Frank Hursh, owner of Katy, TX based Texas Energy Insurance (http://www.texasenergyinsurance.com) said this oversight could be devastating to a company’s bottom line should issues arise as a result of financial management errors by company employees.
“It’s unfortunate but most business owners do not consider fiduciary liability insurance a necessity. These owners could face severe consequences should their companies get sued,” he said in his office earlier today.
The law defines a fiduciary as any individual or entity that deals with employee benefit plans like savings, profit sharing, health and welfare. More specifically, it’s the officer, administrator or executive who designs and manages such plans.
“These individuals or entities are exposed without fiduciary liability insurance should there be legal actions as a result of omissions or errors in plan management, whether internally or from outside sources like investment management groups, accountants, and professional or private financial advisers,” Hursh said.
The Texas insurance specialist said many business owners and financial executives assume general business liability insurance will protect them in fiduciary lawsuits.
“That is not the case. ERISA (Employee Retirement Income Security Act of 1974) fidelity bonds are required for any entity that manages a retirement plan, but these do not cover personal assets from fiduciaries. Directors and Officers liability coverage policies also do not cover personal assets in fiduciary legal cases,” he added.
Hursh said that fiduciary liability insurance covers four main areas including poor investment management, conflicts of interest, poor advise or incomplete disclosures, negligence in planning and failure to enroll employees in plans as required by the law.
“When these happen, employees and anyone else who feel wronged or injured by this failure of omission could file a lawsuit. Without fiduciary liability coverage, the company and its officers could be help financially liable for the mistakes,” Hursh added.
In Texas, Katy TX based Texas Energy Insurance specializes in providing fiduciary liability coverage for small and large businesses. Call (281) 398-1010 or go to http://www.texasenergyinsurance.com/