Although fiduciary liability has been a concern ever since the passage of ERISA in the mid 1970s, compared to other management exposures such as directors and officers or employment practices liability claims have been infrequent. Now there are a growing number of lawsuits against defined contribution plans alleging excessive fees.
Speaking at a Professional Liability Underwriting Society (PLUS) symposium, Chubb senior vice president Alison Martin said claims which had averaged about 20 a year increased to over 90 in 2020. Previously claims had been filed against large plans, but now smaller plans and plan sponsors, including private companies and non-profits, are being sued. Defending against these suits is expensive, and settlement amounts are increasing.
Nick Landis, vice president of AIG said underwriters are now asking policyholders to complete detailed questionnaires with specifics about plan investments, fees and expense ratios. Rates are increasing as are deductibles and coinsurance requirements.
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