Fiduciary Liability Coverage

Fiduciary Liability Insurance – Los Angeles, California

What Is Fiduciary Liability Insurance?

Fiduciary Liability is written to protect the plan fiduciary in the event that they breach their duties under ERISA.

What are the Duties of Fiduciaries Under ERISA?

Duty of Loyalty: The ERISA Fiduciary Duty of Loyalty is specifically enumerated at ERISA 404(a)(1), and requires that an ERISA fiduciary shall discharge his/her duties with respect to a Plan:

  • Solely in the interest of the Plan’s participants and beneficiaries; and
  • For the exclusive purpose of (a.) providing benefits to participants and beneficiaries; or (b.) defraying reasonable expenses of administering the plan.

Duty of Diversification: The ERISA Fiduciary Duty of Diversification is specifically enumerated at ERISA 404(a)(1)(C), and requires that a fiduciary with investment responsibility must diversify investments of a Plan so as to minimize losses. ERISA recognizes that there may be situations where it is prudent not to diversify.

Duty of Non-Deviation: The ERISA Fiduciary Duty of Non-Deviation is specifically enumerated at ERISA 404(a)(1)(D), and requires that an ERISA fiduciary shall discharge his/her duties with respect to a Plan in accordance with the plan documents – insofar as they are in compliance with ERISA.


What are the Sources of Fiduciary Liability Claims?

  • ERISA violations.
  • Conflict of interest in investment of plan assets.
  • Imprudent investment decisions.
  • Inappropriate loans using plan assets.
  • Improperly advising plan participants.
  • Mishandling of funds.
  • Inaccurate year-end reporting.
  • Delinquent employer contributions.

Sample Fiduciary Liability Claims

Fiduciary claim examples are for illustrative purposes only. They are to aid in the understanding of the products and services offered by E-Risk Services. These examples are not intended to provide legal advice or to be relied upon in any dispute. Every claim is unique and bound by all terms, conditions, declarations, exclusions, and endorsements specific to each Insured’s policy.

Mishandling of Funds: A particular state department of labor advises a company that it may commence a lawsuit against it for the funds that it allegedly lost from its 401(k) Plan. The company reportedly transferred the funds from a 401(k) plan managed by one company to another. This situation settled without a lawsuit being brought against the company, but the defense costs exceeded $25,000.

ERISA Violation: The plan fiduciaries for a 401(k) Plan received a letter from DOL advising them that after an extensive investigation it appears that they have violated several provisions of ERISA. The DOL alleges the plan fiduciaries: did not forward amounts withheld from employees on a timely basis; improperly allowed the plan to make loans to shareholder-employees; make delinquent employer contributions to the plan; failed to make timely distributions to terminated employees; and filed Annual 5500 Reports which falsely indicated that the plan was funded in accordance with the minimum funding requirements of ERISA. Total defense costs and settlement exceeded $250,000.

Imprudent Investment Decision: The trustees of an Employee Stock Ownership Plan (ESOP) were sued by the Department of Labor( DOL) and company employees who faulted the fiduciaries for making imprudent investment decisions. The court ultimately found the fiduciaries failed to conduct impartial reviews of investment options. The suit finally settled for $1,000,000.

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We take pride in helping our California businesses protect themselves and their families with California General Liability Insurance.

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