Glossary
Fiduciary liability insurance, defined
Protection for the people who manage an employer's benefit plans, a retirement plan or a health plan, against claims that they mishandled the plan: poor investment choices, excessive fees, errors in administration, or a breach of the duty owed to participants.
In practice
It is distinct from an ERISA bond, which protects the plan against theft by those who handle its money; this policy protects the sponsors and trustees from lawsuits about their judgment. Claims-made, with defense costs inside the limit. Class actions over retirement plan fees have made it a standard purchase for mid-sized employers and a small endorsement to a management liability package for smaller ones. It typically covers the company, the plan, and the individuals named as trustees or committee members. Underwriters ask about plan size, the number of participants, the use of an outside investment advisor and whether the plan has been audited.
A worked example
Suppose a company's retirement committee leaves an expensive fund in the plan lineup for years and participants sue for the extra cost. Defense runs $200,000 and the case settles for $400,000; a fiduciary policy with a $1,000,000 limit pays both, less a $10,000 retention. Hypothetical.
Applies to: Business Owners Policy (BOP)