Community Webinar
Fiduciary Liability and EBLWhat You Need To Know
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Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions;
and state jurisdiction. The instructional materials provided by The Insurance Community Center and its authors is intended as
a general guideline and any interpretations provided by The Community do not modify or revise insurance policy language. Information which is copyrighted and proprietary to Insurance
Services Office, Inc. (“ISO Material”) is included in this publication. Use of the ISO Material is limited to ISO
Participating Insurers and their Authorized Representatives. The Insurance Community Center assumes neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of
the instructional materials provided. Insight Insurance Consulting
[email protected]@insuranceacommunitycenter.com www.insuranceacommunitycenter.com
Copyright 2011©
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In addition the community has unique business networking opportunities.
Enjoy the Weekly Newsletter on a specific topic with a tip of the week; claim; quiz flash and articles
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Marjorie L. Segale, AFIS, CISC, RPLU, CIC, CRIS, ACSR, CISR
Insurance Community Center, LLCDirector of Education6
They are not the same
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EBL coverageFiduciary Liability coverageERISA requirements
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Welfare benefit plan includes Medical plans Disability benefit plans Vacation plans
Pension benefit plan is any plan that Provides retirement income to employee Defers income to periods beyond
termination
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Frequent loss Denial of benefits Improper reimbursement Miscalculation of benefits Surviving spouse did not receive proper
benefits
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Severe loss Plan fiduciaries imprudently offered
employer stock and/or misrepresented risk of investment
Excessive plan fees Promised benefits were cut Change in post-retirement medical benefits Premiums charged for insurance were excess Fiduciaries failed to scrutinize cost vs.
benefit ratio properly
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This is ISO’s language - most insurers’ forms follow similar language
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1. Insuring Agreementa. We will pay those sums that the insured becomes legally obligated to pay as damages because of any act, error or omission, of the insured, or of any other person for whose acts the insured is legally liable, to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages.
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b.This insurance applies to damages only if:(1)The act, error or omission, is negligently committed in the "administration" of your "employee benefit program";
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The amount paid shall not exceed, and will be subject to, the limits and restrictions that apply to the payment of benefits in any plan included in the "employee benefit program".
This is a critical restriction and can leave a gap between the financial loss to the employee and the coverage amount
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Broad definition of insuredBroad definition of employees Broad definition of “administration”Broad definition of “employee
benefit plan” Group life and medical expense plans, as
well as pension and retirement plans, are within the scope of the law
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“Insured” is variously defined as a trust or employee benefit plan, any trustee, officer or employee of the trust or employee benefit plan
The employer (company)Any other individual or organization
designated as a fiduciary
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Definition of employees include Full-time Part-time Temporary Leased Volunteers / Interns Contract employees
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AdvisingCounselingGiving notice to employeesProviding plan interpretationsHandling recordsEffecting enrollmentTerminating or canceling employees,
participants, or beneficiaries under any plan
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Any benefit plan, whether or not subject to ERISA sponsored for the sole benefit of the “employees”
Fringe benefits and excess benefit plans
New or proposed plans – automatic coverage
All plans – US or foreign
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To include written demand for monetary or non-monetary or injunctive relief
A criminal proceedingA formal administrative or regulatory
proceedingsA fact-finding investigation by the
DOL, USPBGC, or any similar authority located outside the US
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Duty to defend In addition to limit Some policies include within the limit
Twelve-month or longer discovery period The cost for an ERP should be shown in
the policy The discovery clause should be bilateral
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Specific language extending coverage to managed care liability claims
Specific language extending coverage to HIPAA claims, fines and penalties and COBRA claims
Punitive damages and exemplary damages where permitted by law
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Automatic coverage for voluntary settlement Often a sub-limit
Pollution coverage extension Waiver of recourse provisions (no
provision for recourse by insurer against fiduciary)
Non-cancelable except for non-payment of premium
90 Days notice of non-renewal43
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Damages and defense costs
arising out of a “wrongful act”
Employee Benefit Liability
Covers
Fiduciary Liability Covers
A mistake, error or omission in
handling of administrative
matters
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The Federal Code refers to the necessity of a fidelity bond to cover the employee plan assets against fraud or theft
An ERISA Bond may be provided separately or the plan may be listed as a Named Insured on the Employee Dishonesty Insurance Policy
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Federal law requires the plan sponsor to carry employee dishonesty coverage that extends to protect the plan assets from any person handling the plan assets. A TPA providing employee dishonesty
coverage for their employees should be viewed as a contractual obligation and not fulfillment of the above obligations
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$1,000 minimum limit per plan10% of plan assets up to$500,000 coverage
$1,000,000 coverage if the plan contains the plan sponsor’s stock
No deductibleOne year discovery period for loss
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ERISA requires the fidelity coverage to be purchased and reported
ERISA does NOT require the purchase of Fiduciary Liability insurance, but the law allows the purchase of this coverage
Fiduciary Liability can include the EBL administrative coverage
EBL will NEVER include the Fiduciary Liability coverage
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This area is developing law around the country in both state and federal courts
Help your client understand that their risk is great and growing
ALWAYS offer Fiduciary Liability IN WRITING Get a rejection signed
Give them insurance guidance but don’t step over the line into the area of law
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Laurie Infantino [email protected] 714 803 5830
Marjorie Segale [email protected]
m 714 206 9583
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