Commercial Insurance Overview
Whether you're a wholesaler, manufacturer or large property manager, our flexible, scalable middle-market insurance solutions designed to protect you against the unique risks and exposures you face.
2011 Survey of Small Business Owners' Perceptions of RiskEven as the economy remains uncertain, small business owners continue to find ways to seek out growth opportunities. Find out how.
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As an industry leader, we pride ourselves in delivering excellence in every phase of our operations. Our insurance professionals work diligently to provide superior products and superior service. Listed below are a few reasons why Trustco should be your insurance broker of choice:
- Flexible & competitive products
- A dedicated team of professionals
- Customized solutions for your unique challenges
- Excellent customer service
- Cutting-edge technology
- Dedicated claims management service
- Risk management expertise
- Policy review and analysis
- Captive insurance consulting and management
- Alternative risk financing options
- ERM & E-Mod analysis, trends, forecasts and control*
To find out more about our commercial insurance select a line of coverage to the left or contact us to find out more.
Trustco's property insurance division provides customized, cost-effective business insurance solutions for owners of commercial properties within an extremely broad variety of industries. Because one size does not fit all, our flexible and responsive property insurance policies are individually designed to meet each customer's unique needs - covering their buildings, personal property and time element exposures.
Utilizing our broad range of insurance carriers, we'll work with you to design tailored insurance solutions that meet your unique business needs. Our highly experienced underwriters & brokers can provide coverage in every corner of the earth. International property exposures of domestic or foreign companies is also available. Trustco provides traditionally structured policies as well as complex alternative market approaches including:
- Primary or excess
- Blanket or loss limits
- Deductible buy backs
- Quota share
- Aggregate deductibles
- Captive & risk retention group fronting
- Reinsurance assumed
Coverage, products, & capabilities
Not every insurer offers a tremendous variety of property insurance program options. Trustco's brokers find the right partner to meet your needs, including ground up, primary, layered, excess, quota share, reinsurance and non-admitted. We have significant capacity to write large accounts.
- Electronic Data Processing
- Spoilage & Contamination
- Claim and engineering services
- Loss pick analysis
- Larger properties, including highly protected risks
- Risk control & engineering
- Worldwide coverage
Making sure you have the right type of business insurance coverage is crucial to protecting your assets. Trustco's team can help you understand what "All-Risks" means and why it's important, the difference between Actual Cash Value & Replacement Cost Valuation, and why it's important to insure your inventory at Selling Price Valuation.
Sample of classes of business written
Our extensive relationships allow us to provide an insurance market for virtually any risk. Examples of our book of business include:
- Commercial and Residential Real Estate
- Hotels and motels
- Industrial parks
- Builders' risk
- Amusement parks
- Colleges & universities
- Hospitals and Nursing Homes
- Contractors equipment
- Schools and Universities
- Food processing
- Plastic & metal workers
- Plastics Manufacturing
- Soft drink bottlers
- Steel workers & Metalworkers
- Communications and Broadcasting
- Equipment Manufacturing
- Museums, Cultural Institutions & Theaters
- Textile and Apparel Manufacturing
- Public entities
Additional coverages available with with property insurance:
- Boiler & machinery: Losses due to explosion, mechanical breakdown, electrical arcing, etc.
- Inland and ocean marine: Coverage for equipment, stock & inventory at unscheduled locations and in transit.
- Crime: Theft, embezzlement, forgery, computer fraud, etc. to your property or property in your control.
- Global/International:Extend your coverage to anywhere in the world.
Commercial General Liability products primarily provides protection for bodily injury and property damage. It also extends coverage for advertising injury and personal injury to a third party for which a company is liable. In addition some policies can extend coverage for Pollution, Product Recall and Clinical Trials to name a few.
