How to Get Fiduciary Liability Coverage in San Antonio

Fiduciary liability is a critical form of protection for individuals and organizations entrusted with managing assets on behalf of others. In San Antonio, where retirement plans, employee benefit programs, and trust structures are increasingly common among small businesses, nonprofits, and municipal entities, securing fiduciary liability coverage is not just advisable—it’s a strategic necessity. Unlike general liability or errors and omissions insurance, fiduciary liability specifically addresses legal claims arising from breaches of duty, negligence, or mismanagement in the administration of employee benefit plans, trusts, or other fiduciary responsibilities under federal and state law.

Many business owners, plan administrators, and trustees in San Antonio mistakenly believe that their general business insurance or professional liability policies cover fiduciary risks. This assumption can lead to catastrophic financial exposure when a claim is filed under the Employee Retirement Income Security Act (ERISA) or Texas state fiduciary statutes. Without proper coverage, personal assets, organizational funds, and operational stability are at risk.

This comprehensive guide walks you through the complete process of obtaining fiduciary liability coverage in San Antonio. Whether you’re managing a 401(k) plan for a mid-sized company, serving as a trustee for a charitable endowment, or advising clients on retirement plan compliance, understanding how to secure this specialized insurance is essential. This tutorial provides actionable steps, industry best practices, essential tools, real-world examples, and answers to frequently asked questions—all tailored to the regulatory and business environment of San Antonio and South Texas.

Step-by-Step Guide

Step 1: Understand What Fiduciary Liability Covers

Before seeking coverage, you must clearly define what fiduciary liability protects. Fiduciary liability insurance responds to claims alleging that a fiduciary—such as a plan sponsor, administrator, trustee, or investment advisor—breached their legal duties under ERISA or state trust law. These duties include:

• Duty of Loyalty: Acting solely in the interest of plan participants and beneficiaries.
• Duty of Prudence: Making decisions with the care, skill, and diligence of a prudent person familiar with such matters.
• Duty to Diversify: Avoiding excessive concentration of plan assets in a single investment.
• Duty to Follow Plan Documents: Adhering strictly to the terms of the governing plan document.

Common claims include:

• Improper investment selection leading to losses
• Failure to monitor service providers
• Delays in remitting employee contributions
• Improper communication or disclosure
• Failure to comply with reporting or filing requirements

It is crucial to note that fiduciary liability does not cover fraud, intentional misconduct, or criminal acts. Coverage is designed for unintentional errors, omissions, or negligence. Understanding this distinction prevents misaligned expectations when purchasing a policy.

Step 2: Identify Your Fiduciary Role and Exposure

Not all individuals or organizations are fiduciaries by default. Under ERISA, a person becomes a fiduciary based on function, not title. If you exercise discretionary authority or control over plan management or assets, or provide investment advice for a fee, you are a fiduciary—even if your job description doesn’t list it.

In San Antonio, common fiduciary roles include:

• Employers sponsoring 401(k), 403(b), or pension plans
• Plan trustees and committee members
• Third-party administrators (TPAs) and recordkeepers
• Financial advisors offering investment recommendations
• Nonprofit board members managing endowment funds
• Church and municipal plan administrators

Conduct an internal audit to determine who in your organization qualifies as a fiduciary. Document their responsibilities and assess the level of discretion they hold. For example, a small business owner in San Antonio who selects the plan’s investment menu without professional advice is a fiduciary. If they delegate that decision to a registered investment advisor under a 3(21) or 3(38) arrangement, their exposure may be reduced—but not eliminated.

Step 3: Review Existing Insurance Policies

Many San Antonio businesses assume their commercial general liability (CGL), professional liability (E&O), or directors and officers (D&O) policies cover fiduciary risks. This is rarely true.

