Fiduciary Liability Insurance

We provide fiduciary liability insurance to fiduciaries of employee benefit plans established by public, private, and non-profit organizations, as well as unions and government entities.

Fiduciary liability insurance provides protection to individuals and organizations in connection with the actual or alleged breach of fiduciary duty owed to employee benefit plans and actual or alleged negligent acts, errors or omissions committed in the administration of employee benefits. ERISA, HIPAA, COBRA and other federal and state laws impose duties and responsibilities to the fiduciaries of employee benefit plans. Fiduciaries who breach any of their responsibilities, obligations, or duties can be held personally liable for any losses to the employee benefit plan and may have to restore such losses out of their own assets. Fiduciary liability insurance is designed to protect fiduciaries against such scenario.

What is the difference between fiduciary liability insurance and an ERISA bond?

Fiduciary liability insurance and ERISA bonds are two separate and distinct types of insurance which are both related to employee benefit plans.

Fiduciary liability insurance provides liability protection to fiduciaries of an employee benefit plan in case they are sued for breach of fiduciary duty or some other problem related to the administration of a plan. It does not provide coverage to the plan against theft of plan assets by employees. Even though ERISA imposes responsibilities on fiduciaries, it does not require that fiduciary liability insurance be carried.

However, ERISA does require that a fidelity bond be carried. Such fidelity bond is designed to provide protection to the assets of the employee benefit plan against fraud or dishonesty, such as theft of plan assets, committed by anyone who handles funds or other property for the plan.

Who are the fiduciaries in an organization?

According to ERISA, a person is considered a fiduciary of an employee benefit plan in any of these cases:

• The person exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets.
• The person renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so.
• The person has any discretionary authority or discretionary responsibility in the administration of such plan.

As many individuals in an organization may be involved in the administration of an employee benefit plan, some could be considered fiduciaries under ERISA without even knowing that they are.

Fiduciary liability insurance policies typically provide coverage to the individuals responsible for the administration of an employee benefit plan, the organization sponsoring the plan, and the plan itself.

What rating factors are used to set fiduciary liability insurance premiums?

Rating factors are variables that impact the calculation of a premium. Some of the common rating factors for fiduciary liability insurance include, but are no limited to, the following:

• Plan assets
• Number of employees
• Policy limit and deductible
• Type of plan
• Industry of plan sponsor
• Financial condition of plan sponsor
• Use of outside experts
• Claim history
• Plan funding level
• Location of plan sponsor

There is no single rating plan for fiduciary liability insurance and insurance companies are allowed to set their own rating algorithm.