ESOP Executive Liability Program

• Application for Coverage
• Program Brochure
• Ten Commonly Asked Questions
• Matching Protection with Need

 

 

 

 

For ESOP Companies and Their Executives

The ESOP Association’s endorsed Executive Liability Insurance Program allows its members to purchase insurance protection in the areas of (i) Director’s and Officer’s Liability, (ii) Fiduciary Liability, (iii) Employment Practices Liability and (iv) Crime. These coverages can be offered in one single policy making coverage both comprehensive and cost effective.

For more information, you may contact Jeff Gelburd, Vice President of Murray Risk Management and Insurance at (717) 735-7176, or (800) 533-5271, extension 381 or by email to jgelburd@murrayins.com.

Director's and Officer's Liability Insurance

Directors and Officers liability insurance covers past, present and future directors and officers appointed or elected to the board. Coverage is usually written in a three-part form. The first part covers payments made directly by the Director and Officer for losses arising from claims made against them which are not indemnifiable by the corporation they serve. The second part is a corporation reimbursement contract to repay the corporation any amount it is obligated to indemnify their Directors and Officers for claims made against them. A third part covers the company itself for loss which it is legally obligated to pay. This third part responds to suits naming the company by itself.

Fiduciary Liability Insurance

Fiduciary Liability insurance provides coverage to past, present and future fiduciaries of the plan sponsor. The policy also covers the plan itself (ESOP) and the plan sponsor. For there to be coverage, the claim must allege breach of fiduciary duty.

Like Directors and Officers Liability insurance, coverage is written on a "claims made" form. As a result, the plan sponsor must notify the insurer in writing of any potential or actual claim as soon as possible as coverage will only apply to those claims (or circumstances which could lead to a claim) provided to the insurer during the policy term. When moving coverage to another insurer, it is important that the new insurer provide full continuity of coverage.

In most cases, the plan sponsor will be able to purchase “Discovery” or an extension of time, usually six (6) to twelve (12) months or sometimes longer terms beyond the policy's expiration or cancellation date if the policy is canceled or non-renewed.

Coverage includes claims arising out of an error or omission in the administration of the plan. Coverage can also be extended to cover health/welfare or other retirement plans. Minimum limits of liability usually purchased for the policy are $1,000,000, and the deductibles range anywhere from $0 to $10,000. Policy limits can be shared with the Directors and Officers Liability or provided separately.

Always consider purchasing this coverage from the same insurer providing the Directors and Officers liability insurance. This coverage is not to be confused with ERISA Bond coverage which the Department of Labor states all plan sponsors are required to purchase covering the assets of the plan.

Employment Practices Liability Insurance

Expanded employer liability poses both a challenge and a risk to businesses of all sizes around the country. Employment law has changed significantly in recent years. Large settlements and the increase in frequency have increased awareness and the need for this insurance.

The Age Discrimination and Employment Act, the Equal Pay Act and the Family Medical Leave Act pose new exposures for claims against employers if policies and procedures are not properly followed or implemented. It’s not surprising to see that with the increased awareness comes the increase in frequency and severity of employment related claims.

Costs associated with defending these claims can be high, ranging from $25,000 to well into the six figures. Coverage can be purchased separately or combined with the Directors and Officers Liability (and Fiduciary Liability). Third Party Liability coverage is also available.

Employment Practices Liability coverage applies to claims brought as a result of the following:

• Wrongful dismissal, discharge or termination, actual or constructive, of employment;

• Employment related misrepresentation;

• Violation of employment laws;

• Sexual or workplace harassment;

• Discrimination;

• Wrongful failure to employ or promote;

• Wrongful deprivation of career opportunity including a wrongful failure to hire or promote; • Failure to grant tenure, negligent evaluation; and/or

• Failure to provide adequate workplace or employment policies and procedures.

Employment Practices Liability Insurance will also cover the company. This policy may be the only source of insurance protection for these types of claims. Usually, General Liability and Workers' Compensation policies do not cover employment related practices. Most, if not all General Liability policies have excluded coverage for employment related claims.

For More Information

For more information, you may contact Jeff Gelburd, Vice President of Murray Risk Management and Insurance at (717) 735-7176, or (800) 533-5271, extension 381 or by email to jgelburd@murrayins.com.