General liability insurance addresses a wide range of liability loss exposures, falling into two categories:
- Premises and operations liability — liability for conditions or activities arising out of the premises or operations of a company
- Products and completed operations liability — liability of a company to a user who is harmed by products manufactured, sold or distributed by the company
- Worldwide coverage
- Coverage for Vendors of products
- Lessors of equipment and premises as insureds
- Personal injury includes discrimination, harassment and segregation (employment-related practices covered separately here)
- Bodily injury may include humiliation, mental anguish, mental injury and shock resulting from physical injury
- Medical expenses, including injury to insured's tenants and persons working on insured's behalf
- Pollution (site, transportation, contractors)
- Clinical Trials
- Product Recall & Withdrawal
- Professional Liability
A general liability insurance program can include a blend of traditional commercial insurance along with alternative risk financing (including dividend, captive & others). Furthermore, the general liability policy form can be purchased on an occurrence basis or a claim-made basis.
A manufacturer of power meat slicers is sued alleging that the safety guard on the slicer failed to perform, resulting in partial amputation of a right thumb and finger. The manufacturer is found liable. General Liability would respond to the $250,000 loss.
A tenant in a condominium complex falls down an improperly lit interior stairwell and suffers significant injuries. The real estate owner is sued for negligence and found liable. General Liability would respond to the $125,000 loss.
A retailer of nutritional products sells private health information about individuals obtained from its franchises. Those individuals bring a class action suit against the retailer seeking damages for their injuries resulting from the disclosure of this information. General Liability would respond to the $600,000 in damages plus significant defense expenses.
To find out how Trustco can reduce your total liability costs for your business please contact us.
- Bodily Injury and Property Damage Liability: Coverage if you or one of your employees are held liable for someone's injury or property damage.
- Physical Damage (Collision): Covers the damage caused by another vehicle or a stationary object, like a building, telephone pole, or guardrail.
- Physical Damage (Comprehensive): Covers damages caused by a variety of risks, including fire, lightning, theft, vandalism, hail and flood.
- Hired Auto Physical Damage: Provides up to $100,000 damage for vehicles your business hires or borrows. No need to purchase the rental company's damage waiver!
- Hired Auto and Non-Owned Auto: Coverage for bodily injury or property damage that occurs during the use of hired or non-owned vehicles used for your business.
- Uninsured/Under insured Motorist: Coverage that protects you if you are injured in an accident caused by the operation of an uninsured auto or by a hit-and-run motorist. It also provides necessary payments to cover your loss should the other driver not have enough insurance.
- Medical Payments for You or Your Passengers: Pays your medical expenses (if they're not covered by workers' compensation) as well as those of your passengers.
- Lease & Loan Gap Coverage: Due to the steep depreciation in vehicle value, particularly in the first year of ownership, many insureds owe more on a total loss to their lease or lien holder than the actual cash value of the vehicle. These coverages ensure that gap is paid on behalf of the policyholder and we make sure they're provided at no additional charge (where available).
Management & Services
"How am I driving" Programs
Trustco provides clients with access to consumer driven feedback of how drivers are performing. Due to our relationships we can provide this at discounted pricing. Additionally, because we help administer and can (at your permission) gain access to reporting, we are able to negotiate superior rates with this data.
Reduced Risk + Reduced Claims = Reduced Costs!
GPS Tracking & Metrics
For our commercial insureds we provide a service that combines the technology of telematics with specifically designed Loss Control services. Telematics allows for real-time identification of driving risk, including potential notifications of when employees speed, go outside of territory, etc. In conjunction with Loss Control services, we can assist your business to effectively evaluate and mitigate those risks.
For many of our clients, we have been able to negotiate additional discounts of up to 15% on their auto insurance premium or see a reduction in loss costs within the self-retained portion of your auto insurance program.
To find out how we can reduce your total auto insurance cost for your business please contact us.
Design a Workers Compensation program that fits your needs!
For many employers, Workers Compensation Insurance is a significant portion of their total Commercial Insurance cost. There are many factors that comprise your workers compensation rates. Helping clients understand how they can control those factors and convert them into savings is what Trustco does everyday.
