Fiduciary liability insurance is a type of insurance designed to protect individuals, companies, and organizations from claims related to breaches of fiduciary duty.
What is fiduciary duty?
Fiduciary duty refers to the responsibility that an individual or organization has to act in the best interest of another party. This can include duties such as providing advice, making decisions, or managing assets on behalf of someone else.
Common examples of individuals or organizations with fiduciary duty include trustees, financial advisors, and retirement plan administrators.
What are some common types of fiduciary duty?
There are several common types of fiduciary duty, including:
Type of fiduciary duty |
Description |
Duty of loyalty |
The duty to act solely in the best interest of the other party and avoid any conflicts of interest |
Duty of care |
The duty to act with reasonable care, skill, and diligence in making decisions and providing advice |
Duty of confidentiality |
The duty to keep any confidential information about the other party confidential |
What does fiduciary liability insurance cover?
Fiduciary liability insurance typically covers claims related to breaches of fiduciary duty. This can include claims related to mismanagement of assets, failure to follow plan documents or fiduciary standards, or breaches of fiduciary duty by members of a board of directors or investment committee.
Fiduciary liability insurance can also provide coverage for legal defense costs, settlements, and judgments related to such claims.
What are some common exclusions from fiduciary liability insurance?
While specific exclusions can vary depending on the policy, common exclusions from fiduciary liability insurance can include claims related to criminal acts, intentional wrongdoing, or breaches of contract.
Do I need fiduciary liability insurance?
If you or your organization has fiduciary duty to others, it may be wise to consider purchasing fiduciary liability insurance. This can help protect against potential claims and legal expenses related to breaches of fiduciary duty.
Examples of individuals or organizations that may benefit from fiduciary liability insurance include:
- Trustees
- Retirement plan administrators
- Financial advisors
- Non-profit organizations
- Board members and executives
How much does fiduciary liability insurance typically cost?
The cost of fiduciary liability insurance can vary depending on several factors, including the size of the organization, the level of fiduciary duty involved, and the amount and type of coverage desired.
In general, however, the cost of fiduciary liability insurance is typically relatively low compared to the potential legal expenses and damages that could result from a breach of fiduciary duty.
In conclusion
Fiduciary liability insurance can provide important protection for individuals and organizations with fiduciary duty. By understanding the types of claims covered, potential exclusions, and the benefits of coverage, it is possible to make an informed decision about whether this type of insurance is right for you.
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