|A company was sued by a group of participants in an employee stock ownership plan (ESOP), alleging improper valuation of the company's stock, which was not publicly traded. A significant shareholder of the corporation had sold his shares back to the company the prior year at a price that was determined to be fair by the trustees of the ESOP. The participants alleged that the stock was grossly overvalued in order to effectuate the buy out of the major stockholder. The stock was re-valued a year later and was found to be worth significantly less on a per share basis than what was paid out to the previous stockholder. The lawsuit settled for $1.5 million.
|Two employees approaching retirement age discovered they hade 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 enrollment was not automatic. The value of the alleged lost benefits exceeded $150,000 and defense expenses were in excess of $200,000.
|Trustees of a profit sharing plan were accused of improperly concentrating plan investments in a single industry and limited number of stocks. The plan fiduciaries were found to have breached their fiduciary duties by failing to diversify the plan's investments. Damages were $320,000 and legal fees were $120,000.
|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 million in lost investment income. Defense expenses amounted to $250,000.
|Due to a miscalculation by plan fiduciaries, the plan was under-funded and benefit payments were incorrect. The Department of Labor found plan fiduciaries had breached their fiduciary duties and assessed a 502(l) penalty against them for which they were personally liable in the amount of 20 percent of the recoverable funds.
|Trustees of six plans were accused of improperly investing plan assets in a residential real estate development loan that defaulted. The trustees were found to have failed to evaluate the borrower's creditworthiness and determine the economic feasibility of the project. Damages and defense costs totaled $550,000.
|Fiduciaries of a 401(k) plan failed to notify retirees of a blackout period that occurred to accommodate a switch to a new administrator. The retirees were unable to change their investment options during that period and brought suit claiming that had they been notified they would have moved their funds prior to the blackout. The settlement was $600,000.
|Participants of a health plan sued the plan's trustee alleging that the trustee did not monitor the performance of its third party administrator (TPA) and paid excessive fees. Damages and defense expenses totaled $530,000.
Fiduciaries interested in further information regarding Fiduciary Liability insurance or other forms of Executive Liability protection (such as Directors and Officers Liability; Employment Practices Liability; Crime; Miscellaneous Professional Liability; Kidnap and Extortion for Ransom; Identity Fraud Expense Reimbursement, etc.) should contact Paul Squassi at Resource Group at 800-279-1433 ext. 201.
For More Information About Fiduciary Liability Insurance see:
Fiduciary Liability Basics
Important Note - The information on this site is general in nature. Availability of coverage referenced in this document can depend on underwriting qualifications and state regulations.Any description of coverage is necessarily simplified. Whether a particular loss is covered depends on the specific facts and the provisions, exclusions and limits of the actual policy. Nothing on this site alters the terms or conditions of any policies. You should read the policy for a complete description of coverage. Coverage options, limits, discounts and deductibles are subject to availability and to individuals meeting underwriting criteria. Not all features available in all areas.