• CGL policies typically exclude fiduciary acts under “employee benefit program” exclusions.
• D&O policies often exclude ERISA-related claims or limit coverage to only corporate directors, not plan fiduciaries.
• E&O policies may cover advisory services but rarely extend to ERISA-specific breaches like late contributions or improper disclosures.

Request a policy review from your current insurer or broker. Ask specifically whether your policies contain:

• A fiduciary liability exclusion
• A “retirement plan” or “employee benefit” exclusion
• Any coverage for ERISA violations

If your policies do not explicitly include fiduciary liability coverage, you cannot rely on them. Proceed to the next step.

Step 4: Determine Coverage Needs and Limits

There is no one-size-fits-all policy. Coverage limits must be tailored to your organization’s size, plan assets, number of participants, and risk profile.

Key factors influencing coverage limits:

• Plan assets: Plans with over $5 million in assets typically require $1–5 million in coverage.
• Number of participants: Plans with 100+ employees often need higher limits due to increased exposure.
• Industry risk: Healthcare, education, and nonprofit sectors in San Antonio face higher scrutiny due to regulatory focus.
• Service provider reliance: If you outsource investment management, your exposure may be lower—but you still retain monitoring duties.

As a general benchmark in San Antonio:

• Small businesses (under 50 employees): $500,000–$1 million
• Midsized businesses (50–200 employees): $1–3 million
• Larger organizations or nonprofits (200+): $3–5 million+

Consider adding a “side A” coverage extension to protect individual fiduciaries if the organization’s indemnification is insufficient. Also, ensure your policy includes defense costs within limits, not in addition to them.

Step 5: Engage a Specialized Insurance Broker

Not all insurance brokers understand fiduciary liability. In San Antonio, seek brokers with expertise in employee benefits, ERISA compliance, and nonprofit governance. These professionals know which carriers offer robust fiduciary coverage and how to structure policies to avoid common exclusions.

Ask potential brokers:

• Do you specialize in fiduciary liability for retirement plans or trusts?
• Which carriers do you place this coverage with?
• Can you provide sample policy wordings?
• Have you placed coverage for clients in San Antonio with similar profiles?

Reputable carriers in Texas include Chubb, AIG, Hiscox, Lockton, and AmTrust. Independent brokers like those affiliated with the National Association of Plan Advisors (NAPA) or the Society for Human Resource Management (SHRM) often have access to specialized programs.

Step 6: Prepare Your Application

Insurance carriers will require detailed information to underwrite your risk. Prepare the following documents:

• Plan document and summary plan description (SPD)
• Latest Form 5500 filing
• Investment policy statement (IPS)
• Service provider contracts (TPA, custodian, investment advisor)
• Employee handbook or benefit communications
• List of fiduciaries and their roles
• History of prior claims or investigations

Be transparent. Carriers penalize applicants who withhold information. If your plan had a late contribution in the past two years, disclose it. If you’ve never reviewed your investment lineup, acknowledge it. Honesty improves your chances of approval and prevents future coverage denials.

Step 7: Compare Quotes and Policy Language

Do not select a policy based solely on price. Fiduciary liability policies vary widely in coverage scope. Compare the following elements across quotes:

• Definition of fiduciary: Does it align with ERISA’s functional definition?
• Exclusions: Are there exclusions for fraud, criminal acts, or non-ERISA plans?
• Defense costs: Are they included within the limit or in addition?
• Retrospective date: Does coverage apply to acts before the policy’s inception?
• Third-party vendor liability: Does it cover claims arising from your service provider’s errors?
• Claims-made vs. occurrence: Most are claims-made policies—coverage applies only if the claim is reported during the policy period.

Example: One quote may offer $2 million in coverage but exclude coverage for investment advice given by an unregistered advisor. Another may offer $1.5 million but include coverage for all fiduciary acts under ERISA and Texas Trust Code. The second may be superior despite the lower limit.

