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Insurance Coverage

How ERISA Separates Employee Benefits Liability From Fiduciary Liability

Your business has general liability insurance and if you offer benefits you likely have employee benefits liability coverage as well. Businesses often ask agents to compare employee benefits liability vs fiduciary liability and wonder why they might need both. One of the answers is hidden in the details of The Employee Retirement Income Security Act, ERISA.

What Does ERISA Say?

ERISA specifically calls out the fiduciary responsibilities of anyone or any entity “who exercise discretionary control or authority over plan management or plan assets…[or] responsibility for the administration of a plan.” That means that all these parties: the business itself, the HR employees helping with benefits, even financial advisors who guide investment strategy for retirement funds can all be held personally liable when mistakes are made on benefits.

What Does It Mean For Your Business?

This clause is important because your EBL coverage won’t cover claims under ERISA. If a claim is made of breach of fiduciary responsibility your business is on the hook. This is a common scenario when a claim isn’t paid correctly which can happen for any number of reasons. Your legal costs are often covered under the EBL policy, but won’t pay settlements that arise from a breach of ERISA.

Claims because of denial of coverage are on the rise and only fiduciary liability insurance coverage will assure your business is protected.