1. Forms
2. MP
3. MP-04-07

What the form is

The MP 04 07 Coverage Extension – Spousal Coverage is an endorsement to an insurance policy. Its primary purpose is to broaden coverage to include the lawful spouse of an "insured person" if the spouse is named as a defendant in a claim solely due to their marital relationship with the "insured person" who is alleged to have committed a "wrongful act". Importantly, this endorsement does not provide coverage for any "wrongful act" committed by the spouse themselves.

Classes of business it applies to

This endorsement is typically used with Management Protection Policies, specifically in conjunction with the Fiduciary Liability Coverage Form (MP 00 07). Therefore, it applies to organizations and their fiduciaries who have fiduciary responsibilities and potential liabilities related to employee benefit plans. Examples include:

• Private companies sponsoring 401(k) plans or other employee benefit programs.
• Not-for-profit organizations with employee pension or welfare benefit plans.
• Financial institutions acting as fiduciaries.

Real-world example: If a company's CEO (an "insured person" under the Fiduciary Liability policy) is sued for alleged mismanagement of the employee pension plan, and their spouse is also named in the lawsuit simply because of jointly held assets or their marital status, this endorsement would provide coverage for the spouse's legal defense costs, provided the spouse did not participate in the alleged wrongful acts.

Special considerations

• Scope of Coverage: Coverage for the spouse is strictly limited to their liability arising from the "insured person's" "wrongful acts" and not their own. If the spouse is alleged to have actively participated in the wrongdoing, this endorsement would not apply to those allegations against the spouse.
• Prerequisite Form: This endorsement is designed to be used with the MP 00 07 Fiduciary Liability Coverage Form. Its applicability may be limited if attached to other coverage forms.
• Definition of "Spouse": The policy definitions for "spouse" (lawful) will be critical.
• Claims-Made Basis: As it attaches to a Management Protection Policy, which is often claims-made, the timing of the claim and the wrongful act will be crucial for coverage determination.

Key information for agents and underwriters

• Risk Assessment: The additional risk exposure from this endorsement is generally considered an extension of the existing fiduciary liability risk of the "insured persons." The primary concern remains the conduct of the fiduciaries themselves. However, underwriters should be aware that this broadens the scope of individuals who could be covered for defense costs.
• Pricing: The premium impact may be minimal as it doesn't cover independent wrongful acts of the spouse but rather their vicarious exposure. It's often included as part of a broader management liability coverage enhancement.
• Coverage Gaps: Agents should explain clearly to clients that this does not provide D&O-like coverage for the spouse's own actions. It's a specific extension for vicarious liability due to the marital relationship in the context of a fiduciary claim against the insured person.
• Underwriting Guidelines: Underwriters will primarily focus on the underlying fiduciary liability exposure. The presence of this endorsement typically doesn't significantly alter the core underwriting of the MP 00 07 form but enhances the overall protection offered.
• Clarity in Explanation: Agents must clearly communicate the limitations of this endorsement to the insured, particularly that it does not cover the spouse for their own wrongful acts.