Fiduciary liability coverage, also known as management liability insurance, was formed to protect businesses against costly claims that are born out of a breach in fiduciary duty. This policy, in essence, protects employers against liabilities for managing employee benefits.
For businesses carrying management liability insurance, it’s important to look at how this kind of coverage breaks down to provide comprehensive protection and what kinds of liabilities businesses are up against.
Here’s a better look.
What is a Fiduciary?
A fiduciary is more of a who than a what. According to the Employee Retirement Income Security Act of 1974 (ERISA), a fiduciary is every single person included in an employee benefit plan document by name or title, as well as those who are able to make discretionary decisions over the management of a benefits plan. Fiduciaries usually include employers, plan administrators, directors and officers, trustees, and internal investment committees.
Fiduciaries have the responsibility of selecting advisors and investments, and to minimize expenses and follow benefits plan exactly. If anyone strays from this path, they could see claims come their way.
A Look at Employee Benefit Plans
Fiduciaries are in charge of monitoring and administering employee benefit plans. These plans fall into two categories typically, including retirement plans and welfare plans. Retirement plans usually include defined benefit pension plans, profit sharing plans, stock purchase plans, and 401K’s. Welfare plans usually include medical benefits, dental, disability, and life.
Who Benefits from Fiduciary Liability Insurance?
Fiduciary liability coverage, also known as management liability insurance, will usually only provide protection for the insured company and its employees who are engaged in fiduciary roles. Different duties and responsibilities are given to those in a company, yes, but if they are fiduciaries they could face the same kind of risks every day.
Coverage does not extend to third parties, outside advisers or those who administer benefits plans. Any outside consultants or administrators of benefits are responsible for securing their own insurance.
It’s also important to note that even if a business hires outside advisors to take on the functions of a fiduciary, this doesn’t exclude the business in question from associated liabilities.
What Kinds of Liabilities Are Covered in a Policy?
Fiduciary liability coverage, or management liability insurance, is similar to errors and omissions (E&O) insurance and often gets confused with it. Fiduciary coverage provides insurance against claims that allege errors in administering plans, giving poor advice on retirement plans, making risky investments, wrongful denial or improper change in benefits, or errors in counseling when administering health or welfare plans.
Any company that offers up benefits plans can be exposed to these risks and more. While larger companies are more likely to have more resources to hire more dedicated personnel in employee benefits, smaller companies can still invest in management liability insurance to keep their business and future protected.
About Axis Insurance
At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (877) 787-5258 to speak with one of our professionals.
