Management Liability

Why Do You Need Management Liability?

Managing a business has a large number of exposures associated with it and it is surprising to learn that many clients choose not to cover themselves for actions that may be made against them. This can be easily included in their insurance programs.

Lets try a quick quiz

Answer the following questions to determine if you have an exposure:

  1. Are you an incorporated entity?
  2. Do you have customers or clients?
  3. Are you required to comply with any legislation?    
  4. Do you have employees?
  5. Do you have competitors?
  6. Do you incur debts?
  7. Do you have dealings with other third parties?

If you answered ‘yes’ to just one of these questions, then you have some exposure to Managers Liability. Yes to all, you have a substantial exposure to many risks.

It seems companies are happy to insure the exposures of property damage and bodily injury. Many have now learnt the importance of also including Business Interruption cover for loss of income caused by property damage.

However what about the ‘management risk’? This has often remained uninsured. Is it because Management is easy and you can never go wrong? Perhaps it is because they are not aware of the exposures that can result for an innocent mistake or error, or even the legal costs that can be incurred just to defend an accusation of a wrongful act.

What are Management Exposures?

A company and its directors face both personal and company liabilities from numerous stakeholders including the following:

  • Employees – actions alleging discrimination, harassment, breach of employment contract, defamation, misleading misrepresentation, wrongful discipline, etc;
  • Creditors – alleging that the Director allowed the company to trade whilst knowing it could not pay its debts;
  • Government agencies – Directors and Officers may be personally liable for breaches of hundreds of statutes (eg. Australian Tax Office, Australian Securities Commission, Trade Practices Commission);
  • Competitors – Trade Practices Act claims brought against the Directors for misleading and deceptive type conduct;
  • Shareholders – alleging that the Directors mismanaged the operations of the company and its funds.

If there is an alleged breach of company law or regulation, your conduct as a manager and as a company is questioned. It is possible that a claim is completely without foundation, but it still costs time and money to defend a matter to a successful conclusion. Do you have the resources to fund your own defence?

What is Management Liability insurance?

Management Liability protects the individuals and the company in relation to the exposures associated with managing a company. Each and every Director, Officer and Senior Manager of an incorporated entity is personally exposed to liability for a breach of duty they owe to stakeholders. The main parts of the cover are as follows:

  • Directors and Officers: covers the Directors, Officers and Employees (including where the company can reimburse the directors) for any claim alleging a Wrongful Act (such as negligence, breach of duty, misrepresentations) by a Director or Officer 
  • Company Reimbursement: provides reimbursement to the company if an individual director or officer has been indemnified by the company (which is a likely requirement under the company’s deed of indemnity found in your constitution.
  • Company Cover: covers the Company where there is a claim against the entity alleging wrongful acts, such as negligence, breach of duty, misrepresentations. A traditional Directors and Officers policy does not include this section
  • Employment Practices: covers the Company for claims alleging employment breaches including wrongful dismissal, discrimination, harassment, deprivation of career opportunity, beach of contract etc.
  • Superannuation Trustee Liability: for trustees of a staff superannuation fund for any alleged act, error, omission, breach of duty, breach of trust, breach of authority, misstatement or misleading statement by the company.
  • Employee Crime: covers the company for theft, fraud, dishonesty embezzlement by its employees either acting alone or in collusion with others

The Management Liability Policy

Management Liability policy has been designed to use the coverage available in an ordinary Directors & Officers Liability cover which traditionally covered only Individual Directors for their own personal liability but if they successfully defended an action, could seek reimbursement from the insured company (Company Reimbursement)

Now insurers have expanded this cover further to include entity coverage for claims that would ordinarily be against an individual director or officer, as well as other employment practices issues, trustee cover for those that oversee the staff superannuation fund, Crime cover for the protection of employees stealing from company as well as other events.

