Fiduciary liability insurance is a specialized form of coverage designed to protect individuals and entities involved in the administration of employee benefit plans.
It covers legal costs and damages arising from allegations of breaches of fiduciary duties. Those duties include managing retirement plans, health benefits, and other employee welfare programs.
Unlike errors and omissions (E&O) insurance or directors and officers (D&O) insurance, which protect against a broader range of professional liabilities, fiduciary liability insurance specifically addresses the unique risks associated with the management of employee benefit plans.
Mistakes in the calculation of benefits, miscommunication of plan options, or failure to enroll eligible employees can lead to claims against fiduciaries.
Allegations that a fiduciary failed to act in the best interests of plan participants, whether due to negligence or conflicts of interest, can result in costly litigation.
Fiduciaries are responsible for managing plan assets prudently. If an investment decision leads to significant losses, they could face claims of mismanagement.
Disputes over the denial or alteration of benefits can lead to lawsuits, with fiduciaries held accountable for their decisions.
Non-compliance with the Employee Retirement Income Security Act (ERISA) regulations, whether intentional or accidental, can result in penalties and legal action.
