Talk to us about your Management Liability Insurance
What is Management Liability Insurance?
Management liability insurance is a packaged insurance product, which is made up of several different coverage sections. The covers are designed to protect private businesses and their managers from risks inherent in the operations of the business.
When operating a business, the entity and directors are exposed to a raft of regulations and legislation. For example, Corporations Act, Workplace Health and Safety, Competition and Consumer Act, tax laws. The risk to directors and business is varied, and Management Liability is the policy designed to cover risks such as:
- Allegations of mismanagement, by third parties and regulators.
- Employment Practices Liability (harassment, wrongful dismissal, etc.)
- Crime (employee fraud or dishonesty third party crime, etc.)
- Statutory Liability (can include fines & penalties related to OHS workers compensation, etc.)
- Tax Audit Costs (the costs associated with receiving a tax audit)
- Identity Fraud Expenses (obtaining new documents, etc.) and more.
What does Management Liability insurance cover?
Management Liability insurance policies have different coverage sections. Each insurer has a different wording, which is why it is important to seek advice from a
qualified and professional insurance broker. The most consistent policy sections across management liability insurance are:
- Management Liability/Directors & Officers Liabilities: This section provides cover for the mismanagement of the company resulting in a legal action (lawsuit) against the company’s directors & officers.
- Statutory Liability/Fines & Penalties: This section provides fines and penalties cover for the directors/officers when there has been an alleged statutory breach. Examples of these are workplace health & safety, employment practices laws, workers’ compensation laws, environmental protection authority, spam and privacy laws, industry-specific rules & regulations, etc.
- Crime Protection: Management liability insurance covers a range of crime related occurrences when there has been a direct financial loss. This can include employee fraud or dishonesty, third-party crime, electronic and computer crime, destruction and damage of money, crime by shareholders, etc.
- Corporate Liability/Company Reimbursement: This section of the policy provides cover in the event that a company is required to indemnify directors and officers.
- Employment Practices Liability (EPL): This section covers the directors/officers for an alleged Employment Practices breach. These can include wrongful/unfair dismissal, harassment, discrimination, bullying, and failure to promote.
The policy is flexible and businesses can select which sections of coverage to include. For example, a business with no employees may choose to retain risk for Employment Practices Liability and Statutory Liability.
Some policies will also provide additional covers relevant to the management of a business, such as:
- Tax Audit Costs: Covers the expenses associated with professional fees incurred during a tax audit, helping businesses manage unexpected tax-related scrutiny.
- Identity Fraud Expenses: Provides reimbursement for costs arising from identity fraud incidents that impact the business or its executives, such as legal fees or credit monitoring services.
- Crime Protection: Management liability insurance covers a range of crime related occurrences when there has been a direct financial loss. This can include employee fraud or dishonesty, third-party crime, electronic and computer crime, destruction and damage of money, crime by shareholders, etc.
- Inquiry/Prosecution/Crisis Costs: Covers the costs associated with responding to regulatory inquiries, defending against prosecutions, or managing a crisis, including media management and public relations support.
- Cyber and Social Engineering: Covers risk of cybercrime and electronic funds transfer fraud, following a breach of cyber security.
Who needs Management Liability insurance?
All businesses have a risk of breaching regulations and all owners, operators and directors are exposed to claims and allegations that could cause a financial loss. Management Liability insurance is a fundamental part of any businesses risk management plan, and it is required by:
- Privately owned and operated companies, whether you have a sole-director or multiple directors.
- Not-for-Profits and Associations (commonly called Association Liability insurance).
- Co-operatives and Mutual Enterprises.
- Sole traders.
- Partnerships.
What claims can be covered by Management Liability insurance?
Management Liability insurance responds to claims from a broad range of risks. The most frequent claims will come from:
- Regulatory Authorities: Responding to investigations and claims against directors and officers for breaches for OH&S, financial markets misconduct and environmental breaches.
- Customers/Clients: Responding to claims of misleading or deceptive conduct or third-party Employment Practices Liability claims.
- Crime: First party losses from being defrauded by employees or third parties (customers/suppliers) suing for employee dishonesty or fraud.
- Shareholders: Claims from shareholders holding Directors and Officers liable for wrongful acts, such as misleading/deceptive or inaccurate disclosures, not acting in the best interest of shareholders, misappropriation of company funds, errors and omissions in financial reports and many others.
- Employees: Claims from employees alleging wrongful dismissal, sexual
harassment, failure to promote, discrimination, unsafe working environment and other employment-related risks. - Creditors: Claims from creditors with allegations of being misled or trading
whilst insolvent.
Talk to us about your Management Liability insurance needs
Contact us to discuss a tailored insurance solution that best suits your business and company structure.
