While business owners are focused on the growth and expansion of their organizations, they should also be concerned with the best way to protect accumulating assets. Legal claims can exhaust an organization’s reserves and reduce a burgeoning business to nothing. Fiduciary liability insurance is as useful a tool to a company’s protection as a good financial plan is to an organization’s growth.
What Makes Up Fiduciary Liability?
Employee benefit plan administrators have a legal responsibility to make prudent decisions and provide sound advice. Additionally, the expectation is that administrators will take appropriate risk in investing plan assets. An administrator could face liability for taking too much risk but also for not taking enough. The appropriateness of a risk is highly subjective, particularly in times of unpredictable market volatility. When plans lose money, disgruntled participants can make claims that an organization was remiss in the prescribed duties. Fiduciary liability insurance helps an organization to support itself against harmful allegations.
When General Liability Isn’t Enough
Under a general liability insurance policy, claims of mismanagement and breaches of fiduciary responsibility may not be covered. General liability policies do not generally cover financial injury. Additionally, there are often specific exclusions for professional services. Fiduciary liability insurance picks up where general liability leaves off, and should be integrated in every professional services firm.