The Definition of Fiduciary Insurance

Fiduciary liability insurance protects companies against questionable benefit investment decisions.

Fiduciary liability insurance covers individuals responsible for the planning, administration and investments of their company's employee financial benefits programs. It specifically insures against claims classified under the Employee Retirement Income Security Act of 1974 (ERISA).

ERISA Scope

Financial instruments falling under ERISA include pension plans, 401k plans, stock bonuses and employee stock ownership plans. Company medical, dental, life insurance and disability plans are also under this classification.

Need

Companies need this insurance because designated fiduciaries are personally liable for mistakes under ERISA law and can lose personal assets. Corporate assets to defend litigation against fund misappropriation may also be lost without fiduciary liability insurance. It also helps defend against lawsuits that are filed during company mergers or acquisitions.

Protection

In addition to designated fiduciaries, this type of insurance also protects the employer and the benefits plan. Plan participants, the Department of Labor or the Pension Benefit Guaranty Corp. may file claims. Covered allegations include improper advice or disclosure, inappropriate advisors on service providers, bad investments, lack of investment diversity, poorly administered plans and conflict of interest.

References

• FiduciaryInsurance.com: Frequently Asked Questions
• Axis Insurance Services: Fiduciary Liability Insurance
• Insure New Media: Fiduciary Liability Insurance Explained
• Insurecast: Fiduciary Liability Insurance

Resources

• The Complete Glossary of Insurance Coverage Explanations: Fiduciary Liability Coverage