NU Online News Service, Nov. 18, 11:49 p.m.EST

A survey of employees at independent agencies reveals manyclients do not understand their fiduciary exposures.

Travelers says it asked 250 agency employees a set of questionsto understand clients' opinions about fiduciary liability.

Of agency employees polled, 54 percent said clients generally donot understand their fiduciary exposure. Only 17 percent initiate aconversation with agents on the topic.

“Even if they do know, there doesn't seem to be an appreciationof the consequences,” says John Trefry, fiduciary liability productmanager for Travelers' bond and financial products.

In fact, 79 percent of agents say clients tell them they don'tfeel like there is an exposure.

The results didn't necessarily surprise Trefry, sincedefinitions of fiduciary responsibilities outlined in the EmployeeRetirement Income Security Act (ERISA) can get hazy, or difficultto comprehend.

However, there is a “functional definition” of fiduciarycontained in ERISA that can expose those with discretionary controlover planned assets, Trefry said.

In other words, the risk goes beyond vendors managing thebenefit plan to the company, board of directors, executive officersand human resources departments.

The number of clients that tell their agents they don't feelthey are exposed was “higher than expected,” Trefry said.

“Personal liability is not well-known,” he said. “Personallythey think they have no exposure. There isn't a lot of mediaattention on these cases. Awards aren't widely publicized.”

Therefore it is up to the agent to be prepared with statistics,including examples readily available from Travelers' ownexperiences, to convince clients of the need for coverage, and thatit's worth the cost (Though about 53 percent of agents say clientstell them the risk is not worth the cost).

According to available industry statistics, the average award is$994,000 and the average defense costs are $365,000. These numbersshould justify the cost of insurance, Trefry said.

“It's a huge opportunity for agents to increase sales andsolidify relationships,” Trefry said. “If you can get theinformation in the hands of the customers—erase the misconceptionsand point out that gap in exposure—more clients will respond.”

One of the misconceptions held by clients is the idea fiduciaryrisk is covered by other insurance policies, like directors &officers, or general liability.

“These types of policies don't respond to a breach of fiduciaryduty,” Trefry said. “They don't fully cover it, if at all.”