Experience Modifier (E-Mod)
Your experience modifier is calculated by NCCI (National Council on Compensation Insurance) which analyzes your claims and premiums versus your industry peers. It applies to your total premiums so controlling this can control your insurance costs. Facts about E-mods:
- E-mods are mandatory* & calculated by NCCI, not by insurance carriers.
- E-mods are re-rated once a year, usually at policy renewal time.
- Employers retain their e-mod even if they change insurance carriers.
- E-mods are transferred to new owners if the business is sold
Claims Review and Classification Audit
As Mitt Romney noted on his trip to London, there were “disconcerting” signs that London may not be ready for the Olympic Games. Problems including security services, immigration, etc. were all facing the games close to the start. At Trustco … Continue reading
- Review of claims trends for safety training & prevention
- Assist in closing open claims and reducing reserves
- Review employee rate classification
- Develop loss control programs to address frequency/severity trends
Service & Programs
Trustco helps clients determine their optimal workers compensation program design within their overall Commercial Insurance package. Trustco provides an analysis of current claim trends in conjunction with projected payrolls & premiums to determine your optimal program. Potential program options include:
E-Mods & ProfitsExperience Modifier's affect on the bottom line.
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- Guaranteed Costs (fully insured)
- Self-insured retention
- Retrospective Rating
- Captives (Group, rental & single-parent)
- Dividend program
We are highly experienced in the area of Workers Compensation coverage and can help you with coverage and compliance issues in all states. To find out how we can reduce your total cost of risk for your workers compensation contact us.
Trustco delivers custom Risk Management, insurance and consulting services to even the most complex cases.
Three steps of risk management
Identify potential risks and response (transfer, reduce, avoid or accept).
Ongoing monitoring of risks to follow changes, improvements & trends.
Implement cost-effective solutions to mitigate your risks.
Outsource & customize your risk management program to your needs.
Trustco's Risk Management Department handles insurance and risk management programs for clients with either complex risk exposures or a desire to more closely control their risks. Requiring more experience than traditional insurance, our risk managers have an average experience of more than 25 years. We'll help you with identifying, monitoring, and mitigating your risks; both existing and those yet to come.
Specific areas of risk management expertise include:
- Statistical analysis, including loss picks (used to determine appropriate deductible/retention level)
- Claims analysis, e-mod analysis, loss trends, benchmarks, and forecasts
- Analysis and review of TPAs & insurance companie
- Claim services, including reserve analysis & disputes, e-mod review, and ERM-6s for self-insureds
- Rating classification audit & negotiations (workers compensation & liability)
- Captive management/consulting services
- Alternative risk financing analysis
- Contract and policy review
- Special consulting projects
Who needs E&O?
The cost to defend any claims, even the most frivolous, can be financially devastating for professionals without commercial insurance. You can protect yourself against such scenarios with Professional Liability. It can be designed to protect a wide range of professionals & consultants including:
- Technology companies, service providers, designers, resellers, on-line services & websites, social media, etc.
- Skilled Nursing Facilities, Assisted &/or Independent Living Facilities, etc.
- Physicians, Surgeons, Radiologists, ENT and other specialists.
- Charities, Entertainment & Media, Manufacturers & Wholesalers, e-tailers, etc.
- Ad agencies, Telemarketing, Writers, Designers & Copywriters, Press & PR consultants and other content providers
- Allied Medical:Acupuncturist, audiologist, lab techs, cosmetologists, counsellors, dietician, Homeopath, Massage Therapist, Opticians, Phlebotomist, etc.
- Staffing & PEO, HR Consultants, Recruiters, Translators, etc.
- Architects, Engineers, Surveyors, Feasibility Analysts, Interior Designers, etc.
I already have General Liability.
While many companies have General Liability in their commercial insurance package, most do not realize it has a number of restrictions that may not cover your actual product & service General Liability policies common limitations include:
- Policy is triggered by claims of bodily injury or property damage; not financial loss.
