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What Is Management Liability Insurance?
Management liability insurance is a packaged product made up of several coverage sections customised for directors and officers of private companies.
It is often referred to as “directors & officers insurance for private companies” but it is actually more than that, as it packages up several important coverages in a single product. Management liability insurance policies are broken down into several sections that cover off a range of risk exposures affecting the directors of private companies. These include:
- Allegations of mismanagement
- Employment Practices Liability (harassment, wrongful dismissal, etc.)
- Crime (employee fraud or dishonesty third party crime, etc.),
- Statutory Liability (can include fines & penalties related to OHS workers compensation, etc.)
- Tax Audit Costs (the costs associated with receiving a tax audit)
- Identity Fraud Expenses (obtaining new documents, etc.) and more.
What Does Management Liability Insurance Cover?
Management liability insurance offers comprehensive coverage tailored to protect leaders against a variety of potential risks.
Below are the key coverages in the insurance:
Main Coverages
Management Liability/Directors & Officers Liabilities
This section provides cover for the mismanagement of the company resulting in a legal action (lawsuit) against the company’s directors & officers.
Statutory Liability/Fines & Penalties
This section provides fines and penalties cover for the directors/officers when there has been an alleged statutory breach. Examples of these are workplace health & safety, employment practices laws, workers compensation laws, environmental protection authority, spam and privacy laws, industry specific rules & regulations, etc.
Crime Protection
Management liability insurance covers a range of crime related occurrences when there has been a direct financial loss. This can include employee fraud or dishonesty, third party crime, electronic and computer crime, destruction and damage of money, crime by shareholders, etc.
Corporate Liability/Company Reimbursement
This section of the policy provides cover for the same claims scenarios as Section 1 (ML/D&O) but is only triggered when the Company has had to indemnify (pay) a Director/Officer for a claim.
Employment Practices Liability (EPL)
This section covers the directors/officers for an alleged Employment Practices breach. These can include wrongful/unfair dismissal, harassment, discrimination, bullying, whistle-blower, etc.
Additional Coverages
Tax Audit Costs
Covers the expenses associated with professional fees incurred during a tax audit, helping businesses manage unexpected tax-related scrutiny.
Identity Fraud Expenses
Provides reimbursement for costs arising from identity fraud incidents that impact the business or its executives, such as legal fees or credit monitoring services.
Crime Protection
Management liability insurance covers a range of crime related occurrences when there has been a direct financial loss. This can include employee fraud or dishonesty, third party crime, electronic and computer crime, destruction and damage of money, crime by shareholders, etc.
Inquiry/Prosecution/Crisis Costs
Covers the costs associated with responding to regulatory inquiries, defending against prosecutions, or managing a crisis, including media management and public relations support.
Pollution Defence Costs
Offers coverage for legal defence expenses related to environmental claims or allegations of pollution, helping businesses address complex regulatory and liability issues.
Let Us Tailor a Solution
Let us work on a tailored insurance solution with you that best suits your requirements.
Contact us to receive customised recommendations on your coverages and program.
Example of Management Liability Insurance Claims
See examples of claims that highlight the importance of management liability insurance coverage in real-world situations.
Management Liability/D&O Insurance
Minority Shareholders
Proceedings were commenced by the minority shareholders against a clothing store chain and its majority shareholder. The minority shareholders alleged that their interests had been unfairly prejudiced by a recent share option, which was uncommercial and diluted their interests. An order was sought that the majority shareholder or the business acquires their respective interests at a specific price per share.
The matter settled on the first day of hearing on the basis that the majority shareholder agreed to buy the minority shareholders’ interests at an agreed price on a without prejudice basis. The clothing store chain was advanced Defence Costs and incurred a total of $725,000.
Breach of Contract
A company is sued by its former agents after it terminates their contracts in order to replace them with fulltime staff. The agents sue for non-payment of commission. Overall settlement and defence costs reached 6 figures.
Statutory Liability
Employment Practices Liability
Crime
Claimants
Shareholders
Can hold Directors and Officers liable for numerous wrongful acts, such as misleading/deceptive or inaccurate disclosures, not acting in the best interest of shareholders, misappropriation of company funds, errors and omissions in financial reports and many others.
Employees
Claims can consist from wrongful dismissal, sexual harassment, failure to promote, discrimination, unsafe working environment and other employment-related risks.
Customers/Clients
Can sue for misleading or deceptive conduct or third- party Employment Practices Liability claims.
Regulatory Authorities
Can conduct investigations and initiate claims against directors and officers for breaches for OH&S, financial markets misconduct and environmental breaches; just to name a few.
Crime
Claims can consist of the company itself being defrauded by employees or third parties (customers/suppliers) suing for employee dishonesty or fraud.
Creditors
Can claim for allegations of being misled or trading whilst insolvent.
** These claims examples have been provided by AIG Australia Limited and Chubb Insurance Company of Australia Limited **
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Management Liability Insurance
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