Fiduciary Liability

Individuals who administer employee benefit plans can be liable for a variety of reasons including the selection of plan investment options, monitoring those investments and educating employees of those options. Steps can be taken to reduce personal liability, such as hiring a competent team of experts, but ultimately the fiduciary remains responsible for the management and administration of the benefit plans.

Defending claims can be expensive and time consuming. According to a recent Fiduciary Liability Survey Report, the average cost of paid claims exceeds $1 million dollars. Defence costs made up a significant portion of overall fiduciary liability losses. When you consider the cost of defending a suit and the possibility of a settlement or judgment, you may ask yourself how can a company afford not to buy fiduciary liability insurance.

Not all fiduciary liability policies are the same, and policy comparisons can be misleading. Do your own analysis and see why Travelers Canada’s fiduciary liability insurance is an industry leader.

Key coverages and features

  • Broad definition of employee 
  • Broad definition of subsidiary 
  • Broad definition of claim
  • Broad definition of employee benefit plan 
  • Broad definition of insureds 
  • Foreign parent corporation coverage extension
  • Spousal and domestic partner liability coverage
  • Definition of loss includes multiplied damages and punitive, exemplary or multiplied damages where insurable by law, with most favourable venue wording
  • Coverage for merged, terminated and sold plans
  • Carveback to the pollution exclusion for diminution in value of securities, other than securities of the insured organization
  • Carveback to the breach of contract exclusion for an employee benefit plan 
  • No exclusions for failure to maintain insurance, libel, slander or defamation
  • Defence option to select duty to defend or reimbursement coverage at policy inception
  • Additional defence coverage 
  • Flexible limit options 
  • Automatic coverage for employee benefit plans formed or acquired during the policy period with assets that do not exceed 25 percent of the plan assets of the insured organization
  • Extended reporting period
  • Worldwide coverage 
  • Full severability of all exclusions
  • Non-cancelable by insurer except for non-payment of premium
  • 30-day notice of non-renewal 
  • Order of payments protects personal assets first
  • Only one retention must be satisfied when one claim triggers coverage under two or more liability coverages

Claims examples

$1,250,000 – A group of employees alleged that that the newly selected outside plan administrator improperly delayed transferring fund balances in the plan from one investment option to another, as directed by the participants. Subsequently, the employees sued the plan trustees to recover more than $1 million in lost investment income. Defence expenses amounted to $150,000.

$530,000 – Participants of a health plan sued the plan’s trustee alleging that the trustee did not monitor the performance of its third party administrator and paid excessive fees. Damages and defence expenses totaled $530,000.

$550,000 – Trustees of six plans were accused of improperly investing plan assets in a residential real estate development loan that defaulted. The trustees were found to have failed to evaluate the borrower’s creditworthiness and determine the economic feasibility of the project. Damages and defence costs totaled $550,000.

For more information about fiduciary insurance from Travelers Canada, call your insurance broker or find a Travelers Canada broker near you.

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Explore real claims that Canadian businesses have experienced and learn how they were protected with coverage from Travelers Canada.

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