Protecting yourself from management mistakes
It is tough running your own business. So many things to think about. Whether it is the administration or accounting operations, employment issues, and of course Insurance risks. That is before you even focus on the core activities of your business.
Did you know there are almost 600 laws a small business has to abide by? Do you know what they all are? We do know of many of them. We can manage this by engaging or employing specialists in this area. We outsource to Accountants, Lawyers, HR Consultants and Risk Advisers (Insurance Brokers) to take care of most of them, but this is a large expense out of the business. Ultimately the buck stops with the Business owner. The excuse of “I didn’t know” just does not stand up in court. As a business owner, you have a duty to know. You have a duty of care that you abide by.
New legislation continues to be enacted imposing tougher than ever restrictions and obligations on management. Employees appear increasingly more knowledgeable of their rights in the workplace. In a difficult economic climate, companies can expect increased exposure to liability and fraud. Yet, surprisingly, many business owners, whether they be directors, company officers and partners may not have any Management Liability and Crime Insurance in place.
I have yet to meet a business owner who is confident that they have everything absolutely perfect when it comes to the management of their company. Mistakes do happen. Problems arise at no fault or control of the business owner. Do they have the resources in place to deal with them?
In a Management Liability policy, the entity itself as well as the individual Directors or Officers are protected for claims made against them from a variety of sources. They are subject to onerous duties and responsibilities - whether they be customers, competitors, government regulators, creditors, contractors or employees, shareholders who suspect mismanagement, investors such as banks who feel they’ve been misled, trade association investigations, industry regulatory bodies or perhaps the liquidator if the company is thought to have traded while insolvent.
If one of these parties thinks that management has not lived up to its duties or responsibilities, rightly or wrongly, then they could pursue serious legal action. And that could be from many directions. With potential penalties that range from hefty fines, all the way to disqualification and possible imprisonment. The need for an immediate and effective response to any threat is clear.
The three most claimed on areas of a Management Liability policy are:
- Employment Practices - claims by past and present employees, include unfair dismissal, harassment, breach of awards and conditions and other disputes
- Crime - fraudulent or dishonest activities carried out by employees or outside third parties.
- Statutory Liability – a breach of regulations by both individuals and the entity that could lead to fines and pecuniary Penalties, as well as the cost of legal representation.
There are other areas of the Management Liability policy that provide additional protection such as Tax Audit and even Superannuation Trustee Liability. Click here for more information.
However, the understated area is the Legal Defence costs that are covered in dealing with any allegations and having these matters dealt with by experts so you can concentrate on running your business.
Many of our clients do not buy this cover because of cost. It is actually quite reasonable for what it covers and in difficult times you are more likely to need this cover.
Can you really afford to be without this cover?
Please contact us for a no obligation quote.
Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Robert Cooper.