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Management Liability Cover: Is Your Business Insured?
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Owning and operating your own business may be the culmination of years of hard work and dreams. However, your dream can turn into a nightmare if you do not carry management liability insurance that covers you, your company’s officers, managers, and directors.
You and those at the top of your organisation are where the buck stops. And there are a large variety of situations that can personally impact you and your company’s upper tier. The potential for lawsuits is everywhere. One in five small to medium-sized businesses finds itself defending a wrongful dismissal claim.
According to SafeWork Australia, work-related illness and injury cost Australian businesses 61.8 billion annually. These are the common issues companies must deal with, but there are many, many more. You owe it to yourself and your company to prepare for problems before they happen by securing management liability cover.
What is Management Liability Insurance?
A management liability insurance policy protects business owners, managers, directors, and other company officers from personal loss due to issues related to the company. At its core, management liability cover exists to protect higher-ups in a company from the risks and problems associated with managing and running a business.
What Does Management Liability Insurance Cover?
Every business has a level of risk associated with it. Depending on the industry, some companies will have significantly higher levels of risk than others. Management liability protects those running a company from several problems such as,
- Breach of Contract Claims Defence Costs
- Business Failures
- Commercial Disputes
- Employee Theft or Fraud
- Employment Practice Claims Such as Harassment, Wrongful Dismissal or Discrimination
- Environmental Defence Costs
- Personal Liability of Company Directors
- Regulatory Investigations and Actions
- Statutory Liability
- Tax Audits
- The Present Economic Climate
- Whistleblower Cover
- Workplace Health and Safety Incidents
It is worth noting that management liability insurance does not eliminate a company’s responsibility for wrongdoing. It protects those in charge from bearing personal and financial responsibility for an action or event that was outside of their knowledge or control.
**For Example**
Dean owns a small brewing company, but his brother-in-law is the Vice President and in charge of day-to-day operations. His brother-in-law dismissed an employee after she allegedly rejected his advances. The former employee filed a suit against the Vice President, the company, and Dean. Because of management liability insurance, Dean will not bear personal responsibility for his brother-in-law’s actions. His brother-in-law will be held responsible for his actions if found guilty of sexual harassment and wrongful dismissal.
Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.
A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.
Dean owns a small brewing company, but his brother-in-law is the Vice President and in charge of day-to-day operations. His brother-in-law dismissed an employee after she allegedly rejected his advances. The former employee filed a suit against the Vice President, the company, and Dean. Because of management liability insurance, Dean will not bear personal responsibility for his brother-in-law’s actions. His brother-in-law will be held responsible for his actions if found guilty of sexual harassment and wrongful dismissal.
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Frans du Plessis
What Is Not Covered by Management Liability Insurance?
There are several occurrences that management liability insurance may not cover. These include,
- Bodily Injury
- Business Insolvency
- Civil Fines and Penalties
- Claims from a Data Breach or Other Cyber Criminal Activity
- Criminal Conduct and Dishonesty by Management
- Damages to Property
- Legislative Breaches
- Preexisting Incidents Known by the Company Before Signing the Policy
What Businesses Need Management Liability Insurance?
If your business is big enough to have several tiers of managers or directors, you should consider having a management liability insurance policy. This is true no matter how careful your managers are or the amount of honesty you see in your directors. Not all claims brought against your business will occur because of mismanagement or dishonesty. Being unaware of regulations or other details will not work as a defence.
**For Example**
Myles owns a trendy clothing business. He gets his merchandise from various small manufacturers who use ethical labour practices and responsibly sourced goods. Being proud of his efforts to help workers and the planet, Myles advertises these facts. However, his buyer, unknowingly, was purchasing goods made by children using synthetic materials. Myles’ company was named in a suit for misleading advertising and fined. Management liability insurance financed the defence of the case and paid the fines. So, even though there was no intent to deceive customers, Myles and his managers were negligent because they bought clothing from an unscrupulous manufacturer.
Sorting through business insurance can be frustrating. You need to know that Grace Insurance is with you every step of the way. Our experienced team dedicates itself to finding the best coverage for clients, regardless of the size of your business.
At Grace Insurance, we pride ourselves on delivering top-notch customer service to all of our clients. If you have questions about management liability insurance or other kinds of business coverage, do not hesitate. Contact Grace Insurance right away. We will get you the answers you need.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
All information above has been provided by the author.
All information above has been provided by the author.
Frans du Plessis, Grace Insurance, ABN 63 133 156 742, AFSL 233750
This article originally appeared on Grace Insurance Blog and has been published here with permission.
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