Fiduciary Liability vs. Employee Benefits Liability
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Does fiduciary liability and employee benefits liability provide the same coverage? The answer is simply ‘no’. So what is it and what’s covered? Let’s take a look:
Fiduciary Liability Insurance
This type of insurance provides protection for fiduciaries against legal liability for claims made against them for a wrongful act (defined as a breach of fiduciary duty imposed by ERISA or similar common or statutory law). It’ll respond to claims for damages arising out of improper investments, plan and employee advice, insufficient funding and failure of an insurer to perform.
Examples include failure to invest plan assets prudently or failure to select a qualified service provider for a covered plan. Some fiduciary liability policies may also provide coverage for negligent acts, as well as errors or omissions in the administration of employee benefit plans.
Employee Benefits Liability Insurance
This type of insurance provides protection for claims arising out of errors or omissions in the administration (defined as counseling employees, interpreting benefits, handling of records and enrollment, termination or cancellation of employee’s benefits…etc.) of employee benefit programs.
Examples include failure to change a beneficiary on a life insurance policy or failure to enroll an employee in the company’s medical plan. It excludes claims based upon failure of any investment to perform as represented by an insured, advice given by an insured to participate in any employee benefit plan, insufficient funding, failure of an insurer to perform, and liability imposed on a fiduciary by ERISA, in addition to other policy exclusions.
Fiduciary liability includes both the corporate entity that sponsors the covered plans, as well as the individuals who serve as fiduciaries of the plans. This is the only coverage that will provide plan trustees and decision-makers with protection against loss of their personal assets.
Employee benefits liability includes the corporate entity and their employees who are authorized to administer their employee benefits program.
How It's Set-up
Fiduciary liability is provided by a standalone policy or as part of a package combined with other management liability coverages. The limits apply in the aggregate. Coverage is on a claims made basis; a retroactive date may apply and typically there’s no deductible. Coverage can’t be included under an umbrella policy.
Employee benefits liability is provided by an endorsement to the general liability policy. The limits apply per employee and in the aggregate. Typically, coverage is on a claims made basis; a retroactive date applies and the deductible is $1,000 for each employee. Coverage can be included under an umbrella policy.
Coverages provided can differ significantly from policy to policy. Please refer to your policy forms for complete details of coverage terms, conditions and exclusions.
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