- To constitute property damage, there must be physical damage to tangible property. Data, lost opportunity, and many more are not considered tangible.
- GL Policies maintain a Professional E&O Services exclusion to insure they don't cover these claims.
Professional Liability fills the gap.
By comparison Professional Liability policies provide coverage for:
- Covers negligent acts, errors or omissions in the performance of professional services for others.
- Responds to third party claims – provides coverage if an Insured causes a financial loss to a client or customer caused by the Insured's products, services or business activities.
- Most policies pay on behalf of the Insured compensatory damages (actual damages, imposed by law) and consequential damages that are a result of a wrongful act, error or omission in the Insured's products or services.
- Consequential damages are those damages that are caused by an injury, but do not necessarily result directly from that injury. *
Defending the innocent.
For many commercial clients they feel they will never be found liable nor negligent of damages. Nevertheless, an unreasonable client won't hesitate to bring a lawsuit, even when an insured is not actually negligent. Defense costs, even in frivolous cases, can be costly in not only dollars but lost work time. A commercial insurance package that includes Professional Liability will help to protect the insured from these losses.
Contact us for additional details on both coverages and claims pertaining to your industry.
Directors & Officers
While D&O policies vary greatly, there are a few standard features you will find in all Directors and Officers liability policies. Each insurance company has their own unique policy, and with each policy there are numerous individualized endorsements & exclusions. For a complete understanding check your policy or contact your broker. However, each standard policy will have
three insuring agreements:
Directors and Officers Liability
Securities Claims or EPL
(Private Company) Employment Practices coverage for most private company policies.
See Employment Practices section below.
Why do I need D&O?
- Insurance coverage to protect the assets of your company/organization and the personal assets of the directors, officers, executives and owners.
- Corporate entities are named as defendants in 80 to 90 percent of lawsuits brought against its directors and officers. D&O can help protect the balance sheet of your company from both frivolous and legitimate lawsuits.
- Attract and retain more qualified directors and officers with D&O coverage. It protects them while making decisions on behalf of the company/organization.
- Lawsuits can come from any number of origins: shareholders, vendors, customers, creditors, regulators and the list goes on and on…
- Defense of a claim alleging conflicts of interest, misrepresentation, breach of duty or unfair business practices (just to name a few) can be financially debilitating…not to mention any settlements and/or judgments that may follow.
Whether you're searching for initial funding of your company, negotiating a buy-out, or are an established public company D&O insurance can be valuable policy in your commercial insurance package. Our D&O specialists can perform a review & benchmark on your existing coverage and let you know where some valuable improvement may exist. Consider it a "risk management" audit that may protect not just your business but your family's future.
Even an organization with good human resources policies and procedures in place can be sued. Even if you're innocent of any wrongdoing the cost of defending a claim can be enormous. Legal fees associated with winning an employment lawsuit often exceed $250,000. After you've spent that much on legal fees, it's hard to feel like you've won anything at all! In addition, the average national jury-award for employment practice liability cases was $326,000 in 2008, up 60 percent from 2007.** Some of our insurer's claims have included:
Whether you have 10 or 10,000 employees an employment lawsuit can be debilitating. From legal costs and depositions to attending Right to Sue hearings any lawsuit can take a lot out of your company; both directly and indirectly. Our Employment Practices Liability specialists can perform a review & benchmark on your existing coverage and let you know where some valuable improvement may exist. Contact us for additional details.
*** Coverage in this example is extended only if certain optional policy provisions are selected and may not be available in every instance
Surety Bond Overview
Surety bonding is broken into three distinct classes; Contract, Commercial and Fidelity & Court Bonds. While some overlap applies, the most commonly required bonds include:
- Bid, performance and payment
- Construction materials supply
- Court bonds – judicial, fiduciary and probate
- Depository bonds
- ERISA fidelity
- Licenses and permits
- Lost instrument
- Maintenance bonds
- Public officials
- Release of lien
- Tax Bonds
Expand your business' footprint
Our surety experts have successfully negotiated deals for clients to extend their product offerings from regional to world-wide. Managing the waters of international surety is a very difficult process involving numerous local, national and international regulations. As a result clients are able to expand their business both in volume and geographic scope with Trustco's help.
