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.
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 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).
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.