Management Liability Insurance

Management Liability insurance is designed to protect company Directors, Officers, and Senior Management against claims arising from their managerial duties. It covers legal costs and damages for claims related to breaches of duty, mismanagement, and/or regulatory investigations. Whether you are running a small business or leading a large corporation, this coverage can protect your personal and professional assets from unforeseen liabilities.

This policy also protects the company itself from risks such as Employment Practices Liability, Workplace Health & Safety breaches, and Financial Mismanagement. This coverage is vital for businesses that wish to shield themselves from the growing number of legal and regulatory risks in our current climate.

Coverage can be extended to include defence costs for claims including Fraud, Defamation, or Wrongful Dismissal, ensuring that both personal and company risks are fully protected. 

Some of the primary coverage components include:

Directors and Officers (D&O) Liability

Protects directors and officers from personal losses due to legal actions taken against them in their professional capacity.

Claims Example:

Insured: Engineer - 56 staff & $20M turnover

Context: The Insured agreed to propagate berry fruit varieties for the Claimant who in turn provided them with the plant material. At various times, the Claimant would place orders with the Insured to propagate blueberry and raspberry plants. There was a contractual dispute as to whether this agreement applied to all orders with the Insured stating that each order created a separate contract. The Claimant sought to terminate the Agreement alleging that the Insured failed to fulfill orders that were placed.

Outcome: The plaintiffs accepted an offer from the Claimant to the sum of $400,000 in full and final settlement of the claim.

Payment: $592,000

Statutory Liability

This protects directors and officers from liability related to statutory breaches, such as violations of environmental laws, health and safety regulations, and other statutory requirements that may result in legal actions.

Claims Example:

Insured: Construction Company - 93 staff & $18M turnover

Context: A series of safety lapses and a failure to check due process and procedures led to an incident where a contractor of the Insured injured his arm.

Outcome: The Statutory Liability section of the Policy was triggered. The Insured received a $400,000 fine under the OH&S Act and incurred close to $200,000 in costs defending the claim.

Payment: $593,500

Entity

Protects the company from claims related to the actions of its directors and officers.

Claims Example:

Insured: Machinery and Equipment Manufacturer - 8 staff & $5M turnover

Context: A claim was made against the Insured by a competitor, alleging that they used Google AdWords Advertising to misrepresent their ability to provide the same products and services as the Claimant.

Outcome: The Insured was able to claim under the Entity section of the Policy and was covered for legal defence costs and settlement to the Claimant.

Payment: $42,000

Employment Practices Liability

Covers claims related to employment practices such as discrimination, wrongful termination, and harassment.

Claims Example:

Insured: Machinery and Equipment Manufacturer - 8 staff & $5M turnover

Context: A claim was made against the Insured by a competitor, alleging that they used Google AdWords Advertising to misrepresent their ability to provide the same products and services as the Claimant.

Outcome: The Insured was able to claim under the Entity section of the Policy and was covered for legal defence costs and settlement to the Claimant.

Payment: $42,000

Crime

This protects the business against losses resulting from criminal acts, including fraud, embezzlement, or theft by employees, executives, or third parties. It is particularly important for companies handling significant amounts of money or sensitive financial data.

Claims Example:

Insured: Veterinary Clinic - 30 staff & $3M turnover

Context: The manager of the Insured’s Clinic defrauded the Insured by fraudulently using the company credit card, making payments to a fake supplier and overpaying their wages. When the fraud was discovered, the manager took their own life. The total amount embezzled from the company was $200,000.

Outcome: The loss nearly forced the Insured out of business however, they were able to seek full reimbursement (subject to the Policy excess) for the fraud under the Crime section of their Policy.

Payment: $180,000

Tax Audit

This component covers costs related to a tax audit, including fees for legal and accounting professionals who can assist in navigating complex tax disputes or investigations. It ensures that your company is not financially burdened by the costs of dealing with tax authorities.

Claims Example:

Insured: Hotel - 15 staff & $9.1M turnover

Context: The Office of State Revenue conducted an audit in relation to tax returns previously lodged by various entities within the Insured’s group of companies.

Outcome: The Insured purchased the Tax Audit Extension under their Management Liability Policy and were able to claim in respect to Accountants’ costs in responding to the audit.

Payment: $40,000

Key Coverage Highlights:

What’s Included in a ML Policy?

When purchasing management liability insurance, it is important to understand what coverage you’re receiving. Here are some key coverage highlights typically included in a management liability policy:

1. Legal Defence Costs
   Whether a case goes to trial or is settled out of court, legal defence costs can be overwhelming. Management liability insurance typically covers these costs, protecting your business and leadership from financial strain.

   
   

2. Settlements and Judgments
   If your company or executives are found liable, the policy can cover the costs of settlements or court judgments. This can be particularly important for small to mid-sized businesses, where a large settlement could be financially devastating.

   
   

3. Investigation Costs
   Coverage also extends to legal and compliance investigations that may arise due to regulatory inquiries or allegations of wrongdoing. Investigations can be costly, especially when they involve government agencies, and this protection ensures that your business will not be financially burdened.

   
   

4. Personal Asset Protection
   Without the right insurance, directors and officers could be personally liable for legal costs and damages. Management liability insurance ensures their personal assets, such as homes and savings, are protected from claims related to their management decisions.

   
   

5. Protection for the Company
   Entity coverage means that your company is protected from lawsuits related to management decisions, even if the directors and officers are not personally involved in the case. This type of protection is essential for mitigating risks that could impact the company's future.

Management liability insurance is an essential protection for any business that wants to protect its executives and itself from the financial fallout of legal claims. Whether dealing with a wrongful termination lawsuit, fraud allegations, or a regulatory investigation, this coverage provides critical financial protection and peace of mind for business leaders.

DUAL Australia Pty Limited. (n.d.). Management Liability Claims Examples. Retrieved from https://2597761.fs1.hubspotusercontent-na1.net/hubfs/2597761/DUAL Australia/AUS Assets/AUS Documents/AUS Claims Scenarios/DUAL-AUS-ML-Plat-Claims-Scenarios.pdf

Jasmin Gabrielli

Jasmin is an experienced insurance professional with over 11 years of general broking expertise across a diverse range of general and hard-to-place specialty lines specifically in commercial applications.