Management Liability insurance – who needs it and why.

Business Directors and Managers are increasingly under pressure to please a multitude of key stakeholders whether they be business partners, employees, shareholders or clients. Should one of these stakeholders become displeased, it can lead to lawsuits and costly compensation payouts.

It’s why Management Liability insurance, which can cover the cost of investigating, defending and settling claims by a third party, is one of the most important business insurances a company can have.

According to Adrian Kitchin, Managing Director of Resilium Insurance Broking, if a business is not adequately covered with Management Liability Insurance, its Directors and Managers could well be at risk of losing not just their business, but also their personal assets as well.

“The reason this insurance is so important is that it can provide cover for a business against claims that arise from mistakes or even deliberate actions, like fraud, from the company or its Directors or employees – both past and present,” he explains.

“It’s important to note that even if you, as a Company Director, are unaware of any negligent actions of one of your subordinates or junior employees, you can still be exposed to legal consequences,” says Mr Kitchin.

What kind of Claims against a Director or Officer or their business can be covered by Management Liability insurance?

• Bullying
• Breach of duty
• Crime loss cover including investigation expenses
• Defamation
• Discrimination
• Fraud
• Harassment
• Occupational Health and Safety
• Tax Audit expenses cover
• Theft by employees or contractors
• Unfair dismissal.

Depending on the cover you take, the right Management Liability policy can typically protect against some or all of these risks:

• Damages and claimant costs awarded against you
• Legal fees
• Investigation costs
• Civil fines and penalties
• Representation costs where you are legally required to attend an inquiry or investigation regarding company affairs.

Do you need Management Liability insurance?

Mr Kitchin says that a good way to know if you need Management Liability insurance is to consider the following questions. If they resonate with you then you would probably need Management Liability insurance.

• Crime– How easy is it for your inventory to be stolen by employees? Do you make electronic payments to suppliers?
• Cyber– What kind of security practices do you have in place to protect your business from cyber risk?
• Employees– Do you have a process in place where employees can regularly voice concerns about the workplace environment and personal development?

“Sometimes business Directors wonder if they should get Management Liability insurance or if they should have Professional Indemnity, or indeed both,” says Mr Kitchin.

“Management Liability Insurance is focused entirely on the ‘act of running a company or business’,” he explains. “Professional Indemnity Insurance on the other hand deals with claims that could be filed by third party companies, partners or suppliers over a faulty or poor service.”

“A Professional Indemnity policy is equally important, but it will not protect your business or your personal assets if there are claims that you, as a Director at the company, were involved in illegal or unethical management practices which in turn caused losses to other individuals or businesses,” he concludes.

Talk to a Resilium Adviser today about the potential risks and exposures that come with running a business and how Management Liability Insurance could be one of the best business decisions you’ll have made.

The information provided in this article is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact Resilium directly.