When your company provides benefits to employees that include the management of investments like retirement pensions and 401k accounts, profit sharing, or health plans, you incur a fiduciary duty to those employees that can leave the company exposed to potential lawsuits if those plans are managed ineffectively. One recent and high profile example is a lawsuit against many major universities for mismanaging retirement accounts by paying excessive administration fees to an outside contractor. To reduce exposure and provide for the financial settlement of any potential suits in the future, businesses need fiduciary liability coverage to protect against mishaps related to those fiduciary duties.
Boundaries To Fiduciary Liability Policies
This insurance is tied to the conduct of your company, its employees, and named agents with regard to their fiduciary duties to employees who receive various kinds of benefits. It takes care of the legal costs of navigating those cases in addition to settlement costs, up to the limits of the policy. It’s not a replacement for a dishonesty bond or other anti-embezzlement protection, instead it protects against issues like:
- Unsuitable advisors being selected
- Mistakes in eligibility for various benefits
- Negligent investment practices
- Failure to diversify investment portfolios
- Conflicts of interest
This list is not exhaustive, and a lot depends on what the policy is actually written to cover. For information about a customized fiduciary liability policy, you need to talk to an insurance agent about your company’s needs.