Protect yourself and your business with comprehensive management liability cover
As a company director or officer, you probably lose enough sleep worrying about the decisions that you make on a daily basis – but did you know that those decisions could leave you personally financially vulnerable? Management liability insurance is a tool to protect you personally in your capacity as a director or officer of a company in the event of a dispute.
£13.6bn is lost by SMEs each year due to the failure to take care of their legal issues (Aviva)
Increased regulatory investigations, contract disputes, insolvency related D&O claims, fraud issues and serious accidents present businesses with unprecedented risks (AXA)
Insurers processed £7.6 million claims per day in 2020, of which £1.8 million was for employers’ liability (ABI 2022 Key Facts).
What is management liability insurance?
People are often familiar with the term Directors’ and Officers’ insurance, but what about management liability insurance?
Management liability insurance is a portfolio of cover encompassing all three core risks associated with the liability exposures facing management:
sometimes referred to as ‘D&O’. Directors’ and officers’ cover can provide protection for claims made against anyone in or acting in a managerial role for alleged wrongful acts carried out in their various roles in the workplace.
Broadly speaking, this covers the organisation for costs incurred in defending against an allegation of wrong doing. It provides an indemnity for legal fees, investigations, expert witnesses, settlements, fines, and awards.
Employment practices liability insurance offers protection to policyholders against claims made by workers for employment related issue including claims of wrongful termination, discrimination and sexual harassment.
Where a typical D&O policy would protect your organisation’s directors personally against claims made against them, management liability insurance protects both company and director(s) across the whole suite of risks associated with the person, the company or its practices.
You can learn more about the importance of Directors’ and Officers’ cover, here.
Do I really need management liability?
The million-dollar question, unfortunately, quite literally…
In your business, you make decisions every day that impact the working environment, whether it relates to recruitment, working practices, processes, outlining duties, pay or even termination. Whether we like it or not, these decisions affect our employees, and each has the possibility to result in allegations made against management and/or the business by a whole host of stakeholders, be it regulators, investors or staff.
Insurers are reporting that since 2020, there has been a marked increase in regulatory investigations, contract disputes, fraud issues and serious accidents. According to Allianz Insurance plc, reports are suggesting that nearly 50% of businesses have experienced a claim or investigation in the last 12 months, with a 30% increase in claims against directors and officers in the last decade.
What is at risk without sufficient management liability in place?
Unfortunately, defence and settlement costs for such cases regularly surpass six figures – not to mention the disruption to business, reputational damage or impacts on employee morale, even if court is avoided.
To make matters worse, if directors face a management liability claim, it is extremely unlikely your standard commercial policy will stretch to offer you any personal protection. Similarly, company assets or funds may not be able to used if the action is against the individual, leaving the individual and their family personally exposed.
Personal risks include:
- Personal bankruptcy
- Criminal prosecution
- Custodial sentence
- Disqualification as director
- Loss of job and business reputation
- Impact on the families’ personal lives, standard of living and potential financial hardship
Why management liability should remain a priority for businesses today?
The inflationary pressures facing businesses right now can often lead to snap decisions being made – such as cancelling or disregarding certain insurance covers seen as ‘non-essential’ to trading. We would suggest management liability should never be counted as such. In today’s litigious world, why protect your business but leave yourself exposed?
We understand the challenges you face in today’s ever-changing landscape. One of these challenges is the increasing risk of legal actions and disputes involving management decisions that could leave you personally liable. It is essential to acknowledge and address these potential risks and take proactive steps to mitigate them.
- What if I am personally sued for a management decision?
- What if an employee accuses me of discrimination or harassment?
- What if my business struggles with financial problems and I am held responsible?
How management liability insurance can help
In such cases, management liability cover often provides financial protection and provision for:
- Legal costs incurred by both the directors, officers, trustees, and employees of the business for a range of claims which might be brought against you
- Regulatory or competent authority investigations
- Extradition proceedings (including appeals)
- Settlements, fines and awards
- A range of public relations and reputational management support to protect both you and your business in the event of an insured incident
(This range of support is not exhaustive and may vary depending on your insurance programme – it is always advised to check your policy wording with the help of your adviser).