If you’re a small, privately held business, you don’t need Management Liability Insurance…
Wrong. TOTALLY wrong.
If you run any business, large or small, you could risk losing not only your business but also, your personal assets as well as your and your family’s livelihood.
And whilst the majority of SME company directors conduct themselves with the best intentions at heart, the reality is that SME directors devote their time to what they do best, leaving little, if any time for corporate governance.
So what exactly is Management Liability Insurance?
A Management Liability policy is a packaged policy aimed at privately owned businesses.
If you have staff, directors, and shareholders or handle money on behalf of third parties, you should have a Management Liability policy in place for your business.
It’s a policy suitable for businesses in most industries. Many businesses insure against tangible property losses, but fail to insure against economic losses.
Cue Management Liability.
So let’s take a look at some of the most common components of a Management Liability Policy.
1. Directors & Officers Liability Cover
Imagine if you or any director, officer or employee acting in a managerial capacity within a business was wrongfully accused of committing a crime like fraud, insolvent trading or manslaughter?
This is where Directors & Officers Liability Cover comes into play – to protect anyone acting in a supervisory capacity from wrongful accusations.
2. Employment Practice Liability
Chances are that someone in your workplace will one day experience bullying – like it or not.
Or maybe someone in your workplace will experience discrimination.
Whatever it is, no workplace is 100% safe from poor employment practices.
This is why every business with employees needs an Employment Practice Liability as part of their Management Liability Policy.
3. Statutory Liabilities
Statutory liability is designed to defend businesses and its employees against unintentional breaches of legislations such as:
- Workplace Health and Safety Acts
- Employment Practices Laws
- Environmental Protection Authority (EPA) Legislation
- Spam and Privacy Laws
To offer more clarity around how Statutory Labilities works, take this example that pertains to the Workplace Safe & Health Act:
A clothing manufacturing company was fined because they failed to take the necessary steps to ensure the safety of an onsite maintenance worker, who was killed when he fell 7 meters through a skylight.
4. Crime Cover
Crime insurance covers a business for the misappropriation of their cash or property that is caused by a third party. A comprehensive coverage will include cover for fraud, cause by employees as well as individuals external to the business.
For the record, fraud is a major issue for Australian businesses; and even more of a problem is the rate of recovery around fraud; according to KPMG’s Fraud Bribery and Corruption Survey, only 8% of fraud victims recuperated their money in full.*
* A Survey of Fraud, Bribery & Corruption in Australia & New Zealand 2012, by KPMG, www.kpmg.com.au, www.kpmg.co.nz, published February 2013 at page 33
5. Corporate Entity Liabilities
Corporate Entities Liabilities provides protection to the company in the event that claims should arise from actual or alleged wrongful acts carried out by that company’s employees.
6. Legal Representation Costs
Much like the name suggests, this refers to having cover for legal representation costs that are incurred by directors and / or officers of a company for their attendance at official investigations or inquiries.
7. Other Covers - Tax Investigation / Public Relations / Crisis Containment
In addition to the aforementioned coverage options that comprise a Management Liability Policy, there are also other coverage options that companies can consider such as tax investigation, public relations and crisis containment.
In summary, it goes without saying that if you operate a business, having Management Liability coverage is a non-negotiable as the exposures associated with managing a business are serious and numerous.