March 2014 The Fiduciary Shield, "If a Plan Merger or Termination Is on the Horizon, Seek Tail Coverage"


This issue of The Fiduciary Shield discusses the importance of tail coverage. In the event of a plan merger or termination, tail coverage provides additional protection not offered by the fiduciary liability insurance policy provision known as extended reporting period (ERP) coverage. ERP coverage provides additional time, generally 12 months following a fiduciary liability insurance policy's expiration, cancellation or termination date, during which claims can be filed provided the alleged wrongful act occurred prior to the policy's expiration, cancellation or termination date. However, since the statute of limitations for fiduciary breaches can stretch up to six years, plans require additional coverage, which tail coverage provides.

The Fiduciary Shield addresses how to obtain coverage, what characteristics tail coverage should include, challenges to purchasing tail coverage and negotiations with insurers, which should begin early in the termination or merger process.

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