Understanding Fiduciary Liability Insurance
Another Management Liability form is Fiduciary Liability. This coverage is often misunderstood and confused for Fidelity bond coverage or Employee Benefit Coverage found under many general liability policies. Fiduciary liability insurance pays the potential legal liabilities arising from claims for failing to act prudently when handling ERISA (Employment Retirement Income Security Act of 1974) based benefit plans. Under the 1974 Act, ERISA imposed substantial liabilities on the fiduciaries of ERISA plans, heightening the need for this coverage. This could mean as an example failing to properly and prudently select an investment advisor for your pension plan or 401K plan. If an employee or retiree of your New York business were to sue the trustees of your pension or benefit plan because poor investment decisions were made that created a shortfall in their accounts, Fiduciary Liability Insurance would respond to defend and ultimately settle the suit. Fiduciaries can also be held liability for the acts, errors and omissions of outside entities that provide administrative and related services to their ERISA benefit funds. This may include third party actuaries, accountants, attorneys, consultants, investment advisors, trust companies and investment management companies.
The Need for Both EBL Coverage & Fiduciary Liability Insurance
Employee Benefit Liability (EBL) insurance, mentioned above, provides protection for the trustees, administrators and entity for administrative failures in handling an ERISA based plan. It is a type of errors and omissions coverage. An example of EBL type claim is the failure to add a beneficiary to a health insurance plan who is than denied medical treatments due to lack of coverage. EBL coverage is limited in its scope and should be purchased in conjunction with Fiduciary Liability.
Both coverage forms are needed to protect the entity and its owners, managers, directors from potential liabilities stemming from their responsibilities of ERISA laws.
Mentioned earlier and worth clarifying is Fidelity coverage. If you have a pension, profit sharing, or 401k plan, you also likely have a Fidelity ERISA Bond to insure against dishonesty or theft of funds from your ERISA plan. Typically the limit of the bond is 10% of plan assets to a maximum of $500,000. This bond will protect the funds from dishonest situations but will not respond to potential liability suits that could arise from dishonest acts of trustees.
We Can Help New York Businesses with Fiduciary Liability Insurance Questions
Since 1929, The Coyle Group has been serving New York businesses in the Rockland County communities of: New City, Nanuet, Haverstraw, Pearl River, Stony Point, Suffern, West Nyack, Congers, Valley Cottage, Nyack, Orangeburg, Blauvelt, Palisades, and Chestnut Ridge; the Orange County communities of: Goshen, Pine Bush, Middletown, Newburgh, New Windsor; the Westchester County communities of: White Plains, Yonkers, New Rochelle, Bedford, Elmsford. And in New York City – Manhattan, Bronx, and Brooklyn.
For more information on Fiduciary Liability Insurance in New York, please call us at 845-634-3606 or reach out to us using the contact box above.