Fiduciary

What does it cover?

Fiduciary Liability insurance provides protection against claims for financial loss by employees alleging mismanagement or negligence in the administration of your employee benefit plans. In most cases the policy will pay on behalf of the insured, the legal liability arising from claims for alleged failure to prudently act within the meaning of the Pension Reform Act of 1974. Coverage can be written on a stand-alone basis or combined with other executive liability coverage. Both the company and the individuals responsible can be held liable.

• Premiums start at $800.
• Deductibles start at $5,000.
• Limits are available to $25,000,000.
• Please click here to download the Fiduciary application.

NOTE: The claims scenarios summarized are offered only as examples. The examples are not intended to establish any standards of care or to serve as legal advice appropriate for any particular factual situations. Coverage depends on the actual facts of each case and the terms, conditions and exclusions of each individual policy.

1. A company suffers financial difficulty and as a result, defers funding of its defined benefit plan. After several years, the firm files for bankruptcy and the plan is under funded by 35%. Plan participants sue the fiduciaries, the company and the plan for breach of fiduciary duty.

Outcome - Paid $207,000 in defense expense and settled for $565,000.

2. A company offers a 401(k) plan managed by a third party. The firm offers 3 investment selections, a money market account, a mutual & fund invested in foreign stocks, and a small cap growth fund. A group of employees bring suit, claiming that the firm selected by the company did not allow adequate investment choices and there were limited opportunities to diversify into more conservative investments.

Outcome - Defense costs were $145,000 and indemnity $ 96,000.

3. Following a company’s announced restructuring, a company’s retirement savings plan participants filed suit alleging that false and misleading representations had been made to plan participants regarding the company’s finances and that there had been a failure to prudently manage the plan’s investment in company stock.

Outcome - Settlement of nearly $10 million paid under the company’s fiduciary liability insurance policy.

Optional coverage enhancements (but not limited to):

• Coverage for penalties and fines.
• Personal asset protection.
• Protection from actions of 3rd-party service providers.
• Duty to defend policy with an option for the insured to assume defense.
• No panel counsel requirement.
• Covers vicarious liability for wrongful acts.
• Punitive damages coverage — most favorable jurisdiction wording.
• Bilateral extended reporting provision.
• Broad severability.

Examples of who buys:

Any company having a sponsor organization and anyone exercising any discretionary authority or control over the management or administration of an employee benefit plan or its assets, can be sued by employees for any alleged breach of fiduciary duty.