Fiduciary Liability Insurance
The Fiduciary Liability Policy is designed to cover the responsibility of employers, trustees and professional administrators with respect to errors and omissions in the administration of employee benefit programs as imposed by the Employment Retirement Income Security Act (ERISA). A fiduciary can be anyone who exercises discretionary authority in managing a pension or employee benefit plan, renders investment advice with respect to monies belonging to the plan or has any discretionary authority or responsibility in administering the plan.
What you need to know about Fiduciary Liability Insurance:
Any fiduciary that breaches any of the responsibilities, obligations or duties imposed by ERISA may be personally liable to compensate the plan for any resulting losses. 100% of the defense costs can be insured in most cases.
Even if your company wishes to indemnify its fiduciaries, it may not be able to do so, or it may be prohibited from doing so by law. Relying on corporate indemnification as your sole protection as a fiduciary may be placing your personal assets at risk.
If your company ever reduces or eliminates some employee benefits, or if it plans to be involved in a major merger or to sell part of a business, it dramatically increases its fiduciary liability risk.
It is a common misconception that the employee benefits liability (EBL) section of the general liability policy or directors and officers coverage will take care of every possible lawsuit against fiduciaries. EBL protects against claims of errors in plan administration but not against the more expensive and complex ERISA violation claims. Directors and officers liability typically excludes both EBL and breach of ERISA fiduciary duty.