What does a Management Liability policy cover?

Management Liability at a Glance

There has never been a more challenging time to run a business. We understand that keeping abreast of all the legislation, from employment law to work health and safety is demanding, regardless of the size of a business. And despite best intentions, compliance and legislative breaches can still happen.

That is where a Management Liability insurance policy steps in.

Management Liability insurance covers the costs of defending directors, managers and employees against any claims that are the result of their actions or decisions in running the business. If you are face with unexpected liability costs, Management Liability insurance can protect your business and personal assets from being sold to cover the cover of paying claims.

What does a Management Liability policy cover?

Management Liability Insurance policies vary in the benefits they provide. CRM Brokers can help you find the most suitable product that meet the needs of your business. To give you an idea, here is the type of cover that your policy may include:

Employment Practice Liability
Covers payouts for claims of employment breaches such as wrongful dismissal, bulling or discrimination.

Case Study: An employee lodged a complaint with Fair Work Australia alleging unfair dismissal. The insured dismissed her because they suspected her of stealing. The Claimant sought damages of over $250,000.
Policy response: Employment Practices Breach against the Company. The Insurer appointed specialist lawyers to represent the insured at Fair Work Australia. There was liability on the part of the insured as it failed to follow the correct process in terminating the claimant. The claim eventually settled for $80,000 in compensation and $55,000 in defence costs.

Directors’ And Officers’ liability
Protects your proprietary limited company’s past, present and future directors, officers and managers against claims of wrongful acts, such as misrepresentation or breach of duty (subject to business size).

Case Study: A competitor alleged the company had breached its patent, and alleged the directors had authorised the breach. The Claimant is suing the Directors and the Company, claiming $5M in damages and an injunction to stop supplying the product.
Policy Response: Claim against the Directors (Entity claim is excluded), total paid $1.8M – Insurer appointed a patent attorney to advise as senior counsel throughout the matter.

Crime
Protects your business against claims such as employee or third party fraud (not all criminal activity is covered).

Case Study: The Insured had a small Accounts Department, with one employee responsible for processing the payments to and from the suppliers. The Company noticed there were insufficient funds which couldn’t be explained. As a direct result, they arranged for an external audit to try & determine the cause. This failed to identify anything unusual. The Company then engaged a forensic accountant who discovered duplicate entries, cheque forgeries and fraudulent EFT.
The Insurer engaged a fraud investigator to quantify the loss and establish how it had occurred. The Employee had been stealing funds over a period of two years, undetected, to fund their drug habit. The insured was on the brink of going into liquidation from having such a shortfall in its cash flow. The perpetrator has admitted the theft but there is little likelihood of recovering any assets. Total Paid: $500,000 sub limit plus investigator’s cost $30,000.

Corporate Liability
Covers costs that your business would incur if you need to defend and settle claims from outside parties alleging wrongful conduct, as well as investigation into the affairs of the company.

Case Study: Employee was injured onsite whist operating machinery resulting in a workplace injury. A few months later a second incident resulted in a worker being injured. Improvement notices were issued to the Company, followed with an investigation by WorkSafe that resulted in proceedings being issued against the Company & Directors for alleged breaches of OH&S Act 2004.
The Insured was found to have breached the Occupational Health & Safety Act. The company was fined $98,000 for both incidents which were reduced due to early guilty pleas, and a conviction was recorded. In addition, $150,000 defence costs were paid to defend the matter.

Statutory Liability
Covers the cost of defence, fines and penalties under some statutes e.g. Work Health and Safety.

Case Study: The Insured was prosecuted by the local council, for breaching the Local Development Act when it cut down what were deemed to be ‘significant trees’. Insured was facing maximum penalty of $120,000 per breach.
After a lengthy defence, the council agreed to withdraw their claim on the basis that the insured pay its own costs which were paid by the Insured’s policy. Total Paid: $190,000 defence costs.

Defence Costs
Covers your legal costs if your business ends up in court.

Case Study: An employee was injured loading a log onto a trailer. The log fell onto him, causing serious injury and ultimate amputation of one leg. The Company & directors faced a Workplace Health and Safety prosecution, with maximum fines of $140,000 per breach.
Insurer appointed specialist lawyers to represent and defend the Insured. The fine is not insurable at law. $185,000 defence costs.

Did you know?

The likelihood of a claim that could be covered under a Management liability policy has tripled in the last five years, with 50% of notifications resulting in a claim.

The most common claims are for employment practices such as, bullying, harassment and wrongful dismissal.

Major claims by amount relate to crime – including employee fraud.

Find out more

Don’t wait until it’s too late – click here for an indicative Management Liability quotation. This should only take 2-3 minutes to complete and a CRM Broker will be able to provide you with an indication on price and may then answer further questions, if you have any.

If you have any further questions regarding Management Liability and how it can protect your business, contact CRM Brokers on 1300 880 494.

 Stay Informed – Connect with us on LinkedIn