The Ullico Casualty Group Inc., a division of Ullico Inc., is the risk solutions provider for labor and offers Professional Liability insurance to protect multiemployer and public benefit funds, unions and joint apprenticeship training committees (JATCs).
We asked vice president of operations Craig Arneson to tell us about the differences between employee benefits liability and fiduciary liability.
Employee Benefits Liability Coverage (EBL) essentially protects against allegations that the end service goal of your plan has not been delivered correctly. Whether a Health & Welfare plan, or a Pension Plan (or other type of employee benefit) an EBL policy will provide defense and liability coverage if those covered by the policy do not properly administer and/or deliver the stated benefits.
Fiduciary Liability insurance provides broader protections for trustees and other fiduciaries, who, under the Employee Retirement Income Security Act of 1974 (ERISA), are personally liable for losses caused to benefit plans and their participants arising out of a breach of the fiduciary duties imposed by ERISA. In the forty years that have elapsed since its passage, the ERISA statute has been broadly applied to the conduct of trustees and other fiduciaries, and their potential liabilities extend not just to failures to properly manage the investments and assets of a benefit fund, but also to such failures as deficiencies in the design of benefit plans, inferior administration and delivery of benefits, and failure to maintain the tax-qualified status of a plan. As ERISA liabilities have expanded, so have the coverages under Fiduciary Liability policies, which more fully protect plan fiduciaries than an EBL policy.
The primary difference between the two policies is their scope of coverage. In the end, an EBL policy will only provide part of the coverage needed by fiduciaries and trustees. It will provide coverage for the delivery, enrollment and administration of the benefits. It will not provide any coverage for the design, administration and maintenance of the fund, not to mention possible breach of duty exposure to manage the trust or plan on behalf of the members.
For example, if a trustee is sued because a beneficiary was not enrolled in a medical program, both the EBL and a current marketplace Fiduciary may respond. However if a trustee is sued because the funds and liquidity of the trust itself were not maintained properly, only the Fiduciary is likely to respond.
Obviously, consult with your professional insurance advisor or agent, but more often than not you will find that a fiduciary policy will provide coverage for a broader range of exposures faced, inclusive of what an EBL policy would afford.
Though a governmental plan, depending on the jurisdiction, is not ultimately governed by ERISA, fiduciaries and trustees are still accountable and duty bound by whatever code or legislation that allowed for the creation of their trust or plan. Often the duties they must meet are spelled out by those same laws and include many more responsibilities than simply the providing, and proper administration of, the "end-use" benefits themselves. Often they can have responsibility for investing, money management, plan design, and financial reporting to their governmental sponsor. These are the kind of duties that would not be covered by the "typical" EBL policy provided in the marketplace.
Again, consult with your professional insurance advisors, but compare the coverage provided by an EBL policy you have, or are contemplating, versus what many of the Governmental Fiduciary Liability policies in the marketplace provide.
If you are seeking protection against the exposures faced as the result of being a fiduciary or trustee of a governmental plan, a fiduciary policy will generally provide better and more thorough coverage.
Craig Arneson is an experienced insurance operations professional with a background in professional liability underwriting. Since joining Ullico in 2006, he has been responsible for adapting underwriting guidelines and systems to changing regulatory environments and claim trends to meet the needs of Ullico's affinity market.