Fiduciary Liability Insurance
Fiduciary Liability Information
Fiduciary Liability Insurance (FLI) also known as management liability insurance and is like errors and omissions (E&O) insurance, protects businesses and employers or plan fiduciaries against claims resulting from a breach in fiduciary duty. Essentially, the policy protects parties against liability for managing or administering employee benefits plans. It also 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 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 was passed in 1974 to ensure that benefit plans, whether pension plans or welfare plans, get the benefits promised by such offerings. The law does not require employers to set up these plans for workers. Rather, it polices the plans once they’re put in place to ensure they meet certain standards.
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.