Fiduciaries have significant responsibility to act in another’s best interest, and they may be held financially responsible if they fail to do so. Purchasing fiduciary insurance is one way that fiduciaries in Massachusetts can help protect themselves against allegations of misconduct.
Fiduciary insurance is a specialized form of liability insurance that’s designed to meet the needs of fiduciaries. In most cases, policies will help cover legal costs and settlements that arise from valid claims. Coverage normally begins when a claim is filed (rather than when a suit is settled).
Fiduciary liability insurance is often purchased by Massachusetts organizations that oversee employee benefits. In an employee benefits citation, the insurance is typically purchased in case the benefits are mismanaged by someone. Mismanaging multiple employees’ benefits can have understandably large costs. When purchased for risks related to employee benefits, the insurance may protect the employer and/or individuals who oversee the benefits.
In addition to employers who provide benefits, anyone else who has a fiduciary responsibility might want fiduciary liability insurance. Trustees, advisors and others who have legal fiduciary responsibilities should talk with an insurance agent who specializes in this type of coverage. A specialized agent will be able to review a fiduciary’s risk exposure and help evaluate whether purchasing this insurance makes sense.
Employee benefits liability insurance normally does cover a range of potential mistakes that can be made when managing employee benefits. These policies commonly exclude situations where fiduciaries provide advice, however.
If fiduciaries offer investment or retirement advice, it’s generally wise to also carry fiduciary liability coverage. Fiduciary liability policies typically do cover situations where fiduciaries are accused of making an incorrect recommendation.
A fiduciary may face a lawsuit from almost anyone, but many fiduciary lawsuits are filed by a few main groups. Employees, the Department of Labor and the Pension Benefit Guarantee Corporation are some of the more likely groups to sue a fiduciary whom they believe has acted incorrectly.
Fiduciary liability policies might cover suits by any of these groups, depending on the specifics of a policy.
Depending on their terms and condition, fiduciary liability policies might cover a wide range of mistakes and claims. These policies frequently cover issues such as:
Fiduciary liability policies’ premiums may be calculated as a flat rate or as a percentage of the assets under management. The percent-based premiums are usually reserved for policies that come with especially high limits.
However a policy’s premium is calculated, this coverage normally is quite affordable. It’s particularly affordable when the premiums are considered in light of how much a claim could cost.
When fiduciary liability coverage is needed to protect someone who oversees employee benefits, the employer who offers those benefits will frequently pay for coverage. In other situations, however, a fiduciary may purchase coverage themselves.
For help finding fiduciary insurance, contact the independent insurance agents at The Feingold Companies. Our team of agents can help you explore fiduciary liability policy options from multiple Massachusetts insurance companies, and we have the expertise necessary to help you determine which policy will best meet your fiduciary coverage needs.