The three main elements of a fiduciary breach case are: 1) a breach, 2) a loss, and 3) that the loss was caused by the breach. Unfortunately for breaching fiduciaries, they’re often the ones who have to prove that there is no link between a breach and losses caused to the plan.
Putnam Investments was sued for only using Putnam Investments to invest plan funds, failing to do adequate investigation into whether these investments were prudent. The trial court found that it had not been shown that there was a link between the breach and the loss to the plan. However, on appeal, the United States Court of Appeals for the First Circuit found that the loss had been properly set out and linked to the breach.
In Brotherston v. Putnam Investments LLC (1st Cir. 2018), the First Circuit joined with four circuits in deciding that in fiduciary breach cases, it is up to the plan fiduciaries to show that the breach did not cause a loss to the plan. Four other circuits, however, have decided that it is up to plan beneficiaries to prove the link between the breach and loss.
Learn more about the burden of proof on fiduciaries to show that a breach did not cause a loss to a plan.
There’s one way to guard against potential legal defense costs and losses in defending against fiduciary breach claims:fiduciary liability insurance!
Under ERISA, fiduciaries may be held personally liable for a breach of their responsibilities in the administration or handling of employee benefit plans. Under ERISA 410, the plan cannot relieve you of this responsibility with indemnification language, however, it specifically permits persons with personal liability to purchase Fiduciary Liability Insurance. Covering yourself with Fiduciary Liability Insurance gives you a piece of mind that you are protected, as you are responsible for the investment managers that you selected. Learn how to bundle your ERISA bond and Fiduciary Liability Insurance for a discounted rate.
So where can you easily purchase Fiduciary Liability Insurance?
Colonial Surety Company is a Treasury Listed surety company providing ERISA fidelity bonds packaged with fiduciary liability insurance and cyber liability insurance. Colonial is one of the leading providers of ERISA related products, offering bonds approved by the Dept. of Labor. We make it easy to obtain your bond instantly as well as allowing you to purchase retroactive bond coverage for the years the plan was not previously covered.
If you would like to learn more about purchasing an ERISA Fidelity Bond, or an ERISA Fidelity Bond package including Fiduciary Liability Insurance, Call 888-383-3313 or email ERISADept@colonialsurety.com.