Management Liability Insurance
Why is management liability insurance important for your business?
What is management liability insurance?
Operating a business is increasingly complex and as a company director or officer you can be personally liable for the actions you take. Management liability insurance provides peace of mind you can defend yourself against civil, regulatory, or criminal allegations. Policies are designed specifically for small and medium sized private companies and offers financial protection to the senior management and the incorporated entity from a range of disputes, litigation, and regulatory investigations. Cover is typically provided under three sections:
1.) Directors and officers insurance
The main cover provided under a management liability insurance policy is directors and officers liability insurance, otherwise known as D&O insurance. The cover protects the directors' and officers' against civil liabilities, regulatory proceedings and criminal allegations, whilst acting in a managerial capacity on behalf of a company. It's important to understand that directors of limited companies have a personal liability and a claim for compensation or investigation is seperate to the incorporated entity. The D&O section can cover these individuals for wrongful acts, by providing cover for defence costs, damages, settlements, awards, and insurable fines.
2.) Corporate legal liability
Otherwise known as CLL insurance or entity cover, corporate legal liability insurance provides the company financial protection from civil litigation and regulatory investigations. Corporate legal liability is similar to D&O insurance but will defend a claim for compensation made against the incorporated entity as opposed to individuals. Breach of contract, copyright infringement and corporate manslaughter are typically covered. It's worth noting that CLL insurance section of a management liability insurance policy can only be purchased in conjunction with the D&O insurance section.
3.) Employment practices liability
Otherwise known as EPL insurance, employment practices liability insurance under a management liability policy provides the company financial protection from claims arising from a range of employment disputes (i.e. wrongful dismissal, harassment and discrimination). Dealing with employees can be highly emotive and if internal procedures aren't followed, you can leave yourself open to successful employment tribunal claims. The employment practice liability section can protect the incorporated entity by defending allegations, paying damages and settlements for an alleged wrongdoing.
Key features of management liability insurance:
It's important to appreciate that directors have a personal liability when undertaking their duties on behalf of the company. Civil, regulatory and criminal allegations made against individuals and/or the company can be very costly and time consuming to defend, even if they're without merit.
Legal Expenses
Covers legal costs, settlements, and compensation claims for wrongful acts like breach of duty
Personal Assets
Protects the personal assets of directors and officers in case they are held personally liable for their actions
Regulatory investigations
Cover regulatory investigations whereby individuals are held accountable for their actions
Looking for Management Liability Insurance? Give us call on 0345 625 0711
ML coverage designed for small to medium sized businessesAdditional business liability insurance
What does our expert say?
"Management liability insurance is an important cover for any business, typically overlooked if the business hasn't raised capital from investors. However, the coverage can provide valuable protection when you need it most, whether that's an allegation of breaching the law or regulatory investigation."
Simon Taylor (Chartered Insurance Broker)
What can management liability insurance cover?
The covers, otherwise known as executive risk insurance, offer peace of mind for senior managers and business owners there are the resources to defend a legal action made against you.
Corporate manslaughter
The Corporate Manslaughter and Corporate Homicide Act 2007 means companies can be found guilty of corporate manslaughter as a result of serious management failures and gross breach of a duty of care. The corporate legal liability section can offer the company financial protection from an investigation by the HSE, police and the Crown Prosecution Service, by providing a legal defence and covering insurable fines.
Legal Disputes
Private company directors are exposed to disputes with shareholders and other directors. The cover can protect individuals from allegation made on behalf of shareholder or other directors. It's also worth acknowledging that individuals can be held accountable for the actions of others, even though they had no knowledge of the wrongdoing.
HSE investigations
Under The Health and Safety Regulations, companies that the HSE consider are in material breach of any health and safety laws are liable for HSE’s related costs, including inspection, investigation and taking enforcement action. Management liability can offer financial protection against regulatory investigations and subsequent insurable fines.
Insolvency
Management liability can cover reasonable professional and legal costs of preparing and defending directors (and shadow directors) against regulatory actions after an insolvency, including any subsequent disqualification proceedings.
Unfounded allegations
A determined litigant can incur thousands in costs and months of time, even when their case has no legal merit. This can occur when claimants feel very strongly about an issue and go ahead with action without following any legal advice. Management liability coverage can provide for reasonable costs of defending allegations made against directors and officers.
Contract disputes
Disagreements with suppliers or customers can mean a claim under the corporate legal liability section of a management liability policy. These types of 'entity' claims are more commonplace than actions against directors for breaches of duty that D&O cover was originally designed for. Some policies will provide sub limited cover for the costs of defending contract disputes with suppliers and customers.