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Management liability insurance protects you against financial loss if you're a director or manager and are accused of making a workplace mistake. It can cover the cost of investigating, defending your name, settling and even paying claims that you are liable for.
What is management liability insurance?
Management liability insurance is designed to protect businesses from mistakes made at the management level. Its primary function is to financially protect directors, senior managers and the business itself from breaches of their responsibilities under The Corporations Act. It can also sometimes cover you for claims made by third parties for loss due to breaches in duty of care.
It is essentially a financial safety net that allows you to investigate and defend yourself should you be accused of something. It can also cover compensation costs if you are found to be liable. It also provides cover for your:
Legal expenses
Investigation costs
Any pecuniary penalties
What does management liability insurance cover?
Management liability insurance cover protects directors and officers from any liability for mismanaging a company. Not to be confused with professional indemnity insurance, management liability insurance covers you for claims against your actions of running a company. You can often tailor a policy to suit your needs and get cover for:
Personal liability
Fines and penalties
Run off for retired directors
Pre-investigation and investigation costs
Environmental violation defence costs
Fraud
Health & Safety defence costs
Breach of contract defence costs
Statutory liability
Employment practice liability
Keep in mind that this is just an example of what management liability insurance can include. Speak to the insurer directly to find out what you can get covered for.
Compare management liability insurance
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If you are ready to speak with a consultant about different business insurance options available, simply enter your details in the form. Keep reading if you want to learn more about the different types of cover available.
What types of claim am I protected against with management liability insurance?
Here's a more in-depth break down of the types of claim management liability insurance can cover you for:
Employment issues. Management liability insurance protects you against employment claims brought by employees. These can include claims for unfair or wrongful dismissal, discrimination, sexual harassment and wrongful failure to employ or promote.
Occupational health and safety issues. Prosecutions and inquiries into breaches of occupational health and safety can be quite damaging for businesses and individual managers or directors. Management liability insurance provides cover in these instances. OHS claims increase steadily about 15 per cent every year, and the amount claimed has risen by roughly 20% in recent years.
Shareholder action against company directors. For example, shareholders may bring a statutory derivative action.
Embezzlement of company funds. Claims alleging any sort of improper and illegal conduct will need to be investigated. Management liability insurance provides cover in these instances.
Intellectual property breaches or theft. These sorts of claims can be brought by your business competitors, and protection against this sort of action in today's complex business world is vital.
Unfair competition breaches. Your business competitors may accuse you of being involved in anti-competitive conduct. Cover for legal fees and any fines you may be required to pay is essential.
Claims from statutory bodies. This includes investigations by authorities like the Australian Securities and Investments Commission and WorkCover. These are serious matters that can be very costly and damage to your business and to you personally.
Claims from a liquidator acting on behalf of the company itself. A liquidator may allege that you are guilty of insolvent trading.
Defamation by directors or officers. Defamation claims are becoming increasingly common in the Australian business landscape.
Taxation investigations. Management liability insurance covers you against these investigations into your company.
Claims of breaches of directors' duties. This may include claims of breaches of fiduciary duties, including breach of trust.
Did you know?
Management liability insurance does not cover you against client claims for the services you provide.
This type of cover is provided by professional indemnity insurance.
Does your business need any other insurance policies?
As well as management liability insurance, there are several other types of business insurance that can protect you for different events. These include:
Public liability insurance. This protects you if your business becomes legally liable if someone is injured or their property is damaged.
Product liability insurance.This covers you if the products you manufacture, distribute or sell result in someone suffering financial damages. It's often bundled with public liability cover.
The range of claims that might be brought against directors and officers includes:
Claims for wrongful dismissal or harassment from employees
Claims from shareholders
Claims from statutory bodies. This includes investigations by authorities like the Australian Securities and Investments Commission and WorkCover
Claims from competitors who may accuse you of being involved in anti-competitive conduct
Claims from a liquidator acting on behalf of the company itself
What are the most common types of claims?
