Fiduciary Liability Insurance

Fiduciary Liability coverage is in place to protect organizations from liability resulting from offering employee benefits such as 401K plans. This type of coverage was created following the passage of the Employee Retirement Income Security Act (ERISA) in 1974. This law made companies accountable for the assets employees were saving in their company sponsored retirement plans. The goal was to protect money in retirement funds and treat these assets as savings mechanisms for employees.

As 401K plans and other employee sponsored benefit plans have become common place in the working world, this is a key coverage for companies and organizations of all types and sizes.

Fiduciary liability coverage is a supplement to other policies including ERISA bonds, D&O, and Employee Benefit Liability. Fiduciary related situations are typically excluded under general liability policies and so it fills a gap where there otherwise may be no coverage. It is common to see standalone fiduciary liability policies or see this coverage included as part of a D&O policy.

Companies typically purchase ERISA bond coverage to protect the value of the assets in the retirement plan, but not the actual liability from managing the plan. The fiduciary liability component is in place to protect the company offering the plan from liability resulting from the management of the plan itself.

Employee benefit liability is offered to protect the organization from mistakes or omissions arising from a benefit plan such as employee sponsored healthcare coverage. It does not protect against lapses in how a manager invests assets in company sponsored 401K plans. This is where the fiduciary liability coverage would step in.

Similarly, D&O coverage protects against allegations of mismanagement from executives and managers but usually stops short in covering ERISA related situations. Fiduciary liability is intended to cover the gap for this type of situation. It can come into play if there are poor recommendations made by third-party financial advisors or sudden swings resulting from a turbulent stock market.

Fiduciary liability coverage is often very affordable and is underwritten based on the specific requirements of the company or organization seeking the coverage.

Have any questions or want to discuss fiduciary liability coverage in more detail? Let’s chat!