To find out how Trustco can help expand your business offering, please contact us.
- General liability
- Automobile DIC/Excess liability
- Employers liability
- Accidental death and dismemberment
- Excess auto liability
- Ocean cargo & Stock Throughput
- Kidnap and ransom
- Foreign Voluntary Workers Compensation
StructureDepending on your presence and footprint internationally there are numerous approaches; each with their own benefits.
- International coverage extensions: Extends current coverage overseas. Basic international operations.
- Global Companion: Ongoing operations overseas, but limited in comparison to domestic exposure.
- Controlled Master Program: Ideal for corporations with numerous operations overseas.
Trade Credit or Accounts Receivable Insurance can guarantee between 80% up to 100% of your invoice amount is paid. Payment can be guaranteed due to insolvency, protracted default (disputed payments) or political risk & currency devaluation. For most policies, claims are paid within 60 days of filing and notification of claim.
Strategic MarketingYou're Approved!
We've all been there, you're offering the client the best deal, it meets all their needs, but you can't get credit terms negotiated! At Trustco, we like to provide the tools to transform this obstacle into an advantage. With Trustco's Trade Credit Insurance you can send your sales force out to prospects & clients with payment terms pre-approved! No longer worry about structuring trade and focus on what makes you unique!
If you are already offering credit terms to a large block of clients Trustco can help you extend your offering and simplify the approval process. For many of Trustco's business insurance clients we provide a blanket limit that applies to all purchasers under $50,000. This means anyone with outstanding invoices of less than $50,000 can automatically be approved for trade terms! For some clients this means an immediate growth of 30% due to payment terms, for others it means reducing the number of people on the credit approval team.
Trade credit policies can be structured in a number of forms:
- Small business export
- Lender's & Financial Institutions (insuring client's receivables
- Bank Letter of Credit
Regardless of your needs we can find a credit policy that fits your needs.
Many clients are surprised at how relatively inexpensive trade credit insurance can be. For most clients (utilizing multi-buyer policies) rates are 0.25% - 0.50% of invoices. Rates dependent on your company's credit history, geographic scope, products & services sold and volume of sales.
Due to the low cost of insurance many clients opt to procure insurance and charge clients an APR of 3-5% which easily covers the difference along with providing profits; all with virtually no risk on your end!
In addition to securing against bad debt many of our policies include:
- Collections of uninsured sales: Access our collections services to collect on even uninsured sales.
- Increase your Line of Credit: Nearly every bank can utilize trade credit insurance to add additional source of repayment and/or collateral to increase your line of credit. Additionally due to us covering up to 100% of A/R you can increase your existing lending base just by adding it! For those selling internationally or to government it's an even bigger benefit!
To find out how Trustco can help expand your business credit terms please contact us.
Inventory & AssetsMaximize the eligible borrowing base with virtually no additional premium! Modifying existing coverage can provide substantially more collateral.
Trustco's Asset Collateralization coverage can do two things; (1) insure your products and assets anywhere in the world for virtually any loss and (2) increase your lendable assets to improve your credit facilities. This product is built off the success of Trustco's Stock Throughput but extended to help both banks and clients improve the availability of credit.
Coverage is provided by valuing assets at SALES VALUATION. Client's profit is included should any physical harm befall the inventory. Inventory is no longer valued at book value but at market value. Target industries include:
- Oil & Gas
- Perishable Goods
Coverage includes strikes, riots, war, and other civil unrest. Should your company or client be shipping or manufacturing goods overseas they are covered by our commercial insurance anywhere in the world. When we say anywhere we do include, China, Afghanistan, Iraq, and even the bottom of the Arctic Ocean! Perishable goods distributors can have spoilage caused by any virtually anything. These inventory risks can be mitigated with the bank as a beneficiary.
