What Is Fiduciary Liability Insurance?
Fiduciary liability coverage helps protect companies from claims of mismanagement and the legal liability related to serving as a fiduciary. If your company sponsors a retirement or health plan for employees, and if you are involved in any way with the management of that plan, you are likely considered a fiduciary. Under ERISA law, fiduciaries can be held personally liable for a breach of fiduciary duties. As a fiduciary, it is your job to select advisors and investments, minimize expenses and follow plan documents exactly. You have a duty to act solely in the interest of plan participants and beneficiaries – not the company. That is a lot of responsibility and it comes with potential for fiduciary liability claims, so you need the right protection.
What does fiduciary liability insurance cover?
For many employers, offering an employee benefit plan is a way to attract and retain workers. However, administering an employee benefit plan can present liability risks, including staggering litigation costs if your company is sued for errors or omissions in the administration of the plan. In addition, the individual fiduciary can be held personally liable and their assets may also be at risk if they do not carry out their obligations. That is why fiduciary liability coverage is important for the well-being of any company and its fiduciaries.
Travelers helps businesses understand fiduciary liability insurance.
Who is fiduciary liability insurance right for?
- Financial institutions
- Nonprofit organizations
- Private companies
- Public companies
Uncover fiduciary liability risks
Learn more about unseen risks and how coverage can help businesses prepare.
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SPEAKER: Fiduciary-- it's hard to say. It's hard to understand. And you might be a fiduciary without even knowing it. So here's the deal. If you manage a health or retirement plan or have the authority to control the plan's asset, you're a fiduciary. You won't see that word on your business card, but it's your duty to select and monitor advisors and investments, minimize expenses, and follow plan documents. That's a lot of responsibility and liability.
A fiduciary can be held personally liable for a breach of duties under ERISA. And the risk is always out there. Your company could be sued, and you could be sued. Make the wrong choices, and it could be your money and your assets at risk.
Consider this. Independent contractors working for three seasons at a company believed they were eligible for the employer's retirement plan. When the company denied that the contractors were eligible, the contractors sued the company for retroactive matching contributions to the retirement plan and earnings on those contributions. Defense costs were approximately $1 million.
Here's another case. Employees participating in their company's 401(k) plan sued the plan sponsor, the plan's investment fiduciary, and individual plan fiduciaries, alleging that they breached their fiduciary duties under ERISA. How? By allowing the plan to incur excessive recordkeeping and investment fees, by failing to eliminate underperforming investment options. The lawsuit was ultimately settled for $14 million, but not before racking up over $2 million in defense expenses.
Here's the bottom line. The average cost of an ERISA case tops $1.2 million. What's more, government regulators are always watching for irregularities. In fact, in the 2019 fiscal year, the US Department of Labor recovered over $2.5 billion in direct payment to plans, participants, and beneficiaries.
With risks like these and those not yet discovered, you need an insurance company who can help protect and prepare you for what may come your way. That's why fiduciary liability coverage isn't a maybe but a must have. Talk to your independent agent to make sure you have the right coverage in place to help protect your business.
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Travelers Casualty and Surety Company of America and its property casualty affiliates. One Tower Square, Hartford, CT 06183 This material does not amend, otherwise affect, the provisions of any insurance policy issued by Travelers. It is not a representation that coverage does or does not exist for any particular claim or loss under any such policy. Coverage depends on the facts and circumstances involved in the claim or loss, all applicable policy provisions, and any applicable law.
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