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Claim Scenarios

Fiduciary liability claim examples

Claim examples that demonstrate why fiduciary liability is a vital coverage for non-profit organizations. 

401(k) delayed transfer balance

A group of trade association employees alleged that their newly selected outside plan administrator improperly delayed transferring fund balances in their plan from one investment option to another, as directed by the participants. Subsequently, the employees sued the plan trustees to recover more than $830,000 in lost investment income. The employees’ case was dismissed, however, defense expenses were $160,000.

Faulty advice or counsel

A nonprofit employee approaching retirement age discovered she had never enrolled in the nonprofit’s 401(k) plan. The employee sued the nonprofit and plan trustees alleging the plan administrators failed to properly advise her of how to enroll and that the enrollment was not automatic. The value of the alleged lost benefits exceeded $200,000. The matter settled for $295,000 and defense costs were $145,000.

Errors & omissions in fiduciary duties

A retired museum employee sued his organizations’ plan administrator and the pension plan alleging an error in administration of the plan and a miscalculation of plan benefits. The employee had announced plans to retire and requested a pension calculation in writing. The plan administrator took over 45 days to value the plan assets. During this time there was a substantial drop in the stock market, which adversely affected the value of the employee’s retirement funds. The museum employee sought $85,000 in damages. The case settled for $65,000.

Improper disclosure to plan participants

Fiduciaries of a foundation’s 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 $850,000.


Any examples in this article are for illustrative purposes only and any similarity to actual individuals, entities, places or situations is unintentional and purely coincidental. This material is not intended to establish any standards of care or to serve as legal advice appropriate for any particular factual situations. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured.


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