Trustees and other fiduciaries of pension and welfare benefit plans have duties to the plans and participating employees of those plans. The Employee Retirement Income Security Act of 1974 (ERISA) and similar state laws impose significant and complex responsibilities on fiduciaries. Simple errors in the administration of benefit plans can create large liabilities. Individual fiduciaries can be held personally liable for the results of their decisions.
An emerging trend in the fiduciary liability arena is the tagalong securities claim. This exposure applies to companies offering their own stock within a retirement plan. The typical D&O claim alleging accounting irregularities or failure to disclose adverse information is brought on behalf of the plan participants as securities holders. The plaintiffs argue that the company's officers and plan fiduciaries violated ERISA by inappropriately investing funds in company stock.
A Fiduciary Liability insurance policy provides coverage for defense, settlement and judgment costs associated with ERISA liability and administrative errors and omissions. The policy protects the Sponsor Organization and individual fiduciaries, trustees and administrators of pension and welfare benefit plans.
Policy limits are provided on an annual aggregate basis, normally for a one year period. Coverage is written to cover claims made against Insureds during the policy year and reported to the insurer during the time specified by the policy. In some cases, it makes sense to tie the D&O and Fiduciary programs together. Sometimes it is preferable to buy separate programs. The Executive Liability Practice can work with you to determine the most appropriate coverage and structure for your company.