Fiduciary insurance is a type of errors and omission insurance

Fiduciary Insurance is a type of Errors and Omissions Insurance. It is a kind of liability insurance and it may provide protection for the nonprofit and board in case their actions cause another party financial harm.

fiduciary insurance

Fiduciary Liability Insurance is a policy that can offer coverage for claims resulting from a breach in fiduciary duty.Fiduciary duty is a financial responsibility that one party has to another.
Specifically, when one person or a group of people oversees how money is used, invested, or dispensed for the benefit of a group or its goals, that person or group has a fiduciary duty to its members or beneficiaries.

In other words, the party in charge of using an organization’s money is responsible to the whole organization for using it wisely. In the case of a nonprofit organization, this party is usually the board of directors. Fiduciary duties (or liabilities) that the board may assume include:

  • Handling salaries, retirement, healthcare, and other finances for employees.
  • Maintaining a tax-exempt status with the IRS and (or paying applicable taxes, if necessary).

Therefore, any breach of these duties (or allegation of a breach) can lead to a claim by employees, organization members, government agencies, or other parties that have a stake in the board’s performance. Fiduciary insurance may cover these claims.

What breaches of fiduciary does this policy typically cover?

It protects fiduciaries against alleged claims:

  • Errors in administering plans, such as unfair enrollment or terminations, resulting in lost or improper benefits;
  • Errors in counseling when administering health or welfare plans, resulting in lost or inaccurate benefits;
  • Giving weak or careless advice on investing employees’ retirement plans;
  • Making unsafe investments in a defined benefit pension plan;
  • false statement or improper change in benefits;
  • unwise selection of and/or monitoring or third-party service providers.

Fiduciary liability insurance is designed to protect the business
from claims of mismanagement and the legal liability arising out
of their role as fiduciaries.

A fiduciary liability policy covers associated legal costs to
defend against claims of errors and a breach of fiduciary duty.


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