained that “any breach of any duty by a fiduciary is not necessarily a breach of fiduciary duty.” Though this case is unique, I have no doubt this case will be cited regularly in professional liability defence positions. Nicholl Paskell-Mede offers a great overview of the case here in “LIMITING THE SCOPE OF FIDUCIARY DUTY” and valuable comments on the appellant and Supreme Court decisions can be found on Osgood Hall Law School’s thecourt.ca here
If you would like to discuss the possible response of available insurance coverage, including lawyers professional liability policy or directors’ and officers’ liability policy, or fiduciary liability insurance other insurance implications, please call.
Greg Shields, Partner
Mitchell Sandham Insurance Brokers
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