Business Insurance
Protect Your Employee Benefits Plan Fiduciaries
Fiduciary liability insurance covers the people who manage your employee benefit plans when an ERISA breach-of-duty claim puts them on the hook.
Fiduciary liability insurance pays defense costs and settlements when someone responsible for managing an employee benefit plan is accused of breaching their fiduciary duty under ERISA. ERISA, the Employee Retirement Income Security Act of 1974, holds plan fiduciaries to a strict legal standard: act in participants' best interests, or face personal financial liability. That exposure is real even when a mistake is unintentional. A plan investment that underperforms, an administrative error in processing a distribution, a failure to diversify plan assets, these situations can all generate claims. Standard general liability policies do not cover ERISA-related claims, so this coverage fills a gap most businesses don't realize they have.
What this coverage includes
Defense costs for ERISA breach-of-duty claims
When a plan participant, the Department of Labor, or a co-fiduciary files a claim alleging a breach of fiduciary duty, defending that claim is expensive before a single dollar of liability is determined. Fiduciary liability coverage pays attorney fees, court costs, and expert witness fees through the litigation process. Many policies also give you access to counsel who specialize in ERISA disputes, which matters because this area of law is narrow and technical.
Liability for financial losses to the plan
Under ERISA, a fiduciary found liable may be required to personally restore losses to the plan, not just pay a fine. If an investment decision, a late contribution remittance, or a flawed enrollment process results in measurable harm to participant accounts, the fiduciary can be on the hook for the full amount. This coverage steps in to pay those restoration amounts up to the policy limit, keeping a judgment from becoming a personal financial catastrophe for the individuals named.
Coverage for a broad class of fiduciaries
A fiduciary is anyone with discretionary control over a benefit plan or its assets. That includes corporate officers, HR administrators, benefits committee members, outside investment managers, third-party administrators, and plan trustees. Because ERISA casts a wide net, fiduciary liability coverage is typically written to follow those individuals, not just the company entity, so the people actually making decisions have protection in their own names.
Plans covered beyond retirement accounts
ERISA governs more than 401(k) and pension plans. Health and welfare plans, group life insurance, disability plans, and flexible spending accounts can all fall under ERISA's requirements and create fiduciary exposure. A well-structured fiduciary liability policy covers claims arising from the administration of the full range of benefit plans your organization sponsors, not just the retirement assets.
Pairs well with
Directors and Officers (D&O) Liability Insurance
D&O coverage protects corporate officers and board members from claims tied to their management decisions. Fiduciary liability and D&O are often purchased together because the same executives can face claims under both their corporate and plan-management roles.
Learn more ›Employment Practices Liability Insurance (EPLI)
EPLI covers claims from employees related to how they are treated in the workplace. Benefits-related disputes, such as wrongful denial of a benefit or failure to notify an employee of plan rights, can blur the line between EPLI and fiduciary liability exposure.
Learn more ›Commercial Crime Insurance
ERISA requires many plan fiduciaries to carry a fidelity bond covering theft of plan assets. Commercial crime coverage can satisfy that bonding requirement and extend protection to other employee-dishonesty scenarios that could trigger plan losses.
Learn more ›Business Owners Policy (BOP)
A BOP bundles general liability and commercial property coverage for small to mid-size businesses. It does not cover ERISA claims, which is precisely why fiduciary liability sits outside it as a separate policy.
Learn more ›What this coverage protects against
Common risks and how this coverage addresses them. Tap any scenario to expand.
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A poorly timed fund change wipes out participant gains.
The risk
A benefits committee at a Meridian manufacturing company decides to replace an underperforming target-date fund with a new option. The transition is poorly timed, and participants lose a meaningful percentage of their balances during the switch. Several employees file an ERISA claim alleging the committee acted imprudently.
How this coverage helps
Fiduciary liability coverage pays the legal team that defends the committee members and, if the claim results in a judgment requiring plan restoration, covers that payout up to the policy limit. The individual committee members are not left funding the defense from personal savings.
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Employer contributions arrive at the plan a week late.
The risk
A payroll processing error at a small Eagle-based construction company causes employee 401(k) contributions to be remitted to the plan seven days late over three consecutive pay periods. A participant calculates the lost investment earnings and files a complaint with the Department of Labor.
How this coverage helps
The fiduciary liability policy covers the cost of responding to the DOL inquiry, any required correction under a voluntary compliance program, and legal counsel fees. The company's owners, who serve as plan trustees, avoid absorbing those costs out of pocket.
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A terminating employee says no one told him about COBRA.
The risk
A former employee of a San Antonio-area services firm claims he was never provided timely COBRA election notice after his termination. He incurred significant medical expenses assuming he still had coverage. He sues the company's HR director personally as the plan administrator.
How this coverage helps
The HR director is a named fiduciary under the plan, so the fiduciary liability policy responds. It funds the legal defense and, if the court finds the notice failure caused compensable harm, covers the damages up to the policy limit.
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An outside investment advisor makes a concentrated bet that collapses.
The risk
A third-party investment manager hired to oversee a company pension concentrates a significant share of assets in a single sector. When that sector corrects sharply, plan participants lose a substantial portion of their retirement savings and file an ERISA claim against both the manager and the corporate plan sponsor.
How this coverage helps
Because the fiduciary liability policy covers outside fiduciaries who have discretionary authority over plan assets, both the investment manager and the corporate trustees have defense coverage. The policy also covers indemnification obligations the company owes to the outside manager under their service agreement.
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An employee misses open enrollment because of a system error.
The risk
A benefits platform glitch prevents a warehouse employee from completing her health plan enrollment during the annual window. She discovers the error after the deadline and cannot get retroactive coverage. She files a claim alleging the plan administrator failed to provide a reasonable enrollment process.
How this coverage helps
The fiduciary liability policy covers the administrative cost of responding to the claim and any required remediation. If a court orders the company to make the employee whole for medical expenses she paid while uninsured, the policy covers that exposure.
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A co-fiduciary points the finger after a shared decision goes wrong.
The risk
Two trustees of a nonprofit's retirement plan disagree after the fact about who approved a particular fund selection. One trustee files a cross-claim against the other, alleging sole responsibility for the decision. The named trustee now faces both the participant claims and the internal dispute.
How this coverage helps
Fiduciary liability policies cover co-fiduciary claims in addition to participant and regulatory claims. The trustee named in the cross-claim has independent defense coverage, and both sides of the internal dispute can be handled without the organization's general operating budget being depleted.