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Being in a position of leadership isn’t easy. Sometimes, management is mistreated and requires protection from other parties. Other times, they need protection from their own mistakes.

Rightly or wrongly, allegations against management and breaches can include:

  • Occupational Health & Safety (OH&S) incidents
  • sexual harassment claims
  • unfair dismissals
  • defamation cases
  • fraud
  • breaches of statutory duty
  • statutory fines and penalties.

When allegations of mismanagement, misconduct or legislative breaches begin to surface, the entire business could be in trouble.

This is where management liability insurance comes into play.

What is management liability insurance?

Management liability insurance is a type of business cover that provides a safety net for the company or manager in the event of a claim. This type of policy aims to protect your company’s financials against legal costs and other expenses if allegations are ever substantiated.

Management liability insurance can include the following protection:

  • covering expensive legal and defence costs;
  • claims investigation costs;
  • damages and claimant costs awarded against the business; and
  • some civil fines and penalties that come from mismanagement, misconduct or legislative breaches.

Management liability insurance is broken into multiple types of liability covers – which you can tailor to suit your business needs. You can choose them all or just the specific types applicable to you. These include:

Directors & Officers Liability (D&O)

Directors & Officers liability protects the personal assets of corporate directors and officers if a third party sues them. It also typically protects the company if they’re implicated. Any company with a board or committee should consider this type of insurance. D&O liability can protect against the following:

  • fraud or breach of fiduciary duty
  • misappropriation of trade secrets or company funds
  • unfair competition and breach of confidentiality.

Corporate Liability

Corporate liability protects a company against criminal activities committed by employees or the company itself. It may also cover claims against a lack of action taken by a company. In the event of a claim, so long as it’s covered, Corporate liability will provide financial coverage. This type of management liability insurance protects against:

  • allegations of fraud
  • Workplace injuries
  • being prosecuted by a regulatory authority for breaches of the Corporations Act (2001).

The corporations act 2001 relates to a set of laws and how a company must conduct its business.

Employment Practices Liability

Employment practices liability is an extension of D&O liability that provides protection against employee-relation claims. You’ll receive protection against allegations of bullying, sexual harassment, unfair dismissal and discrimination.

Statutory Liability

Statutory liability generally covers penalties and fines, if a company breaches a law imposed by the government or a regulatory body. This type of insurance offers protection against a breach of Occupational Health and Safety Act (2011) and other legislation like workers’ compensation.

Crime

This type of insurance protects against financial loss due to theft of money by a business’ employees (including managers) or a third party. Crime also covers fraud or dishonesty committed by employees or a third party.

Does your business need management liability insurance?

Whether your business needs management liability insurance depends on your business’ individual needs and circumstances. This type of policy can be crucial in safeguarding your company against expensive legal costs caused by management.

Once again, you may not need total coverage. You can just choose the types of management liability insurance that apply to your business’ situation.

Case study: Cutbacks and claims

Unfair dismissal claims from disgruntled or unfairly treated former employees can happen in the corporate world – even if you or your managers weren’t acting maliciously.

For example, let’s say a company is hit with a substantial budget cut and forced to make several redundancies to save money. And one of the unlucky, is an almost five months pregnant woman.

Upon hearing the news, she consults her lawyer and later files an unfair dismissal claim based on discriminatory motives. The right level of employment practices liability will cover the legal fees if the company is found guilty.

What doesn’t management liability insurance cover?

Management liability insurance may not cover some civil fines, penalties and/or legislative breaches plus certain events, which we detail below:

  • dishonesty or criminal activity conduct by management
  • business insolvency
  • bodily injury or damage to property – although other business insurance policies may protect your company in these situations.

Always remember to read your policy’s Product Disclosure Statement (PDS) to know exactly what you are and aren’t covered for.

Does your business need additional insurance policies?

Aside from management liability insurance, other types of business insurance can protect your business and its assets – and may also cover legal fees and compensation costs.

These types of business insurance policies include:

  • public liability insurance, which protects your business against being held responsible for personal injury or personal property damaged by the business;
  • product liability insurance, which protects your business against loss or damage to customers caused by products you use or sell;
  • professional indemnity insurance, which protects your staff from being found negligent or in breach of their professional duty, due to any service or advice they may have provided to clients or customers.
  • revenue and assets insurance, which protects the business against issues affecting revenue, assets, or income directly or indirectly, including:
    • car
    • building
    • contents
    • cyber (e.g. online attacks, breaches of customer data)
    • key person (i.e. business being affected by the loss of a key person)
    • business interruption (events which can shut down your business for months at a time, such as a fire or natural disaster).

business insurance

What information do you need when comparing management liability policies?

When using our online comparison service, you’ll be required to enter the following details:

  • contact details
  • business details, e.g. the total number of employees
  • financial information, e.g. annual revenue
  • details about any previous claims.

The size of your business will affect the level of management liability insurance you need for complete coverage. It’s therefore essential to provide all the information you can about your business and its services.

Additionally, you must divulge any past complaints or claims made against your business to your potential insurer. Any intentional or even unintentional omissions of prior claims could make your cover invalid.

Frequently asked questions

What type of business needs management liability insurance in Australia?

Any business with a management team that wishes to protect their assets against possible litigation costs would benefit from management liability insurance. Like all insurances, think of management liability insurance as a safety net should anything go wrong.

How much management liability insurance will I need?

Your business’ size, type and other key variables will dictate the level of management liability insurance you require. When you compare policies through our handy service, we ask you to provide this information so you can effectively quote you a range of cover options.

What happens if my company doesn’t have management liability insurance?

Suppose a claim is made against one of your companies’ managers or directors, and you don’t have the appropriate level of cover. In that case, you’ll need to carry of cost of legal representation and any payouts (if it gets to that point).

How much does management liability insurance cost in Australia?

It depends on a range of variables, including your industry, the size of your business, and whether you’ve had any previous claims. Use our free online comparison tool to get some quotes and sift through cover features, exclusions and add ons.

Protect your business: Compare management liability insurance today!

The higher you are, the further you could fall, and nobody wants to fall without a proper safety net.

If you’re ready to invest in a cost-effective management liability insurance policy, compare business insurance policies online with us today. In minutes, you can compare a range of policy quotes from some of Australia’s top insurers. When it comes to protecting all you’ve worked hard for, it pays to compare.

*As with any insurance, the different types of business cover will be subject to terms, conditions and exclusions specific to your policy wording or Product Disclosure Statement (PDS).  This information is general in nature and not intended as professional business advice.

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