1. Forms
2. MP
3. MP-00-07

What the form is

MP 00 07 is an Insurance Services Office (ISO) Fiduciary Liability Coverage Form. It provides specialized liability coverage on a claims-made basis. This means the policy in effect at the time a claim is first made is the policy that will respond, regardless of when the alleged wrongful act occurred, subject to any applicable retroactive date. The primary purpose of this form is to protect an organization and its individual fiduciaries from legal liability arising from their duties in managing employee benefit plans. Coverage is for claims alleging "wrongful acts," which are typically defined as any actual or alleged negligent act, error, or omission in the administration or management of such plans, or a breach of fiduciary duties as imposed by the Employee Retirement Income Security Act of 1974 (ERISA) and other similar federal, state, or local laws.

Classes of business it applies to

This form is essential for virtually any private or public entity, whether for-profit or not-for-profit, that sponsors or administers employee benefit plans. Examples of such plans include:

• Defined contribution plans (e.g., 401(k), 403(b) plans).
• Defined benefit pension plans.
• Employee welfare benefit plans (e.g., health, dental, life, disability insurance plans).
• Employee Stock Ownership Plans (ESOPs), though these may present unique underwriting considerations.
• Multi-employer plans (Taft-Hartley trusts).

The insureds under this form typically include the sponsoring organization (the employer), the benefit plans themselves, and any past, present, or future duly elected or appointed directors, officers, and employees acting as fiduciaries or trustees of these plans.

Special considerations

• ERISA Imposed Liability: The Employee Retirement Income Security Act of 1974 (ERISA) establishes strict standards of conduct for fiduciaries and imposes personal liability on them for breaches of these duties. This can include liability for investment losses, excessive fees, or improper denial of benefits.
• Claims-Made Nature: Policyholders must understand the implications of a claims-made policy, particularly the need for continuous coverage to avoid gaps. If coverage is terminated, an extended reporting period (or "tail coverage") may be necessary to cover claims arising from acts that occurred before termination but are reported after.
• Distinction from ERISA Fidelity Bond: Fiduciary Liability Insurance is not the same as an ERISA Fidelity Bond. An ERISA bond is required for most plans and protects the plan from losses due to fraud or dishonesty by persons who handle plan funds. Fiduciary Liability Insurance, conversely, covers claims related to breaches of fiduciary duty and errors or omissions in plan administration.
• Settlor Decisions: Certain decisions made by an employer concerning the establishment, design, amendment, or termination of a benefit plan are considered "settlor" functions, not fiduciary acts. Coverage for liability arising from settlor decisions may be limited or excluded, or may require a specific endorsement.
• Defense Costs: Legal defense costs for fiduciary liability claims can be substantial, even if the fiduciaries are ultimately found not liable. This form typically provides for the payment of these defense costs, often within the limit of liability.

Key information for agents and underwriters

• Risk Assessment: Underwriting this coverage involves evaluating the sponsor's financial stability, the types and complexity of benefit plans offered, the number of participants, the plan assets' value, and the procedures for plan administration. Key areas of review include the process for selecting and monitoring investment options and service providers, plan fee structures, employee communications, and any history of prior claims or regulatory investigations.
• Common Claim Sources: Claims frequently allege imprudent selection or monitoring of plan investments, charging excessive fees, conflicts of interest, failure to diversify investments, errors in calculating benefits or eligibility, improper advice to participants, or failure to follow plan documents.
• Coverage Scope and Exclusions: Agents should clearly explain the scope of coverage, including the definition of "wrongful act" and "loss," as well as key exclusions. Common exclusions might relate to fraudulent or criminal acts, personal profit or advantage, prior acts, or claims for benefits due under the plan (unless the plan is unable to pay due to a wrongful act).
• Endorsements: A variety of endorsements may be available to tailor the coverage, such as those addressing penalties under HIPAA, costs associated with voluntary compliance programs (e.g., IRS or DOL correction programs), or coverage for settlor acts.
• Market Conditions: The market for fiduciary liability insurance can fluctuate based on litigation trends and regulatory scrutiny. Staying informed about current market conditions is important for advising clients on available coverage and pricing.