(CN) – A subscriber of a member-owned insurance exchange cannot sue the board of directors for allegedly withholding billions of dollars in unallocated surplus funds, the 5th Circuit ruled.
In a federal class action, James True claimed that the United Service Automobile Association, a large reciprocal insurance exchange, breached its fiduciary duty to subscribers. The amount of surplus funds retained by the directors vastly exceeded the amount needed to ensure the USAA’s financial stability, True said.
The federal appeals court in New Orleans affirmed the lower court’s ruling that the board of directors has no duty to USAA members, only to the entity itself. Judge Benavides likened the structural relationship to that of a corporate board and its shareholders, saying the two were “nearly identical.”
“USAA directors have a fiduciary duty only to the exchange, which represents the interests as the subscribers as a whole, not to individual subscribers,” Benavides concluded.