Making Defendants Look Dumb?



Lawsuits against 401k plan sponsors are continuing at an “unprecedented pace,” with 2022 second only to the flood 2020 brought on. Attorneys point out that despite some modest signs of courtroom optimism for plan sponsors, defense remains a big challenge: plaintiff lawyers seem to know how to make sponsors appear clueless.


Motion To Dismiss

Defense efforts for plan sponsors caught up in litigation associated with the exceptionally high standards of ERISA law have focused on early stage dismissal. Experts at the National Association of Plan Advisors (NAPA) point out that there has been a modicum of success, with some courts ruling “in favor of a higher standard of ‘plausibility.’” However, although some courts are recognizing that “ERISA doesn’t give broad 20-20 hindsight to bring cases,” defense remains challenging, with “a lot of discretion…still left to the individual judges and…a lot of variety across the circuits….” Confronting the likelihood that copycat cases will continue at a rapid pace, NAPA experts note: “unfortunately, there’s not much else that fiduciaries can do differently, other than doubling down and sticking to a firm process and documenting decision-making.”


Daniel Aronowitz, Managing Principal of Euclid Fiduciary underscores the difficulties plan fiduciaries face during litigation, pointing out: “You can have the best process in the world, but plaintiff’s lawyers are good at making defendants look dumb if a case gets to trial. You have to prove a good process to the judge and it can be very difficult to do….” As copycat cases impact plans of all sizes, sponsors are advised not to go it alone: securing ERISA defense costs $600—per hour. Protection is essential and Colonial Surety is here to help with affordable Fiduciary Liability Insurance. With this, for a few dollars a day, you’ll have coverage for defense costs and penalty limits up to $1,000,000 if faced with alleged or actual breaches of duty in connection with the employee retirement plan. Cyber Liability coverage is included at no extra cost, providing additional protection against regulatory actions related to data and privacy, as well as expert response services.


Add on Fiduciary+Cyber Insurance Here


Spiraling Issues

As if ERISA litigation related to fees and investments currently winding through courtrooms across the country is not enough, there are several other hot button issues under the microscope. Experts anticipate litigation related to the inclusion of environmental, social and governance factors in investment options, advise monitoring performance extra carefully, and urge:“If you decide to do it, document it well because it does increase the risk….” Attorneys specializing in ERISA law are also carefully monitoring several cases that are likely to set precedent related to the cybersecurity of participant data and assets. Relatedly, recordkeepers and plan sponsors are both advised to secure insurance and carefully adhere to the protocols for disclosing use of data to participants.

Legal experts remind plan sponsors of the importance of preventing cyber incidents from spiraling into fiduciary incidents. Toward that end, putting a cyber breach response plan in place is critical. In fact, doing so is one of the specific practices prescribed by the Department of Labor. Fortunately, expert response plans can be put in place quickly and efficiently, via Colonial Surety’s affordable Cyber+Fiduciary Liability Insurance. Along with defense costs and penalty limits up to $1,000,000, coverage includes:


  • Expert-led response services following a data breach.
  • Protection from lawsuits and regulatory actions related to the breach.
  • Legal services.
  • Computer forensic services.
  • Public relations and crisis management expenses.
  • Notification services.
  • Call Center services.
  • Credit and Identity monitoring


Obtain your protection, efficiently and affordably today: 


Cyber+Fiduciary Liability Insurance HERE


Pension plan professional? Colonial can help you make sure your plan sponsor clients have the coverage they need—and we’ve got you too. From Errors and Omissions Insurance to Fiduciary Liability Insurance, Employment Practices Liabiity Insurance–and more, we’re HERE with the coverages pension professionals need to keep the business going—and growing.


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Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.