NU Online News Service, Aug. 13, 3:44 p.m. EDT
A new report from the Chubb Group of Insurance Companies insists that, now more than ever, fiduciary liability insurance should be included within any corporate risk management program.
In the current work environment of staff reductions and employee benefits to attract and retain workers, fiduciary liability exposure needs to be recognized.
"Employees who still have jobs may not be inclined to rock the boat, but those who find themselves overboard are more likely to take legal action against employers, especially if their 401(k) plans sustained losses before they were terminated," said Christine Dart, vice president and manager for worldwide fiduciary liability at Chubb.
Under the Employee Retirement Income Security Act fiduciaries can be held liable for losses to a benefit plan incurred as a result of alleged errors, omissions, or breach of their fiduciary duties.
"Particularly in times of economic transition--when layoffs, workforce adjustments, and corporate mergers and acquisitions are more likely to occur--more plan participants are willing to step forward as ERISA plaintiffs," according to the report, written by Alison L. Martin of Chubb's specialty claims department and two partners from the law firm Morgan Lewis & Bockius LLP of New York.
Recent court rulings "have helped empower individual plan participants to bring actions for losses to their own accounts, paving the way for other claims against fiduciaries," said Charles Jackson, a co-chair of the ERISA litigation practice at Morgan Lewis.
There has been an influx of attorneys from the securities field to the ERISA arena, increasing litigation potential. In addition, a provision in ERISA provides attorneys' fees to plaintiffs when they win a case, but never to the defendants, said the report.
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