E & O Insurance

[Dougsbpc]

We have had E & O insurance for almost 20 years and have never had a claim. Hopefully we never will.

Isn't E & O insurance to cover damages resulting from an error and/or omission? The biggest exposure for a TPA firm is a plan disqualification as the result of a mistake. Is that not what it is for?

In reading our current policy and the prior policy, the exclusions section seems to exclude coverage for damages resulting in any way from penalties initiated by the IRS.

Just wondering if anyone else has run into this.

Thanks.

[mbozek]

We have had E & O insurance for almost 20 years and have never had a claim. Hopefully we never will.

Isn't E & O insurance to cover damages resulting from an error and/or omission? The biggest exposure for a TPA firm is a plan disqualification as the result of a mistake. Is that not what it is for?

In reading our current policy and the prior policy, the exclusions section seems to exclude coverage for damages resulting in any way from penalties initiated by the IRS.

Just wondering if anyone else has run into this.

Thanks.

Purpose of E & O insurance is to pay employer if employee embezzles money or causes loss of plan assets due to negligence, not reimburse employer for failure to comply with tax rules. Otherwise plan sponsors would have no incentive to make sure that plan complies with all reporting and disclosure requirements and non discrimination rules b/c insurer would for pay the cost of non compliance. Why would an insurer guarantee an employer's compliance with tax laws?