Step 8: Purchase and Implement the Policy

Once you select a policy:

• Pay the premium and receive the policy documents.
• Review the policy with your broker to confirm understanding.
• Provide copies to all named fiduciaries and plan committees.
• File the policy with your legal counsel and HR department.
• Update your organization’s risk management policy to reflect fiduciary liability coverage.

Keep the policy active. Lapses in coverage can result in complete loss of protection for past acts. Many carriers offer multi-year terms with premium discounts for continuous coverage.

Step 9: Maintain Compliance and Documentation

Insurance is only as good as the practices behind it. Carriers may deny claims if they determine your organization failed to follow prudent procedures. Maintain:

• Regular investment reviews (at least quarterly)
• Documented meeting minutes of fiduciary committees
• Updated investment policy statements
• Annual fiduciary training for all fiduciaries
• Proof of timely remittance of employee contributions

In San Antonio, the IRS and Department of Labor conduct periodic audits of retirement plans. A well-documented fiduciary process not only reduces risk but also strengthens your claim position if litigation arises.

Step 10: Review Annually and Update as Needed

Plan size, employee count, service providers, and investment options change. Review your fiduciary liability coverage annually during your risk assessment. Adjust limits if your plan assets grow by 20% or more. Add new fiduciaries to the policy if roles change. Update your broker if you switch TPAs or investment advisors.

Many San Antonio-based employers overlook this step. A company that grew from 80 to 220 employees over two years without updating its coverage may find its $1 million policy inadequate when a claim arises. Proactive reviews prevent underinsurance.

Best Practices

Delegate Wisely, But Don’t Abandon Oversight

Many San Antonio employers believe hiring a 3(38) investment manager removes all fiduciary responsibility. This is incorrect. While a 3(38) manager assumes investment selection responsibility, the plan sponsor retains the duty to monitor their performance. Failure to conduct annual reviews—even with a 3(38)—can still result in liability.

Best practice: Document your monitoring process. Include meeting agendas, performance reports, and decisions to retain or replace service providers.

Train Your Fiduciaries

ERISA fiduciary training is not optional. The Department of Labor recommends annual training for all fiduciaries. In San Antonio, where many small business owners wear multiple hats, this is often neglected.

Best practice: Conduct a 90-minute annual fiduciary training session covering:

• ERISA basics
• Prudent person standard
• Conflicts of interest
• Documentation requirements
• Claims process under your policy

Use resources from the Employee Benefits Security Administration (EBSA) or local universities like the University of Texas at San Antonio (UTSA) that offer compliance workshops.

Document Everything

Documentation is your strongest defense. In litigation, “if it wasn’t documented, it didn’t happen.”

Best practice: Maintain a fiduciary file for each plan, including:

• Meeting minutes with signatures
• Investment analysis reports
• Service provider evaluations
• Communication logs with participants
• Remittance records with bank confirmations

Store records electronically with backup and access controls. The IRS requires records to be retained for at least six years.

Use a Written Investment Policy Statement (IPS)

An IPS is a roadmap for investment decisions. It outlines objectives, risk tolerance, asset allocation, and criteria for selecting and evaluating investments.

Best practice: Develop an IPS with input from your investment advisor and fiduciary committee. Review and update it annually. A well-drafted IPS demonstrates prudence and can shield you from claims of arbitrary decision-making.

Perform Regular Fee Analyses

High fees are one of the most common triggers for fiduciary lawsuits. In San Antonio, some plans still use legacy contracts with hidden revenue sharing or excessive administrative fees.

Best practice: Conduct a benchmarking analysis every two years using tools like the Department of Labor’s Fee Disclosure Tool or third-party platforms like PlanSponsor or Fiduciary360. Compare your fees to industry benchmarks for similar-sized plans.

Disclose Conflicts of Interest

If your advisor receives commissions, 12b-1 fees, or revenue sharing, you must disclose this to participants. Failure to do so constitutes a breach of the duty of loyalty.

