When it comes to running a business, the decisions
and actions of Directors, Managers and employees shouldn’t be taken lightly.
Not only are there certain risks that come
with making such decisions, but the responsibility of these key players to
successfully protect the business’s bottom line is huge. This is where management
liability insurance can help your business.
While other insurance coverages are
necessary to protect the tangible assets of a business, management liability
insurance protects your people – those who make the operational decisions that
affect your business on a day-to-day basis.
Without it, your company and its people may
be vulnerable to the many exposures relating to the management of your business,
leaving them personally liable for any alleged or actual wrong doing. These
risks and the cost of defending litigation could cripple an otherwise healthy
and profitable business.
Ready to find out more?
Here’s everything you need to know about
management liability insurance as a business owner, Director or Manager.
What is Management Liability Insurance?
Management liability insurance is designed
to protect businesses and individuals against costly fines and penalties that
can come with managing a company.
It covers against:
- Legal defense costs
- Damages and claimant costs
awarded against you or your business
- Investigation costs
- Civil fines and penalties
It’s an insurance coverage which should be
part of any company’s risk management framework, regardless of what industry
According to the Fair
Work Commission, there are an average of 280 unfair dismissal claims lodged
weekly against Australian businesses. Up
to $3 million in fines could also be faced by your business under work
health and safety laws.
Most Australian business owners would be unable
to ignore the legal risks of their operations, or afford the costs and recover
losses should a claim occur.
However, with the right management
liability insurance cover, businesses have adequate protection against these
potentially crippling costs.
Management Liability Insurance vs Professional Indemnity
Management liability insurance is often
confused with professional indemnity insurance.
But there are key differences between the two
every business owner should know about.
Professional indemnity insurance is useful for businesses to provide defense against third-party claims. Its purpose is to cover the activities of the business, whereas management liability insurance focuses on the act of running a business, including mismanagement claims which have caused loss to others.
Benefits of Management Liability Insurance to Your
To ensure your business isn’t exposed to a
large financial loss, it’s critical to consider management liability cover.
Benefits to your business include:
- Provides a necessary safety net
to help protect your bottom line
- Protection for you, your
business and personal assets against unexpected claims
- Keeps the business’ cash flow
unaffected by liabilities or losses associated with an insured event
- Provides cover for legal
resources, advice and costs needed to defend an unexpected claim
This type of coverage protects the business
owner, the Directors of the business and the company against financial losses
in the event they are alleged to have not met their duties. This includes past,
present and future Directors, and anyone else involved in the management of the
Employees may also be covered to protect
against claims arising from employment practices such as sexual harassment,
unfair dismissals and other employment issues.
Common Management Liability Insurance Claims
Typically, covers are split between the
- Directors and officers
liability and company reimbursement
- Employment practices liability
- Statutory liability
- Company liability
Some examples of common claims covered under management liability insurance include:
- Occupational health and safety
- Unfair competition
- Fraud/breach of duty and breach
of statutory obligation
- Insolvent trading
- Unfair dismissal
- Crime cover, including theft by
employee, theft of inventory and theft by contractor or consultant
- Misleading and deceptive
- Intellectual property breach
- Unfair treatment of
- Identity fraud
- Accidental death (manslaughter)
Claims often arise from actual or alleged breaches. Fortunately, taking out the right management liability insurance cover for your business needs can help minimise the damage.