In today’s complex business world, employers face more than just the challenges of running a successful operation. If your company offers employee benefits—like retirement plans, group health, or pension funds—you’re likely considered a fiduciary under Canadian law. That means you’re legally obligated to act in the best interests of your plan participants. But what happens if a mistake is made, or an employee claims you mishandled their benefits? Enter fiduciary liability insurance: an often-overlooked but essential coverage for organizations of all sizes.
At AIM Insurance, we’re committed to helping Canadian businesses understand and manage their risks. In this guide, we’ll break down what fiduciary liability insurance is, why it matters, who needs it, what it covers, and how to get the right protection for your organization.
Fiduciary liability insurance is a specialized policy designed to protect businesses and individuals who manage employee benefit plans. It covers claims that allege a breach of fiduciary duty—meaning any act, error, or omission in the administration of those plans.
Key points:
Canadian law imposes a high standard of care on fiduciaries. Even a simple administrative error—like forgetting to enroll an employee in a benefits plan, or making a mistake in plan documentation—can result in costly lawsuits. Unlike commercial general liability or D&O insurance, most standard policies do not cover fiduciary breaches.
From group RRSPs and defined contribution pensions to health and dental plans, today’s benefits packages are more complicated than ever. Each plan comes with its own rules, deadlines, and compliance requirements. Even with the best intentions, mistakes can happen.
Canadian courts have seen a rise in employee lawsuits related to benefits administration, investment losses, and plan mismanagement. Claims can come from current or former employees, plan beneficiaries, or even government regulators.
Fiduciary liability is personal: directors, officers, and plan administrators can be held personally responsible for losses. Without insurance, your personal assets could be at risk.
If your organization offers any type of employee benefit plan, you should consider fiduciary liability coverage. This includes:
Typical benefit plans covered:
Key roles covered:
AIM Insurance works with leading Canadian insurers to offer policies that typically cover:
Like all insurance, fiduciary liability policies have exclusions. Common exclusions include:
It’s important to review your policy carefully and work with an experienced broker—like AIM Insurance—to ensure there are no gaps in your coverage.
A company’s HR manager forgets to enroll a new employee in the group health plan. Months later, the employee faces a medical emergency and discovers they have no coverage. The employee sues for the cost of medical bills and lost benefits. Fiduciary liability insurance covers the legal defence and settlement costs.
A non-profit’s board delegates pension plan investment decisions to a volunteer who lacks experience. The plan suffers significant losses due to poor investment choices. Plan members sue the board for breach of fiduciary duty. Fiduciary liability insurance helps cover the costs of defence and any awarded damages.
An administrator makes a clerical error, resulting in an underpayment of retirement benefits to several employees. The employees file a class-action lawsuit. Fiduciary liability insurance responds to the legal costs and settlement.
While fiduciary liability insurance is well-known in the United States (due to ERISA laws), awareness is growing in Canada as benefit plans become more complex and litigation risks rise. Canadian policies are tailored to local laws and regulations, and are available from major insurers.
Key features of Canadian policies:
Premiums vary based on factors like:
Small businesses with basic group benefits can often secure coverage for a modest annual premium. Larger organizations or those with complex pension plans may pay more, but the cost is small compared to the potential legal exposure.
At AIM Insurance, we’ll review your organization’s needs and provide competitive quotes from top Canadian insurers. We’ll also help you understand your options and tailor coverage to your specific risks.
Insurance is just one part of a strong risk management strategy. Here are some practical steps every employer can take:
As a family-owned, Canadian brokerage with offices across Ontario, Alberta, and Atlantic Canada, AIM Insurance understands the unique needs of local organizations. We offer:
Fiduciary liability insurance isn’t just for large corporations—it’s a vital safeguard for any Canadian employer offering employee benefits. With the right coverage, you can protect your organization, your assets, and your people from the unexpected.
Call us at 877-AIM-4TMW or visit www.theaim.ca to get started.
AIM Insurance—Protecting Canadian businesses, employees, and communities with trusted advice and tailored coverage.
This blog is for informational purposes only and does not constitute legal or insurance advice. Please consult with a licensed broker to discuss your specific needs.
