Management Liability policies have evolved from Directors & Officers Liability Insurance, which was designed to protect the personal assets of directors and officers by providing indemnity for loss arising from a claim as a result of a wrongful act committed in the course of performing their management duties. The product is now a packaged product similar to a Business Insurance package, however covering the intangible components of your business risk such as claims from shareholders, employees, or statutory bodies. Some of the types of cover included are as follows;
Directors & Officers Liability Insurance
Protects the Directors & Officers against claims resulting from management decisions. Directors face liabilities under Corporations Law, Trade Practices Act, Environmental legislation and a variety of government bodies and statutes (e.g. ATO and ACCC). Both Executive and Non Executive Directors can be held liability for actions of the company at a personal level which can put at risk personal assets.
Employment Practices Liability Insurance Protects the directors and the company from claims brought by employees for unfair dismissal, harassment, discrimination and/or unfair work practices.
Fidelity Guarantee Insurance Protects the company from direct losses resulting from employee theft.
Statutory Liability Insurance
Protects directors and the company from statutory civil fines and penalties where at law the insurer is able to pay (e.g. OH&S fine following a workplace injury).
Examples of risks that are covered under each section
Management Liability Coverage Section:
Investors, customers, clients, government regulators, and competitors can sue a firm’s board members and officers over their actions or decisions.
Directors and Officers Liability Insurance
Employees and formers employees can sue a firm, its board members and its officers for discrimination, harassment, and other illegal employment practices.
Employment Practice Liability Insurance
A regulatory/Government body may impose a fine upon the company for breach of their statutory requirements.
A trusted employee can embezzle funds, steal company money, or commit fraud over a long period of time.
Other important sections that may be provided include
OH&S Investigations and legal expenses
Crime cover in addition to fidelity cover
Tax audit expenses
What does the policy exclude?
These policies typically exclude someone who holds more than 15% of the shares from being able to sue another director and obtain cover under the policy. They typically exclude bodily injury and property damage claims. The reason for this is the company already has a general insurance program in place.
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