Certified Professional in Health Care Risk Management (CPHRM) Practice Exam 2025 - Free CPHRM Practice Questions and Study Guide

Fiduciary liability insurance is designed to protect organizations and their fiduciaries from claims and lawsuits that arise from breaches of fiduciary duty, particularly those that occur under common law or the Employee Retirement Income Security Act (ERISA). This type of insurance is essential for individuals who manage employee benefit plans, as it covers liabilities related to the financial management of these plans.

Fiduciaries are held to a high standard of care in managing assets and must act in the best interests of plan participants and beneficiaries. If a fiduciary fails to adhere to these responsibilities—whether through negligence, mismanagement, or non-compliance with ERISA regulations—the insurance provides coverage for legal fees, settlements, and other expenses associated with defending against such claims.

Understanding fiduciary responsibility is crucial in the context of risk management because violations can lead to significant financial losses and damages, underscoring the importance of having the right coverage in place to protect against these risks.