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Fiduciary Liability Insurance
There is a lot of confusion regarding the differences between the fidelity bond that is required by ERISA, fiduciary liability insurance, and employee benefits liability insurance. The fidelity bond only applies to dishonest acts on the part of the plan trustees. Employee Benefits Liability insurance normally only applies to claims arising out of administrative errors and is very limited. Many insured think that by having employee benefits liability coverage they do not need fiduciary liability coverage. This is definitely not true.
To protect the fiduciaries who may violate their responsibilities under ERISA, many funds have purchased Fiduciary Liability insurance. The Fiduciary Liability policies on the market all have the same basic intent: to cover claims made against an insured for any loss sustained because of a breach of fiduciary duty.
Following are examples of the types of wrongful acts that are generally covered by Fiduciary Liability Policies:
- Negligent investment practices
- Failure to diversify investments
- Failure to file required reports
- Conflicts of interest
- Errors in computing eligibility Benefits lost because of inadequate instruction to beneficiaries.
Benefits lost because of inadequate instruction to beneficiaries.
