Running a business involves many aspects, and having the appropriate insurance coverage is one of them. One type of insurance you’ll want to consider is management liability insurance, which covers some risks that may occur from the actions and decisions of a business. These actions, from its directors, managers, and employees, may include inappropriate conduct like sexual harassment claims or legal claims, like defamation or unfair dismissal.
There are some industries where Australian small to medium enterprises can afford to bypass their operations' legal and regulatory risks, although it’s best to cover all bases. Fines from different government or industry regulatory bodies can easily hit hundreds of thousands in dollars, breaching millions of dollars for severe violations. The cost of defending litigation can also quickly cripple a healthy and profitable business, which is why this type of insurance is crucial. Here’s what you need to know about management liability insurance:
What is Management Liability Insurance?
This type of insurance policy covers the costs of defending a business’s directors, managers, and employees against claims that have resulted from their actions or decisions. Having the right policy will protect a company’s stakeholders from fines, defence costs, and penalty compensation. It’s important to note that managers and owners can also be held liable, which will jeopardise your personal assets. Fortunately, management liability insurance also safeguards your wealth and your family’s security, providing extensive protection.
Given the many conflicts that arise from the workplace, especially those triggered by volatile market conditions caused by the pandemic, it is vital to have comprehensive coverage. Many SMEs have faced legal action, which can devastate what was previously a thriving business. With management liability insurance, you can protect your hard work and preserve your business.
Activity Covered by Management Liability Insurance
Specific coverage will vary between policies and insurance companies, so you’ll need to check your policy to determine the activities it will cover. Regardless, most policies cover the defence and legal costs involved in claims made against directors and senior managers that arise from the following actions:
Fraud allegations
Breach of the Corporations Act
Breach of unfair competition laws
Breach of OHS laws and regulations
Breach of fiduciary duties
Breach of confidentiality agreements
The insurance policy also covers certain acts by employees. These include dishonest acts, such as fraud, physical theft of money or property, and allegations of harassment, discrimination, or bullying.
The Benefits of a Management Insurance Policy
Policies will contain different details and benefits, but the most common coverage includes different liabilities: employment practice, directors’ and officers’, crime, corporate, statutory, and defence costs.
Employment practice liability supplies cover alleged employment breaches, such as bullying, failure to promote, breach of contract, discrimination, harassment, wrongful termination, and similar acts. Directors’ and officers’ liability safeguards your proprietary limited company’s past, present, and future directors, officers, and managers against claims of inappropriate acts. These include breach of duty, though this depends on your business size, and misrepresentation.
Crime liability offers protection for your business in the event of a direct financial loss, including theft of money and employee fraud. Corporate liability takes care of the costs your company would face if you must defend and settle claims from third parties alleging improper conduct. Statutory liability covers the cost of defence, penalties, and fines under some statutes, and defence costs cover your legal costs if your business is taken to court.
Conclusion
Management liability insurance offers invaluable protection to a business faced with claims of wrongful conduct. By getting this policy for your business, you’ll save thousands of dollars, preserve your reputation, and protect your directors, managers, and employees from financial ruin.
New Wave Insurance is a team of Gold Coast insurance brokers that can help you find the right insurance for your assets, businesses, and vehicles, like management liability insurance. We’ve helped thousands of individuals and small businesses find the appropriate coverage for their circumstances. Book a free consultation today!