Clients utilizing third party manufacturers, outsourced warehousing and fulfillment, or contract work may also insure their products while in the Care, Custody or Control of others. This can apply anywhere in the world regardless of political status. Additionally, further commercial insurance coverage is available should a crucial supplier or manufacturer suffer a loss which delays the client's business.
Other equipment can all be insured at replacement value, not actual (depreciated) value. Thus lending of equipment or other property is easy with the knowledge that any physical harm will result in replacement with brand new equipment.
Should the client be a good credit risk, we can cover the rest! Please contact us to find out more!
Modern-day business insurance began at Lloyd's Coffee House in the 1700s where merchants would negotiate terms to manage the risk of their products being shipped. At the time piracy was an issue, along with weather conditions and the uncertainty of foreign ports. In some respects not much has really changed, though we as a people gotten much more sophisticated in causing disruptions. Stock Throughput insurance is the modern-day version of original cargo insurance.
Am I at Risk?
Stock Throughput's coverage is self contained in its name; its role is to cover your inventory & stock all throughout the entire process. For some clients this may include sourcing berries in Bolivia, shipping some to the US and others to Japan, processing them at third-party manufacturer's who forward parts on to a bottling company, who holds the bottles and provides fulfillment. From there it may be stored in owned or third-party warehouses and eventually delivered to the end user. Throughout this process the product is occasionally in client's control, but it is always a supply chain risk to the client should something go awry. In our experience we are yet to see a third-party provide full coverage for clients good's in the care. Though you may not have control of it, nor have taken title, it may still harm you financially in a loss.
Coverage includes strikes, riots, war, and other civil unrest. Should your company be shipping, manufacturing, or sourcing goods overseas they are covered anywhere in the world. When we say anywhere we do include, China, Afghanistan, Iraq, and even the bottom of the Arctic Ocean! Perishable goods distributors are covered for spoilage caused by any virtually anything. Earthquakes, flood, tornadoes, hurricanes, terrorist attacks... all can be covered with this extensive type of commercial insurance.
Clients utilizing third party manufacturers, outsourced warehousing & fulfillment may also insure their products while in the Care, Custody or Control of others. This can apply anywhere in the world regardless of political status. Additionally further coverage is available should a crucial supplier or manufacturer suffer a loss which delays the client's business. Other equipment can all be insured at replacement value, not actual (depreciated) value.
Coverage is available to all customers, however those that gain the highest benefit are outlined below. Coverage is provided SALES VALUATION, thus your profit is included should any physical harm befall inventory. Traditional coverage insures at book value, we prefer to make you whole. Target industries include:
- Oil & Gas
- Perishable Goods
Due to combining Property, Cargo & Inland Marine policies into one Stock Policy most of our clients recognize a net premium decrease. For clients who do not have existing coverage this can often be procured at $1 per $1,000 of product, or 0.1%.
Let us show you how we can extend your stock coverage with no increased costs by contacting us!
Media and technology is revolutionizing the way we communicate. Yet traditional insurance policies have not kept up with this evolving landscape. Security & Privacy liability is a type of commercial insurance that has been specifically designed to provide comprehensive protection for the cyber, privacy and media risks faced by companies in their day to day operations.
Security & Privacy is a policy that has been designed with the future very much in mind. These policies are modular in design, which allows Trustco to tailor the cyber, privacy and media coverage specific to the risks clients face. Coverages include:
- Comprehensive media liability, including cover for user generated content
- Advertising and personal injury
- Defamation, including libel and slander
- Intellectual property rights infringement
- Invasion of privacy
- Blanket errors and omissions
- Breach of contract
- Cyber liability (Unauthorized access, preventing access, transmission of virus, etc.)
- Privacy liability (Breach of private information, both client and employee, HIPAA, GLBA, COPPA, PCI, etc.)
