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Your quick guide to

Management Liability Insurance

What is management liability insurance?

When you’re running a business, you may be personally liable for any actual or alleged breaches of the Corporations Act. And it’s not just large companies that are exposed – small and medium business owners and officers could be at risk as well.

Management liability insurance covers the costs of defending directors, managers and employees against any claims that are the result of their actions or decisions.

The likelihood of a claim that could be covered by a Management Liability policy has tripled in the last five years. With 50% of notifications resulting in a claim

Chubb 2016 Private Company Risk Survey

Who should consider insurance?

If you are faced with unexpected liability costs, management liability insurance can protect your business and personal assets, such as your home, from being sold to cover the cost of paying claims.

Did you know?

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

2016 Private Company Risk Survey

Chubb

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

2016 Private Company Risk Survey

Chubb

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

2016 Private Company Risk Survey

Chubb

What insurance should you take out – and what can it cover?

Management liability insurance policies vary in the benefits they provide. To give you an idea, here’s the type of cover that your policy may include:

Type of cover

Potential benefits

Employment practice liability

Covers payouts for claims of employment breaches, such as wrongful dismissal, bullying or discrimination.

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).

Crime

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

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.

Statutory liability

Covers the cost of defence, fines and penalties under some statutes e.g. Work Health and Safety (fines under Work Health and Safety cannot be covered by insurance in NSW).

Defence costs

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

What usually isn’t covered?

Exclusions and the excess you need to pay can vary greatly depending on your insurer. Generally, your policy won’t cover:

  1. Cybercrime, unless specifically set out in your policy (you can get cover extensions in some cases).
  2. Employee entitlements.
  3. Property damage or bodily injury.

There are other exclusions which your Steadfast insurance broker can outline for you.

Case study

A former employee claims they were wrongfully dismissed from your business because they were unwell at the time their position was terminated. They want to be reinstated to their role and remunerated for their loss of income while they were out of work. After numerous unsuccessful conciliation attempts, the matter is brought before a court and you have to pay damages to your former employee.

A Management Liability policy allows you to recover some or all of these costs so you can continue to run your business without having to sell your business or personal assets. Depending on your policy, you may be able to make a claim for your legal defence costs, as well as the amount paid to your former employee.

Book a FREE Discovery Meeting

If you would like to discuss this or any other product in more detail. Book a no-obligation discovery session with one of our specialists.