Management Liability Insurance

Management liability is a policy that provides protection against actions or litigation brought against either Directors &/or Officers of the company as well the company in its own right.

Covers available under this type of policy found within the insurance industry are:-

• Directors & Officers Liability
  Covering claims against wrongful acts made against the directors and Officers
  
  
• Company Reimbursement
  Covering claims against wrongful acts made against the directors and Officers
  
  
• Entity (Company) Cover
  Covering claims made against the company in its own right.
  
  
• Employment Practices Liability
  Covering claims for wrongful dismissal, discrimination, sexual harassment and other forms of employment practice breaches.
  
  
• Fidelity Cover
  Covering direct financial loss caused to the company by the dishonesty or fraudulent acts of the company’s employees or directors
  
  
• Superannuation Trustees Liability
  Covering claims for mismanagement of staff superannuation fund.
  
  
• Statutory Liability - “Pecuniary Penalties”
  Covers the directors and officers against actions from a legislative or government body. This section can be extended to incorporate the company in its own right.
  
  
• Crisis Containment
  Covering the costs of appointing a public relations consultant to assist with the management of a crisis which threatens the company’s business.
  
  
• Internet Liability
  Protects the company against traditional publishing related exposures created by the existence of a company’s website
  
  
• Kidnap, Ransom & Extorsion
  Protects the company for ransom and extorsion payments as a result of kidnapping or extortion treats.

 

What are Management Liability Exposures?

A company and it’s Directors & Officers face both personal and Corporate Liabilities from numerous stakeholders including the following :-

• Shareholders
  
• Employees
  
• Competitors
  
• Creditors
  
• Regulators
  
• Customers
  
• Liquidators / Administrators
  

If a breach of company law or regulations is alleged against the directors, officers or entity the focus is on your conduct as a manager and on the company.

You may think that the claim is completely baseless or without merit, but it will still cost time and money to defend this allegation.

Any legislative or government body can take an action against the company, directors and or officers. Below are the more familiar bodies:-

Australian Tax Office (ATO), Australian Securities and Investments commission (ASIC), Occupational Health & Safety (OH&S), Trade Practices Act (TPA), Work cover & Local Councils.

Other legislative acts that companies face exposure to especially under the employment practices liability coverage are:-

• Racial Discrimination Act
  
• Sexual Discrimination Act 1984
  
• Human Rights and Equal Opportunity Act 1986
  
• Disability Discrimination Act 1992
  
• Workplace Relations Act 1996
  
  

Points to be aware of :-

• Workplace Agreements which only relate to unfair dismissal issues, as the companies Directors & Officers are exposed to many other areas of litigation and actions as highlighted above.
• Please be aware that a standard Directors & Officers policy will not cover the entity.
  

 

Claims Examples

Statutory Liability

A steel manufacturing company was successfully prosecuted by Work Cover for breaching occupational health and safety legislation when an experienced employee of the company was injured in the task of changing guides, combs add shearing blades on the company’s cold shear machine. The machine was used to process large pieces of steel.

The court imposed a penalty of $26,000 less a reduction for an early guilty plea.

Occupational Health & Safety

A privately held company with 40 employees and an annual revenue of $9.5 million dollars. During a busy time the company employs a part time contractor who caught his hand in a machine and lost two fingers. This resulted in a full occupational health and safety investigation.

Company was found liable for $100,000 plus paid $45,000 in defence costs.

Crime – Altered Cheques

Wholesaler with a staff of 86 employees and an annual revenue of $15 million had a debtor clerk misappropriate $200,000. This was achieved by altering cheques received from debtors over a period of eighteen months. This continues until her absence from work when the fraudulent scheme was discovered.

Total amount of funds misappropriated $300,000

Employment Practices Liability

An employee was terminated by his employer for smoking in a restricted area of the building. The company has 19 employees and an annual revenue of $3.7 million The terminated employee sued his employer for wrongful termination based on age discrimination from comments made by his supervisor such as “your too old”. The Employee further alleged he could only be terminated for good cause, although he had a history of poor performance issues. The dismissed employee sought back pay, front pay, damages and legal fees totaling an estimated $275,000.

The employer settled with the dismissed employee for $350,000 and the employer also paid $130,000 in defence costs.