We often hear the term fiduciary liability, but how many of us actually know what that is?
What is Fiduciary Liability?
To begin, we must understand what a fiduciary is. A fiduciary is someone that acts on behalf of someone else, who is bound by ethics and the law to act in the other person’s best interests. A fiduciary is committed to putting their client’s best interests ahead of their own. The word fiduciary is often applied to the responsibility held by anyone who administers employee benefit programs or retirement plans.
Fiduciary liability, therefore, references that responsibility and the legal liability that the fiduciary person assumes on behalf of a company or institution.
A Company’s Responsibility
A company can be held responsible by the law in the event that the fiduciary responsibilities of an employee or outside provider result in accusations of mismanagement or breach of duty. Managing the risk associated with this responsibility and assuming the costs of legal fees associated with claims against errors or breach of duty is the responsibility of every company.
How Can I Protect My Company?
While not required under ERISA, holding fiduciary liability insurance is one of the best ways to protect your company in the event that there is fiduciary mismanagement or fiduciary breach of duty. Contact an insurance professional if you believe your company is not covered.
