WASHINGTON — CUNA Mutual Group said Tuesday it has introducedEnhanced Defense Reimbursement coverage to help credit unionsagainst rising litigation costs.

Housed within the company's management and professional liability insurance policy, the newcoverage reimburses credit unions for certain defense costsassociated with claims that are commonly not covered by liabilitypolicies.

President/CEO Bob Trunzo told Credit Union Times theproduct is an example of how CUNA Mutual can evolve to provide whatcredit unions need, because the firm is so close to the community.The product was created in response to credit union feedback, headded.

CUNA Mutual said some emerging but typically uncovered risksthat led to developing enhanced defense reimbursement include:

• Increased levels of litigation seeking injunctive reliefdamages (e.g., recent ATM and Americans with Disabilities Actlitigation against credit unions)
• Heightened patent troll litigation activity
• Growing regulatory risks driven by Consumer FinancialProtection Bureau rulemaking
• Disgorgement claims, such as the overdraft re-sequencinglitigation

Recent news stories of patent infringement cases have emergedalleging some credit unions were in violation of certain patents bynot having a proper license, CUNA Mutual said.

Patent trolls continue to file suits resulting in increasedpatent infringement cases involving technology, online banking,ATMs, for instance, which have been costly to credit unions, thecompany noted, adding a typical patent infringement case throughtrial could cost from $400,000 to $500,000.

New rules from the CFPB went into effect Jan. 1, 2014, whichwill expose credit unions to potential violations, CUNA Mutualsaid. “While the CFPB has direct enforcement for credit unions withmore than $10 billion in assets, their rules will impact all creditunions.”

In addition, litigation involving alleged overdraftre-sequencing has recently made news as some credit unions wereaccused of reordering debits, largest to smallest in order togenerate increased overdraft fees, according to CUNA Mutual.

These suits seek to have these increased fees disgorged, orreturned. Such disgorgement claims have not traditionally beencovered by insurance.

“Emerging litigation risks continue to plague the financialindustry, and even the most vigilant credit unions can fall victimto these lawsuits,” said John Wallace, vice president of commercialproducts for CUNA Mutual.

Various limit, deductible and co-pay options will be availablefor the new coverage, the company said.