Management liability insurance is a cover that is often overlooked by business owners and is one of the MOST important insurance covers that should be put in place to protect not just your business, but the directors and key management as well.
Businesses can experience unwelcome surprises that could potentially threaten your financial position. As a director or officer, you may be exposed to personal liability further threatening the future success of the business. Increased regulation has heightened the operating risk for businesses of all sizes.
Management Liability insurance is specifically designed to protect private companies and their directors. It’s more comprehensive than traditional directors and officers insurance, as it protects both the financial wellbeing of the company, and the personal wealth of its directors and officers.
Management Liability Insurance Sections of Coverage:
Directors & Officers Liability
Directors & Officers Liability will protect the past, present and future directors and officers of a business. It will also cover anyone else involved in the management of a company, including employees. Director & Officer claims can arise from acts such as:
- Engaging in Unfair Competition
- Fraud or Breach of Fiduciary Duty
- Misappropriation of Trade Secrets
- Insolvent Trading
- Intellectual Property Breach
These types of claims can be made against an individual, the company or both.
Company Liability can also be known as Entity Liability or Corporate Liability. Company Liability provides cover for actions arising from managerial matters. Many of the claims made against the directors and officers will typically be brought first against the company.
- Wrongful Act including Fraud
- Shareholder Dispute
- Unfair Treatment of Shareholders
- Environment Prosecution
- Breach of Contract
- Accidental Death
- Identity Fraud
Employment Practices Liability
Employment Practices Liability is the most commonly claimed under section of a Management Liability Insurance policy. This cover provides protection to the company, directors, officers, and employees for employment breaches. Claims traditionally arise from:
- Bullying and/or Harassment
- Unfair or Wrongful Dismissal
- Employee Duress
- Employee Misconduct
Statutory Liability cover can pay fines and penalties awarded against the business for allegations of wrongful breach of certain legislation. Statutory Liability also provides legal costs to defend the matter as well as representation at an investigation or inquiry. Statutory Liability can cover fines or cash penalties arising from unauthorised or irresponsible actions of the Directors, Partners, Employees, Contractors and or Agents. Claims can arise from breaches to the following:
- Occupational Health and Safety Legislation
- Spam Act
- Liquor Licensing
- Environmental Protection Agency
- Building Act
- Fair Trading Act
- Privacy Act
Statutory Liability Insurance does not provide protection arising from policy prosecutions or breaches of taxation legislation.
Fidelity Insurance Cover
Fidelity Insurance cover is also known as Crime Insurance cover. Fidelity Insurance protects a business from dishonest acts by employees, contractors, shareholders and other third parties. Fidelity Insurance protects against loss of both money and tangible property caused by forgery, defalcation, embezzlement or other fraudulent acts. Interestingly, it is usually the most trusted employees that represent the greatest fraud risk. These employees know the security measures and set up hidden systems to help them steal and keep stealing. Unfortunately, most fraud is only uncovered by accident. Claims relating to Fidelity Insurance include:
- EFTPOS theft
- Electronic and computer crime
- Falsifying invoices
- Theft of cash from tills
- Overpaying wages
- Siphoning money from bank accounts
- Theft of inventory
- Direct financial loss to a third party
It is important to note some of the limitations of cover, for example a policy will not pay a claim arising from losses caused by bad accounting