Get the latest insights, news and product reviews delivered straight to your inbox.

Management liability insurance explained

by Grant Bendeich
General Insurance Broker
July 28, 2022
5 min read

Owners and operators of small to medium enterprises can be liable to a wide variety of stakeholders – such as investors, creditors, customers, regulators, the public and other businesses – for their management and business practices and decisions.

Management liability insurance can provide vital protection for business owners, who may otherwise be liable for damages arising from their business practices.

Find out how much it costs to get covered.

Management liability insurance coverage

Management liability insurance offers cover for a range of managerial risks including allegations of mismanagement, employment-related claims, crime losses, and more.

Most policies provide cover for legal costs and compensation arising from allegations that you’ve caused someone else a loss and some policy sections compensate you for losses you suffer.

Coverage does vary by insurer, but here are the most common coverages offered for management liability insurance

Employment practice liability

Employment practice liability insurance (EPLI) covers the cost of paying claims of employment breaches, such as wrongful dismissal, bullying or discrimination.

Case study: An employee at your café claims that she was the victim of sexual harassment over a three month period. She presents evidence for her claim including specific incidences of harassment and her daily encounters with abusive language. The woman sues your company for damages. EPLI coverage would provide for any legal costs or settlements.

Directors’ and officers’ liability

Directors and officers liability insurance provides protection for the personal liability of directors and officers of a company while they are performing their roles as directors and officers. This coverage can protect directors and officers if they are accused of management errors or improper conduct by providing for the legal costs and potential losses suffered through lawsuits.

Case study: Your start-up business is seeking funding. Your business projects a 100% growth in revenue for the next year. Because of this impressive forecast, you acquire funding. However, growth results never materialise, and your investors sue your company and its directors for misrepresenting the company’s revenues. D&O coverage would provide for any legal costs or settlements.


Commercial crime insurance protects your business against claims such as employee or third party fraud (not all criminal activity is covered). It can cover your property, merchandise, cash, and securities against theft, embezzlement, or forgery by employees. Crime insurance can also protect you from non-employee third parties who commit forgery, theft, robbery, burglary, or fraud.

Case study: An employee in your finance department altered customer payments to make them payable to himself, rather than the business account. Commercial crime insurance would cover your losses from this theft.

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 an investigation into the affairs of the company.

Case study: As a financial adviser in your organisation provided advice to a client in relation to an investment.

The client’s requirements included an investment plan which would provide a certain level of income per year and a minimum risk of capital loss. The adviser recommended investment in a particular fund, which supposedly satisfied the client’s requirements.

The client did not receive any yearly income but also suffered a capital loss during the two-year investment period.

The adviser also failed to provide any updates to the client during the two-year investment period regarding the state of his investment. Furthermore, at the time of the original investment, there were clear signs that the fund was starting to perform badly.

It was alleged that the fund was of a sophisticated nature that did not suit the client’s needs. Therefore inappropriate advice was provided. The matter was heard in court and your business was liable to pay compensation to the client.

Statutory liability

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.

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 heard in court and you are required to pay damages to your former employee.

NewSure General Manager, Brett Edmonds says management liability insurance is essential to safeguarding Australian businesses.

“All these case studies, show potential exposure to businesses,” said Edmonds. “Educating the community about the value of management insurance is a core part of NewSure’s customer engagement strategy. The industry has historically struggled to clearly articulate the tangible value it adds,” he said.

Get management liability insurance Australia

There are a number of different types of management liability insurance
available and it is important to choose the right cover for your business.

NewSure are a specialist small business insurance service provider, helping you compare quotes and buy business insurance.

We offer complete insurance solutions for all types of businesses – from start-ups to medium and large size enterprises. Let us help you.

Talk to us or request a callback.


Important notice – NewSure Insurance Brokers Pty Ltd

This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.

Information is current as at the date the article is written as specified within it but is subject to change. NewSure Insurance Brokers Pty Ltd make no representation as to the accuracy or completeness of the information. Various third parties have contributed to the production of this content. All information is subject to copyright and may not be reproduced without the prior written consent of NewSure Insurance Brokers Pty Ltd.


Small business insurance explained

As a small business owner, you are likely to be aware of the importance of having insurance. But what type of cover should you have?

Three things to do before purchasing or renewing your business insurance

Purchasing business insurance need not be difficult, but it should be done in a disciplined and well-coordinated manner.

Insurance made radically easier

Call us on 02 4969 8100 or request a call back.

We know that navigating the world of insurance can be complex and confusing. Our brokers compare the myriad of insurance options on the market for you, providing expert advice to implement your chosen plan.

We empower thousands of Australian businesses to focus on what they do best, knowing they’re protected against any possible eventuality.