When running a business, whether large or small, you can be held personally liable for breaches of the Corporations Act.
Management liability insurance is designed to cover the costs of defending directors, managers, and employees against claims resulting from their actions or decisions.
Who Needs Management Liability Insurance?
Management liability insurance is essential if you are a company, or you employ staff.
This type of insurance is designed to protect the directors and the company against financial losses in the event they are alleged to have not met their duties.
If you are faced with unexpected liability costs, management liability insurance can protect your business and personal assets, such as your home, from being sold to cover the cost of paying claims.
24% of frauds at Australian companies that are committed by an employee. (PwC, Global Economic Crime and Fraud Survey, 2020)
What Does Management Liability Insurance Cover?
The coverage provided by management liability insurance can vary, but generally includes:
- Employment Practice Liability: Covers claims related to employment breaches, such as wrongful dismissal, bullying, or discrimination.
- Directors’ and Officers’ Liability: Protects past, present, and future directors, officers, and managers from claims of wrongful acts like misrepresentation or breach of duty.
- Crime: Safeguards your business against claims of employee or third-party fraud.
- Corporate Liability: Covers defence and settlement costs from outside parties alleging wrongful conduct and investigations into company affairs.
- Statutory Liability: Covers defence costs, fines, and penalties under certain statutes (note: fines under Work Health and Safety cannot be covered by insurance in NSW, VIC & WA).
- Government Inquiry Costs: Covers the cost of representation at government inquiries.
- Defence Costs: Covers legal costs if your business ends up in court, provided the underlying claim is covered by the policy.
Case Study Example
Consider a former employee who claims wrongful dismissal due to illness at the time of termination.
After unsuccessful conciliation attempts, the matter goes to court, resulting in damages paid to the former employee.
A management liability policy can help recover these costs, allowing your business to continue operating without having to liquidate business or personal assets.
Additionally, you might claim legal defence costs and the amount paid to the former employee.
In the 2020-21 period, 13,281 unfair dismissal claims were lodged in Australia (Fair Work Commission, Annual Report 2020-21).
This statistic underscores the importance of being prepared with management liability insurance.
Be Prepared
At Northern Insurance Solutions, we specialise in finding the right management liability cover for your business.
Our experienced team can guide you on policy options and help you bundle this policy with your existing business insurance cover.
Call our office on 07 4783 1310 to discuss how we can assist.
Learn more about Management Liability Insurance.
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