Though the range of issues and incidents a management liability insurance policy covers is quite varied, the most common types of claims made include:
Wrongful dismissal or harassment in the workplace
Discrimination such as the wrongful failure to employ or promote
Allegations of improper and/or illegal conduct
Statutory derivative actions by shareholders
False, misleading and deceptive conduct
Breaches of a director's duty
WorkCover investigations and claims relating to OH&S
Claims brought against the company by a liquidator
Theft by employees
Breaches of intellectual property rights
Investigations by the Australian Taxation Office
What am I not covered for with management liability insurance?
These
Asbestos. No claim will be paid for any loss arising from the inhalation of or exposure to asbestos, or for the cost of cleaning up, or removal of, or damage to, or loss of use of property caused by asbestos.
Bodily injury and property damage. No claim will be paid for any bodily injury, mental anguish, emotional distress, sickness, disease or death of any person, or for any damage to or destruction of property.
Capital raising. The insurer will not be liable for any loss resulting from claims related to the raising of capital by debt or equity.
Dishonest or criminal intent / improper conduct. Management liability insurance in Australia will not cover any loss resulting from claims related to wrongful acts committed with reckless, dishonest or criminal intent. In addition, you will not be covered if you use your position or any information you have as a result of your position to help yourself or someone else to cause a detriment to the company.
Industrial relations. If the loss arises from claims related to things like strikes, lock-outs, negotiation of enterprise agreements or collective redundancies, your insurance policy will not provide any cover.
Insolvency. Loss connected to the insolvency, bankruptcy or financial impairment of your company will not be covered.
Outside jurisdiction. Claims brought in a court or tribunal outside of Australia or New Zealand will typically not be covered under your policy.
Known claims and circumstances. Similar to the treatment of some pre-existing conditions on life insurance policy, claims made before the commencement date of the insurance policy will not receive coverage.
Major shareholder. Some policies will not provide cover in the event that you incur a loss resulting from claims made by a shareholder in control of 15 or more per cent of the company.
Personal profit. If you gain any personal profit or financial advantage which you were not entitled to, you may not be covered under a management liability insurance policy.
Pollution. The insurer will not be liable for any loss relating to pollution, including any financial loss to the company resulting from this.
Products or services. Loss brought about by claims arising from any breach of duty in any professional services rendered by your company will not receive cover under management liability insurance. This is what professional indemnity cover is for.
Securities. Any loss resulting from your offer, sale or listing of any securities will not be covered.
War, terrorism and radioactivity. The insurer will not cover you for any loss relating to either of these three incidents.
FAQs
How is management liability insurance different to professional indemnity insurance?
Many people make the mistake of assuming that management liability insurance and professional indemnity insurance are one and the same, but there are some key differences between the two types of cover
Management liability insurance
Professional indemnity insurance
What are you protected against?
Claims against the management of the company
Claims against a company's professional services
Who do the claims usually come from?
Shareholders, employees, OH & S inquiries, etc
Clients, competitors, business partners
Who is this covered designed for?
Any party that directs or manages a company
Any party or business that provides professional services
While professional indemnity insurance covers you for professional services rendered, management liability cover is concerned with the act of running a company. Make sure you're aware of the difference between the two and that you take out both forms of cover if it is required for your business.
A. Unfortunately not. This type of cover is provided by professional indemnity insurance.
A: Claims by employees for wrongful dismissal or harassment or claims from shareholders, liquidators, competitors or statutory bodies such as ASIC, WorkCover and the ATO.
A: Legal expenses, investigation costs, pecuniary penalties and any damages and claimant costs awarded against you.
A: Claims related to asbestos, pollution, bodily injury, property damage, capital raising, dishonest conduct, industrial relations, insolvency, war, terrorism or radioactivity.
A: Management liability insurance costs depend on a range of factors, including the type of industry you work in, the size of your business and whether you've made any claims in the past, so there's no way to accurately say how much you will personally pay. A broker can get some quotes for you though.
Gary Hunter is a writer at Finder, specialising in insurance. He’s been writing about life, health, travel, home and pet insurance for over three years, has pored over hundreds of product disclosure statements and written more than 500 insurance articles. Gary is passionate about helping Aussies understand their insurance policies so that they can get better value for their money.
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