Best practice: Include clear, plain-language disclosures in your SPD and participant communications. Avoid legalese. Use examples: “Your advisor receives compensation from the mutual fund company for recommending this fund.”

Engage Legal Counsel for Plan Design

San Antonio has a growing legal community specializing in ERISA and employee benefits. Engage an attorney to review your plan documents, service provider contracts, and fiduciary committee charter.

Best practice: Retain counsel on an annual retainer to review changes in law, such as new DOL rules or Texas-specific fiduciary standards under the Texas Trust Code.

Tools and Resources

Essential Tools for Fiduciary Management

• ERISA Fiduciary Checklist (DOL): The U.S. Department of Labor provides a free downloadable checklist to help identify fiduciary responsibilities. Available at www.dol.gov/agencies/ebsa.
• PlanSponsor Magazine’s Fiduciary Resource Center: Offers templates for IPS, meeting minutes, and fiduciary training materials. Subscription required.
• Fiduciary360: A cloud-based platform for documenting fiduciary decisions, tracking investments, and generating compliance reports.
• Guideline, Betterment for Business, or Paychex: Platforms that offer built-in fiduciary support, including automated monitoring and reporting.
• UTSA Business Law Clinic: Offers free legal consultations for small businesses and nonprofits in San Antonio on ERISA compliance.

Recommended Reading

• ERISA: A Practical Guide by James C. Reilly
• The Fiduciary Rule: A Guide for Plan Sponsors by the National Association of Plan Advisors (NAPA)
• Texas Trust Code Annotated (Westlaw or LexisNexis)
• Plan Fiduciary Responsibilities: A Compliance Handbook (Pension & Benefits Daily)

Local San Antonio Resources

• San Antonio Chamber of Commerce: Hosts quarterly HR and benefits compliance workshops.
• South Texas College of Law Houston – San Antonio Branch: Offers continuing legal education on fiduciary law.
• Financial Planning Association of San Antonio: Provides fiduciary training for advisors and plan sponsors.
• Texas Society of CPAs – San Antonio Chapter: Offers seminars on retirement plan compliance and fiduciary risk.

Technology to Reduce Risk

Adopt technology to automate fiduciary tasks:

• Automated contribution remittance systems to prevent delays
• Investment monitoring dashboards that flag underperforming funds
• Document management systems with audit trails
• Participant communication portals with built-in disclosures

These tools reduce human error and create a defensible audit trail—both critical for fiduciary liability claims.

Real Examples

Example 1: San Antonio Nonprofit with Underfunded Coverage

A small nonprofit in San Antonio managed a $2.1 million endowment for its scholarship program. The board members, all volunteers, assumed their D&O policy covered fiduciary acts. When a beneficiary sued alleging poor investment performance and failure to diversify, the claim was denied because the policy excluded employee benefit programs.

The nonprofit had no fiduciary liability coverage. The legal defense cost $185,000, and the settlement was $420,000. The organization nearly closed.

Lesson: D&O policies do not cover trust or endowment fiduciary duties unless explicitly endorsed. Always confirm coverage scope.

Example 2: Mid-Sized Manufacturing Firm with Proper Coverage

A San Antonio-based manufacturer with 150 employees had a $3 million fiduciary liability policy. After a former employee alleged the company delayed 401(k) contributions by 14 days (a violation of ERISA’s seven-day rule), the insurer covered $87,000 in legal fees and a $120,000 settlement.

The company had documented monthly contribution reviews and had trained its HR team on remittance deadlines. The insurer noted the strong compliance record as a mitigating factor.

Lesson: Coverage + documentation = favorable outcome.

Example 3: Financial Advisor in San Antonio Facing a Claim

A registered investment advisor in San Antonio provided investment recommendations to a local school district’s retirement plan. The district sued after a fund underperformed. The advisor’s E&O policy denied coverage because the claim involved fiduciary duties under ERISA.

