All you need to know about Management Liability Insurance

Posted on: Tuesday, 7 November 2017.

Traditionally insurance coverage was provided for two distinct categories of risks. Firstly, Property damage risks e.g. Fire, Theft, Malicious Damage, Motor Vehicle and extending to consequential loss. Secondly, Liability risks for Personal Injury or Property Damage to Third Parties.

As time evolved, Insurance coverage then turned to protecting People Risks. Coverage has been provided for some time for injury to your employees whilst at work. However, as society changed exposures began to arise where your business and the people employed by or representing you, began to create new liabilities. Hence, Management Liability arose which is principally designed to protect your business and your employees against these liabilities to third parties.  

What is Management Liability Insurance?

As a director, manager or owner of a business, you may be liable for any mismanagement or illegal practices that occur in the company. Even if you are unaware of activities or negligent actions of one of your subordinates or junior employees, you could be exposed to legal consequences that not only affect the company but your personal assets as well.

What does Management Liability Cover?

A Management Liability policy is “a group of policies” that is designed to cover a multitude of potential exposures that you, and the business, are exposed to on a daily basis.   

Management Liability Insurance policies cover the following:

  • Directors & Officers Liability
  • Superannuation Trust Liability
  • Employment Practices Liability
  • Statutory fines and penalties cover
  • Employee Crime

Who could bring a claim against me?

There are over 5000 individual legislative provisions that can result in fines and penalties, plus there is a wide variety of people and entities that can take action against you personally. Really any party that feels the way you conducted your business had on adverse effect on them.

What are some examples of claims/penalties/suing?

  • You could be sued by an employee who alleges harassment, bullying or discrimination.  Even a potential employee who you interviewed and didn’t employ can bring an action against you.  
  • Your employees could be committing fraud or misappropriating goods and services. 
  • You made honest mistakes in the management of the business, and are now trading whilst insolvent(declared guilty of the bankruptcy of the organisation) you could be liable for the debts. 
  • A worker could be injured and you’re now facing OH&S fines or penalties.
  • You mistakenly breached some form of legislation.  
  • The ATO is going to audit the business.
  • An employee sexually harassed the mail courier.
  • The list can go on and on . . .  

Any litigation that takes you to a court of law or industry tribunal will almost always include legal fees and expenses. Could your cash flow cope with a large lawyer’s bill? The Management Liability policy can provide funds to defend any action made against you and/or your company.

Next steps?

If you'd like to learn more about Management Liability Insurance and how it can protect your business please contact us, call us on (08) 6279 2300 or email us at info@cwib.com.au.

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