WASHINGTON — CUNA Mutual Group said Tuesday it has introduced Enhanced Defense Reimbursement coverage to help credit unions against rising litigation costs.
Housed within the company’s management and professional liability insurance policy, the new coverage reimburses credit unions for certain defense costs associated with claims that are commonly not covered by liability policies.
President/CEO Bob Trunzo told Credit Union Times the product is an example of how CUNA Mutual can evolve to provide what credit unions need, because the firm is so close to the community. The product was created in response to credit union feedback, he added.
CUNA Mutual said some emerging but typically uncovered risks that led to developing enhanced defense reimbursement include:
- Increased levels of litigation seeking injunctive relief damages (e.g., recent ATM and Americans with Disabilities Act litigation against credit unions)
- Heightened patent troll litigation activity
- Growing regulatory risks driven by Consumer Financial Protection Bureau rulemaking
- Disgorgement claims, such as the overdraft re-sequencing litigation
Recent news stories of patent infringement cases have emerged alleging some credit unions were in violation of certain patents by not having a proper license, CUNA Mutual said.
Patent trolls continue to file suits resulting in increased patent infringement cases involving technology, online banking, ATMs, for instance, which have been costly to credit unions, the company noted, adding a typical patent infringement case through trial could cost from $400,000 to $500,000.
New rules from the CFPB went into effect Jan. 1, 2014, which will expose credit unions to potential violations, CUNA Mutual said. “While the CFPB has direct enforcement for credit unions with more than $10 billion in assets, their rules will impact all credit unions.”
In addition, litigation involving alleged overdraft re-sequencing has recently made news as some credit unions were accused of reordering debits, largest to smallest in order to generate increased overdraft fees, according to CUNA Mutual.
These suits seek to have these increased fees disgorged, or returned. Such disgorgement claims have not traditionally been covered by insurance.
“Emerging litigation risks continue to plague the financial industry, and even the most vigilant credit unions can fall victim to these lawsuits,” said John Wallace, vice president of commercial products for CUNA Mutual.
Various limit, deductible and co-pay options will be available for the new coverage, the company said.