Fiduciary liability coverage protects your managers, giving them the confidence to make decisions on behalf of your company. Coverage under this policy is designed to protect individuals who have a fiduciary responsibility to manage employee benefit plans. Managers or business owners making decisions about your company’s 401(k) plan or other qualified employee benefits could be personally liable for any employee claims siting damages or loss.
If you (or the person managing your employee benefits) fail to act diligently, make bad decisions in selecting reputable third party providers, or simply make a mistake when administering plans, this policy will provide you with defense coverage and in some cases pay for damages owed.
Claims can be brought by participating employees, legal estates, the Department of Labor, and the Pension Benefit Guaranty Corporation, with allegations ranging from:
- Improper Advice or Disclosure
- Inappropriate Selection of Advisors or Providers
- Imprudent Investments
- Lack of Investment Diversity
- Breach of Responsibilities set by ERISA
- Negligence in the Administration of a Plan
- Conflict of Interest with Regard to Investments
Wouldn’t I be protected under the ERISA Act for any decisions I make regarding employee benefits?
No, not necessarily. Under the ERISA act of 1974 (Employee Retirement Income Security Act), fiduciaries (such as yourself) can still be held personally liable for losses to a benefit plan. Should an employee incur a loss as a result of your error, omission, or breach of duty, you want to know that you’re protected. Many fiduciaries believe incorrectly that their ERISA fidelity bond protects your personal assets from being a part of the claim.
What about a Directors & Officers policy, wouldn’t that cover these types of losses?
One might think that this type of coverage is included in your D&O policy. However, most D&O policies exclude fiduciary liability exposures as well as those exposures pertaining to the Employee Retirement Income Security Act (ERISA) because of the implications of working with another person’s financial securities. Designated fiduciaries are not the only targets of such lawsuits; targets can also include the employer and even the plan itself, which is why a specialty policy is critical.
I represent a company looking to compare our insurance rates to make sure we’re spending our money wisely. Could you look through our policy to see if there are places for improvement?
One of our specialties is looking at an operation to see where they are open to risk, and also where they could be paying less. We would love to work with your directors to compare rates and look at alternate plans.