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What is Fiduciary Liability Insurance?
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 large financial burden on companies and uninsured or underinsured individuals.
In fact, 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.
Why it’s smart to have Fiduciary Liability Insurance
A class of recently-retired employees sued an oil and gas company and its officers who served on the committee that administered their pension plan. They alleged that the director of employee benefits had misrepresented the benefits available to early retirees. The retirees also claimed that the defendants misplaced critical records of plan participants, which resulted in an underpayment of benefits otherwise due. The suit was dismissed, but the matter was settled during the appeal process. The company’s settlement and legal costs totaled $1.25 million.