Fiduciary Liability Insurance | Know What Coverage You Need As A Fiduciary
Fiduciary Liability insurance responds to claims made against employers, employee benefit plans, board members and employees for breaches of fiduciary duty with respect to employee benefit plans. Allegations may include imprudent investment of plan assets, excessive fees paid to service providers, non-compliance with plan documents, and false and misleading statements to plan participants. Under the ERISA law, anyone who uses discretion in administering or managing employee benefit plans is a fiduciary and is subject to strict standards of conduct, including a duty to act prudently and solely in the interest of plan participants and their beneficiaries. ERISA plan fiduciaries may be personally liable for any breach of their duties.
According to Travelers, 69 percent of substantive ERISA litigation cases are resolved in favor of the plaintiffs. The average settlement for ERISA suits is $994,000 and average defense costs are $365,000.*
Claim Scenarios
- $350,000 Failure to Provide Information — Two employees approaching retirement age discovered they had never enrolled in the company’s 401(k) plan. The employees sued the company and plan trustees alleging the plan administrator failed to properly advise them how to enroll and the enrollment was not automatic. The value of the alleged lost benefits exceeded $150,000 and defense expenses were in excess of $200,000.
- $25,000 Failure to Act in a Timely Manner — A former employee of an Internet services provider files a suit against the company, claiming they failed to transfer his 401(k) plan funds in a timely manner to a new plan when he resigned his employment, resulting in $25,000 in losses.
- $400,000 Failure to Divest Under Performing Option — Plan participants alleged that the fiduciaries of a 401(k) plan had failed to divest the plan of an investment option that was not keeping pace with the performance of the comparable index and resulted in poor returns. The case settled for $250,000 after $150,000 in legal fees had been spent.