- PCI notification expense
- Property and business interruption, including cyber perils
Who faces these risks?
While virtually any company with either employees or customers face these risks, industries that routinely suffer covered losses and would benefit from this commercial insurance policy include:
- Entertainment and media
- Education (Public, Private, Charter, Higher Education, etc.)
- Financial (Banks & Credit Unions, Lenders & Sourcing Agents, Brokers & Consultants, etc.)
- Healthcare (Physicians, Nursing Facilities, Labs & Specialists, etc.)
- Life Science (R&D, Pharmaceutical, Clinical Trials, etc.)
- Leisure and hotels
- Manufacturers and wholesalers
- Professional services (Accountants, Lawyers, Printers, Brokers, etc.)
- Public sector
- Retailers & e-Tailer
- Support services
- Website operators and e-tailer
Coverage starts at as little as $300 annually. To find out how Trustco can cover your information risks please contact us!
"For businesses, no trust violations have the potential to be as harmful as those committed by the very individuals who are relied upon to make the organization successful: its employees. "**** Good HR & pre-employment screening can deter most crime & fraud from occurring. However, when it does occur, Crime & Fidelity Insurance can provide financial reimbursement from these losses. For example:
2010 Global Fraud StudyReport to the Nations on Occupational Fraud and Abuse
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- A typical organization loses 5% of its annual revenue by theft from employees.
- The typical dishonesty scheme by an employee lasts around 18 months from beginning to detection.
- The average loss for employee dishonesty is $160,000 with nearly one quarter of all losses totaling at least $1,000,000.
- Even the best internal controls, no matter how well conceived, frequently fall short of stopping a trusted employee from engaging in fraudulent activity.
Fiduciary LiabilityIf your company sponsors a retirement or health plan for the employees and if you are involved in any way with the management of that plan, you are likely considered a "Fiduciary" and can be held personally liable for what happens to the plan (under ERISA law). Defending a claim, even if it is without merit, is expensive and time consuming. According to the latest Tillinghast Survey*, the average cost of paid claims was $994,000, with an average reported defense cost of approximately $365,000! In this instance, Fiduciary Liability is the only type of business insurance that will help you avoid these costs.
Do I already have coverage?Employee Benefits Liability vs. Fiduciary vs. ERISA Bond: It can be difficult to determine the difference between a fiduciary liability policy, an employee benefits liability policy (EBL) and an ERISA bond. All of these types of commercial insurance policies provide some type of coverage in connection with employee benefit plans, but fiduciary liability policies are markedly broader than EBL, and neither of them provides the same coverage as an ERISA Bond. Here is a quick overview of each of the coverages:
EBL coverage is generally limited to administrative errors and omissions. Administration includes handling records in connection with any plan; enrolling, terminating or cancelling employees under any plan; and interpreting plan benefits. In general, claims involving administrative errors and omissions are frequent but not severe.
In contrast to EBL coverage, a fiduciary liability policy not only covers administrative errors and omissions, but also your personal liability for a breach of a fiduciary duty in connection with an employee benefit plan.
An ERISA bond is first party coverage that pays the plan for any loss from theft of plan assets. By law, every plan is required to have an ERISA bond.
Historical claims examples:
- Delayed Transfers $1.25MM:A group of employees alleged 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 $1,000,000 in lost investment income. Defense expenses were $250,000
- Failure to Monitor:Legal action brought by employees alleged the wrongful elimination of a profitable investment option, improper selection of another and failure to monitor the actions of the outside investment manager. Defense costs were $358,000 and the court awarded the plaintiffs $500,000 in damages.
- Failure to Inform: Two employees approaching retirement age discovered they had never enrolled in the company's 401(k) plan. The employees sued the company and plan trustees, alleging the plan administrators failed to properly advise them how to enroll and the enrollment was not automatic. The value of the alleged lost benefits exceeded $150,000, and defense expenses were in excess of $200,000.