for violation(s) of any of the responsibilities, obligations or duties imposed upon fiduciaries by the Employee Retirement Income Security Act of 1974, or amendments thereto or any similar provisions of state statutory law or common law.

Westport Ins. Corp. WC DO-103 (7/96)

ERISA sets forth a broad scope of fiduciary obligations and created numerous liability exposures for individuals and companies that create and manage pension and employee benefit plans. The law was designed to not only define the responsibilities of plan fiduciaries, but also to balance the interests of plan participants and sponsors. The law's numerous and complicated provisions deal with, among other things (1) the duties and responsibilities of inside and outside fiduciaries, (2) the types of plans that are covered by, and exempt from, the law, (3) prohibited transactions and those subject to Internal Revenue Service penalties, and (4) bonding requirements as respects fiduciaries. Failure to comply with ERISA provisions can subject individual and corporate fiduciaries to both civil and criminal penalties.

When ERISA was originally passed by Congress, pension and employee benefit plan participants, as long as they fulfilled certain requirements, were guaranteed to receive a promised set of benefits. In turn, plan sponsors were promised freedom from having to comply with a complicated maze of state regulations when they operated across state lines as well as less worry about jury trials and damage awards. Unfortunately, many of the benefits promised when ERISA was passed failed to materialize or were modified dramatically by the courts in ensuing years. (Shortly after the Act's passage, the complicated provisions of ERISA led Rep. John Erlenborn to say that the acronym stood for “Every Ridiculous Idea Since Adam.”)

Today there is a well-developed market for fiduciary liability insurance. Most organizations purchase separate coverage for this exposure, although several D&O insurers will endorse fiduciary liability coverage on the D&O policy for an additional premium or will offer a comprehensive executive protection package policy that includes D&O, fiduciary, crime, employment practices liability and kidnap-ransom coverages.

A few D&O insurers exclude not only ERISA-fiduciary liability but also liability for errors and omissions in administration of employee benefits programs. The employee benefits administration errors and omissions exposure can be included by endorsement to the CGL policy or within a separate fiduciary liability policy.