Fiduciary Liability Insurance
Fiduciary Liability Information
Fiduciary Liability coverage (FLI) protects plan fiduciaries against claims alleging breaches of their duties to the plan, its participants and their beneficiaries, as well as claims arising out of errors and omissions in the administration of the plan. “Administration” generally refers to the giving of counsel or advice to plan participants, record keeping and the managing of plan enrollment, cancellation or termination.
While an Employee Benefits Liability endorsement to a General Liability policy does provide some protection for administration, it does not provide coverage for breach of fiduciary duty under ERISA, which is also specifically excluded under the D&O policy. It is also important to note that, like D&O and EPL, FLI also provides coverage for the costs incurred in defending such claims.
ERISA defines plan fiduciaries as those having discretionary authority or discretionary responsibility in the administration of plan assets. These can include a plan’s sponsor (the Company), its employees, plan trustees, the administrator and the directors of the sponsor to the extent they perform such functions.
ERISA sets the framework for the conduct expected of fiduciaries in carrying out their duties to the plan. It also sets prohibitions on certain transactions that could be construed as being self- dealing, a conflict of interest or are made with parties in interest to a plan.
FLI may be purchased on a stand-alone basis, or as a shared or sublimit to the D&O coverage. In many cases, private companies with ESOPs owning a significant percentage of the company’s stock will have the D&O and FLI limits tied together for common claims.
FLI is generally very affordable and can often contemplate retention amounts as low as $0 to $2,500, depending upon the number of plans, the total assets in the plan and the types of plans to be covered.
As with D&O and EPL coverage, the policy is a claims-made form and, in many cases, is written on a duty-to-defend basis, meaning that the insurance company is responsible for conducting defense of the claim with expert counsel that they retain.
Courtesy of RT Specialty