Fiduciary Liability Insurance. Fiduciary Liability coverage insures those who sponsor,
manage, and administer employee benefit plans. Any company that establishes a pension plan,
401(k) plan, profit-sharing plan, employee stock ownership plan, or other type of employee
benefit plan (e.g., health, dental, disability, etc.) can be sued for alleged violations
of the Employee Retirement Income Security Act of 1974 (ERISA) and other laws.
A business and its management can be held liable for plan losses resulting from breaches of
fiduciary duties, negligence, errors and omissions. Additionally, fines, penalties, legal
fees, and other legal expenses can place a hefty financial burden on companies and individual
fiduciaries that are uninsured or underinsured.
Fiduciary Liability Insurance covers losses due to alleged breaches of duties and other wrongful
acts occurring in the insured's capacity as a "fiduciary" of an employee benefit plan. According
to ERISA, a "fiduciary" is defined as any person or entity that exercises any discretionary
authority or control over the management or administration of an employee benefit plan or
its assets. ERISA requires that fiduciaries uphold certain standards, including:
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Serving in the interest of plan participants and beneficiaries (duty of loyalty)
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Acting in a prudent manner (duty to care)
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Diversifying investments to minimize losses (duty of diversification)
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Acting in accordance with plan documents and in compliance with ERISA (duty of non-deviation)
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