The Insuring Clauses found in a typical Management Liability wording are:

  • Directors & Officers Liability cover
  • Company / Entity Cover
  • Employment Practices Cover
  • Superannuation Trustee Cover
  • Crime Cover

Additional cover in the policy usually found are

  • Investigation/Legal Costs – directors & the Entity
  • Advanced payment of defence costs
  • Estate, Heir, Legal Representative, Spouse or Domestic Partner               
  • Automatic Reinstatement (non exec)
  • Discovery Period
  • Retirement Cover
  • Outside Directorship
  • New / Former Subsidiary
  • Pollution Defence Costs
  • Fines & Pecuniary Penalties Extension
  • Public Relations Cover
  • Emergency Legal expenses
  • Statutory Liability incl Occupational Health & Safety Legislation
  • Internet Liability
  • Advertising Liability
  • Crisis Loss costs
  • Costs of defending Extradition Proceedings
  • Continuous Cover
  • Extended Reporting Period

Providing your financial position is good, you should make sure that there is no insolvency exclusion in the policy, at least for claims for matters that led to insolvency. Seek good advice but normally, the provision of satisfactory Financial Statements can have this deleted.

Your Insurance Broker…

CPR Insurance Services has access to virtually the whole Insurance Market, and can find the right cover at the most competitive price. We are one of the leading experts of this cover for Private companies.

If you just want an indication at this stage, we can do this also. The quote is subject to completion of a proposal form. All we need is your current turnover, type of industry, number of staff and years in business. It will need referral if there have been previous claims.

An insurance broker's role is to act as your representative and work in your interests, seeking the best cover at the best price for you from market knowledge.

So call a good Insurance Broker. Call CPR.- Experts who will save you

Latest News

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Today the High Court dismissed appeal by Insurers on the Business Interruption test case. Even the big insurers make silly mistakes! But you the policy holder may benefit if you were one of the 40% of Business Pack policy holders that added Business Interruption cover to their Business Pack. While it was never the intent of insurers to cover policyholders for the loss of income from a pandemic, the fact that insurers never factored in a risk premium for it, and the fact there is supposed to be a material or physical loss to trigger the Business Interruption section, none of that matters according to the highest Court in the land. So what was the mistake? Simply that when insurers defined what they considered to be the definition of an infectious disease, they referred to the Quarantine Act of 1908 which since was superseded by the Biodiversity Act of 2015. Because the Quarantine Act of 1908 no longer exists, apparently you cannot draw on this for a definition of an infectious disease? Not one of the insurers picked up on this! Shows how much interest we take on the business of Governments, except what is reported in the media.

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Three Years running - Insurance Brokerage of the Year 1 to 5 staff

Mandy and Robert Cooper were extremely honoured and astounded to once again win, Insurance Brokerage of the Year for 2020 from Insurance Business Australia magazine. This is the third year running.

While this year has not been the easiest of years for the business with Covid 19, the Recession, the hard market and issues at Lloyds of London, we are literally all in this together as an Insurance Industry.

CPR Insurance Services continues to make our clients the number one focus of our business while managing our relationships with Insurers, who we need more than ever in this market climate.

CPR Insurance Services are a highly ethical Brokerage with a reputation as a trusted advisor who always acts in the Client's best interests. Their experience, knowledge and expertise is amongst the highest in the industry.

CPR Insurance Services is now ten years old as a business and is proud of being an Authorised Representative of Ausure and their partnership with Steadfast, giving CPR the strength and backing to match it with any Broking firm in the Insurance Industry, but remain focussed on supporting the Small to Medium business segment.

Memberships of the National Insurance Brokers Association, Australia and New Zealand Institute of Insurance and Finance, Australian Insurance Law Association, Australian Professional Indemnity Group and the Australian Institute of Company Directors, ensures CPR Insurance Services maintains the high standard of knowledge and expertise required to be one of the best Brokerages in Australia.

CPR Insurance Services also plays a strong role in their local community supporting other Sporting Clubs and Community organisations. They also support and promote local businesses with their operation of the Kedron Brook Business Group who meet regularly and has 174 members.

We are truly honoured to receive this National award once again for the third year as a recognition of CPR Insurance Services contribution.

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