The advisor had purchased a separate fiduciary liability policy and received full defense and indemnity coverage. The claim was dismissed after the advisor demonstrated adherence to the plan’s IPS.

Lesson: Advisors must carry fiduciary liability insurance—even if they’re not plan sponsors.

Example 4: Church Plan in San Antonio Ignored Compliance

A church in San Antonio sponsored a 403(b) plan for its staff. The pastor, acting as fiduciary, selected a single annuity product without documentation or review. After three participants filed a class-action lawsuit alleging imprudent selection, the church had no fiduciary liability policy.

Legal fees exceeded $300,000. The church’s insurance carrier refused coverage, citing “uninsured fiduciary acts.”

Lesson: Church plans are not automatically exempt from ERISA fiduciary duties. Many still require coverage.

FAQs

Is fiduciary liability insurance required by law in San Antonio?

No, it is not legally required under federal or Texas law. However, ERISA imposes fiduciary duties, and failure to protect against breaches can lead to personal liability. Most prudent organizations obtain coverage as a risk management necessity.

Can I be personally liable for fiduciary breaches?

Yes. Under ERISA, fiduciaries can be held personally liable for losses resulting from breaches. This includes using personal assets to pay settlements or judgments. Fiduciary liability insurance protects personal assets.

Does my 401(k) provider provide fiduciary liability coverage?

No. Recordkeepers, TPAs, and investment providers may offer fiduciary support services, but they do not provide insurance. You must purchase your own policy.

How much does fiduciary liability insurance cost in San Antonio?

Costs vary based on plan size and risk. For a small business with 25 employees and $500,000 in plan assets, expect $1,500–$3,000 annually. Larger plans may pay $5,000–$15,000. Premiums are typically lower than D&O or E&O policies for equivalent limits.

Can I get coverage if I’ve had a prior claim?

Yes, but it may affect pricing or require a higher deductible. Full disclosure is required. Some carriers specialize in “non-standard” or “prior acts” coverage.

Does fiduciary liability cover cybersecurity breaches?

No. Cyber liability is a separate coverage. However, if a data breach results from a fiduciary’s failure to implement reasonable security protocols for participant data, fiduciary liability may cover related claims. Confirm with your broker.

Do I need coverage if I have a 3(38) investment manager?

Yes. You still have a duty to monitor the 3(38) manager. Fiduciary liability insurance protects you for failures in monitoring, not investment selection.

What happens if I don’t have coverage and a claim is made?

You are personally responsible for legal defense and any damages awarded. This can lead to bankruptcy, loss of personal assets, or professional disbarment for advisors.

How often should I review my fiduciary liability policy?

Annually. Changes in plan size, service providers, or regulations may require adjustments. Review after any major organizational change.

Can I add fiduciary liability to my existing business insurance?

Usually not. Fiduciary liability is typically written as a standalone policy due to its specialized nature. Some carriers offer endorsements, but standalone policies offer broader protection.

Conclusion

Obtaining fiduciary liability coverage in San Antonio is not a one-time transaction—it’s an ongoing component of responsible governance. Whether you’re a small business owner, nonprofit trustee, or financial advisor, your fiduciary duties carry real legal and financial risk. Without proper insurance, a single claim can devastate your organization or personal finances.

This guide has provided a comprehensive roadmap: from understanding your exposure, to selecting the right policy, to maintaining compliance that supports your coverage. The key is not just purchasing insurance, but building a culture of fiduciary diligence. Document every decision, train your team, monitor your providers, and review your coverage annually.

San Antonio’s business community is growing rapidly, and with growth comes increased regulatory scrutiny. Those who proactively manage fiduciary risk will not only avoid costly litigation—they’ll build trust with employees, participants, and stakeholders. Fiduciary liability insurance is not an expense. It’s an investment in sustainability, integrity, and peace of mind.

Take action today. Review your current protections. Consult a specialized broker. Secure your coverage. Your fiduciary responsibilities are too important to leave to chance.