Management Liability Protects Your Managers
Management liability insurance is an insurance policy that protects managers and key people against claims of wrongdoing.
A management liability insurance policy will protect directors, owners and executives of a company plus the company itself against exposures involved with managing a business.
If you own or are involved in the management of a company, you carry specific responsibilities which could leave you personally liable if something were to go wrong.
In other words, if someone decided to sue your business, whether the fault lies with your organisation or not, the business owners, company directors and senior managers could be at risk of losing personal assets, such as their home.
In Australia, the current economic climate has seen operating risks increase for businesses of all sizes. For example, business failures, regulatory investigations and actions, employment practices claims and employee theft are all becoming more prevalent.
It’s, therefore, more important than ever to make sure your business – and the people who run it – are secure and adequately protected. Having reliable business insurance cover in place is essential so that if something does go wrong you can get back to business as soon as possible.
Phoenix Insurance Brokers can advise you on the right management liability insurance for your business and we can tailor a policy to your requirements.
Cover Legal Costs With Management Liability Insurance
Management liability insurance can cover the cost of investigating, defending and settling claims by a third party, as well as paying compensation for which your business is deemed liable.
Claims arising against your business could disrupt normal operations for an extended period of time. It could also be stressful and time consuming for your people to deal with. What’s more, an unpredictable and potentially large liability claim could really harm your business and even render it unrecoverable.
It makes sense then to have adequate protection in place that will minimise any damage.
As with any business insurance policy, there are always exclusions. There is also often an excess and limits on cover, so it makes sense to go over your specific requirements in detail with your local insurance broker expert.
Common Ways Managers Can Be Liable
Being the owner or executive level manager in a company carries with it certain responsibilities. For example, if there is alleged or actual wrongdoing, a director, officer or owner of a company can be held personally liable. Insurance claims against directors have increased dramatically in the past few years so making sure your business is protected should the unexpected happen makes good business sense.
Here are some examples of management liability claims:
- An employee of a medium-sized call centre believes he is being excluded and bullied at work. He makes a claim to Fair Work and takes his employer to court. The employer claims on their management liability insurance which covers the cost of their legal fees and the costs for the compensation they are ordered to pay the employee.
- Owners of a hotel are found to have breached the maximum capacity specified by their Liquor Licence. They are fined $50,000. They claim this against their management liability insurance which reduces the chances of a negative financial situation in the business.
- A company is sued by its former agents after terminating their contracts and replacing them with full-time staff. The former agents sue for loss of commission. The company settles with the agents for $100,000. Management liability insurance covers these costs preventing the company from going out of business.
Management Liability Claims Against A Business
The following organisations and groups of individuals can bring an action against a company plus its directors, officers and employees:
- Government regulators i.e. ACCC, ASIC, WorkSafe and the Australian Taxation Office (ATO)
- Employees
- Competitors
- Creditors
- Shareholders (especially minority shareholders)
- Clients
- Liquidators/Administrators
The 6 Components Of A Management Liability Insurance Policy
A management liability insurance policy comprises 6 components:
- Directors and officers liability
Protection for past and present directors and officers who may have committed a wrongful act. - Corporate liability
Covers legal and defence costs, and in some cases settlement and compensation costs for claims made against the business by a third party. - Employment practices liability
covers the costs associated with claims made against your business to do with wrongful dismissal, bullying and discrimination. - Statutory liability
protects your business with cover for claims made against your business by statutes, such as the Fair Work Act and Occupational Health and Safety. - Commercial crime
Claims for loss arising from any fraudulent or dishonest act committed by an employee or a third party. - Internet liability
Loss arising from an actual or alleged electronic publishing claim. This includes claims made with respect to libel, slander, plagiarism, violation of the right of privacy, or infringement of copyright.
Management Liability Insurance Covers
- Damages awarded against you
- Legal costs
- Investigation costs
- Civil fines and penalties
Management Liability Insurance Does Not Cover
- Damage to physical assets such as property. This would be covered by public liability insurance which protects your business in cases where the property is damaged, or someone who doesn’t work for you is injured, during the course of your business operations.
- Management liability insurance is also different to professional indemnity insurance. Where management liability insurance provides protection against the financial exposures that come with managing a company, professional indemnity insurance protects professionals who provide advice or services and covers them in the event a customer claims their advice or services have caused them to suffer financial loss.
- Management liability insurance does not cover your staff or employees. If you have staff, it’s important to take out workers’ compensation insurance should anything happen to your employees while at work.
Phoenix Insurance Brokers will understand your unique business needs and can help explain the subtle differences between the types of business insurance and can package an insurance policy to suit your specific requirements, ensuring you are covered against all possible scenarios.
Management Liability Insurance FAQs
Management liability insurance covers management and the company against the legal costs associated with claims of wrongful acts.
Management liability is very necessary because it protects directors and managers from legal action against them. Management liability insurance will also cover the costs associated with the claim, i.e. damages, legal costs, investigations costs, fines and penalties.
Professional indemnity insurance is often in place for large and medium businesses that give general advice to their clients, such as consulting companies, occupational health workers, personal trainers, medical professionals, even insurance brokers. It ensures that businesses are adequately covered if they unintentionally make a mistake or give advice that is flawed or incorrect.
Management liability insurance is more focused on the actions of directors and officers who unintentionally involve themself in a wrongful act. If the customer or employee alleged event did take place, management liability insurance will help with the defence costs and any required compensation – depending on the extent of the cover.
The cost of a management liability policy will depend on factors such as the size of the company and industry. The best way to get an accurate commercial insurance quote is to speak to our experienced brokers.
No, management liability insurance covers the company and key management against the cost of claims of wrongdoing. Public liability insurance covers your business in cases where the property is damaged or when someone who is not an employee is injured during your business operations.
Management liability will usually cover claims of employment breaches. These include situations such as wrongful termination, bullying or discrimination inside the workplace. To ensure your business is adequately covered, get professional advice about your insurance cover from an experienced broker.
