Fiduciary Liability Insurance for Startups

Fiduciary liability insurance is designed to cover claims that arise from the management and administration of employee benefit plans. These claims usually involve allegations that fiduciaries failed to act in the best interest of plan participants.

In practice, fiduciary liability is about benefits governance.

This is different from:

• D&O: Management decisions about running the company and investor or shareholder claims.

• EPLI: Employment disputes like discrimination or wrongful termination.

• Cyber: Security incidents and privacy claims.

• CGL: Bodily injury and property damage.

• Tech E&O: Customer claims that your product or services caused financial loss.

Fiduciary liability focuses on benefit plans and related duties under laws like ERISA, where applicable.

Fiduciary liability is most relevant for startups that:

• Offer a 401(k) plan or are launching one soon.

• Provide group health benefits and manage enrollment and eligibility.

• Offer an HSA or FSA.

• Use plan advisors, recordkeepers, and third-party administrators.

• Are growing headcount and adding benefits complexity.

• Have executives or HR leaders making benefits decisions.

Even if you outsource administration, the company and its decision-makers can still be accused of making poor fiduciary choices.

Startups usually add fiduciary liability when:

• They launch a 401(k) or change providers.

• They scale benefits and want protection for benefits decision-makers.

• They start receiving benefits-related questions from employees and leadership.

• They move into later stages where investor diligence becomes more formal.

• They want a clean insurance stack aligned to standard venture-backed expectations.

Many startups wait until they are larger, but the cost to add fiduciary liability is often reasonable relative to the downside risk it addresses.

Coverage varies by policy form, but fiduciary liability is generally designed around allegations such as:

• Failure to properly manage or administer a benefit plan.

• Errors in enrollment, eligibility, or plan communications.

• Negligence in selecting or monitoring plan vendors (recordkeepers, TPAs, advisors).

• Allegations that plan fees were excessive or not properly reviewed.

• Claims tied to mismanagement of plan investments (where applicable).

• Defense costs for covered claims, often a major driver of benefit.

A key point: fiduciary claims can be expensive even before liability is proven, as defense costs and settlement pressure can rise quickly.

Common limitations include:

• Intentional wrongdoing, fraud, or personal profit.

• Prior known circumstances or prior claims.

• Benefits promised outside the plan terms (depending on wording).

• Claims that are better addressed under other policies (for example, employment disputes under EPLI).

• Taxes, penalties, or amounts that are uninsurable by law (varies by jurisdiction and wording).

Note: Fiduciary liability is not the same as a fidelity bond. Many plans require a separate ERISA fidelity bond to protect the plan against theft or dishonesty; fiduciary liability addresses claims alleging breach of duty, not theft protection.

Examples are not promises of coverage, but these are typical categories:

• A group of employees alleges the 401(k) plan paid excessive recordkeeping fees.

• Employees allege the plan investment lineup was imprudent or not properly monitored.

• An eligibility or enrollment error causes an employee to miss benefits coverage and they allege harm.

• A plan communication is inaccurate and employees claim they relied on it.

• A vendor mistake leads to plan administration issues and the company is drawn into the dispute.

Startups often have fast-changing headcount, limited HR bandwidth, and benefit vendors chosen quickly. Fiduciary claims do not require a public company or a large workforce; they arise when employees believe plan decisions were careless or costly to participants.

Adding fiduciary liability helps protect:

• The company.

• HR and finance leaders.

• Executives involved in plan decisions.

• Plan committees.

Fiduciary liability usually involves:

• Limit: Maximum the policy pays for covered loss.

• Retention: What the company pays before coverage responds (often applies to the entity).

Drivers for choosing limits include:

• The size of the benefit plan.

• Whether you have a 401(k) and its growth rate.

• The complexity of vendors/investments.

• Whether you have formal plan governance.

A practical approach is to start with a baseline limit once you have a 401(k) and increase as plan assets and headcount grow.

Built for venture-backed benefit stacks

Corgi is designed for startups that need a clean, standard insurance stack as they scale, and fiduciary liability is often one of the missing pieces once benefits mature.

Underwriting aligned to startup operations

Corgi focuses on the inputs that actually matter for fiduciary exposure: plan types, headcount, vendor structure, and governance practices, without unnecessary friction.

Coordinated with your other liability policies

Fiduciary liability fits alongside D&O, EPLI, Cyber, Tech E&O, and CGL. Corgi can help you structure coverage so there are fewer gaps and clearer roles for each policy.

Keeps diligence clean

As you grow, investors, board members, and executive hires often want to see that your benefits-related risk is covered.

What is fiduciary liability insurance?

It is insurance that helps cover claims alleging mistakes or breaches of duty in administering employee benefit plans, such as a 401(k) or health plan, subject to policy terms.

Do startups need fiduciary liability if they have a 401(k)?

Many do. Once you offer a 401(k), you have decisions around vendors, fees, and administration that can create fiduciary exposure.

Is fiduciary liability the same as an ERISA bond?

No. An ERISA fidelity bond is designed to protect the plan against theft or dishonesty. Fiduciary liability covers allegations of breach of fiduciary duty and administrative errors, subject to terms.

Does fiduciary liability replace EPLI?

No. EPLI covers employment disputes like discrimination and wrongful termination. Fiduciary liability covers benefit plan governance and administration claims.

*Important notice: Coverage is subject to underwriting approval and availability varies by jurisdiction. Nothing here constitutes a binder of insurance or a guarantee of coverage. Coverage is provided only under the terms, conditions, exclusions, and limits of an issued policy. Insurance services are provided by Corgi Insurance Services, Inc. Insurance products are underwritten and issued by Technology RRG, Inc., where permitted by law.*