Explaining Management Liability to Your Clients

There are four key areas you should focus on when explaining Management Liability (ML) insurance with your clients:

• WH&S defence costs, fines and penalties;
• Employment issues, Employment practices liability;
• Employee theft or third-party crime; and
• Personal asset protection. 

Why these areas? From recent reviews of our data we have identified that there has been an increased flow of claims and notifications in these areas.

So, what are the risks to your clients and why should they consider an ML policy?  Let’s dive into each area:

Explain WH&S Defence Costs or Fines & Penalties

• If your client allegedly breaches any WH&S legislation, a Management Liability policy will pay the investigation and defence costs for Directors & Officers (D&Os), and the company.
• The policy will also pay fines imposed on both the D&Os and the company providing it is legal to do so and they are not proven to be reckless or deliberate. Currently, it is illegal for an insurer to indemnify an insured for a fine or penalty in relation to contravention of a WH&S obligation in NSW, Victoria, or Western Australia.

Case example

A café was fined $220,000 for workplace bullying.  The cost of this fine and the defence costs was covered under the insured’s ML policy.

Explain Employment issues, Employment Practices Liability

• The policy will cover alleged breaches of employment law and awards including unfair dismissal, sexual harassment, discrimination, bullying, etc.
• However, it does not cover failure to pay correct entitlements or rates of pay as the company is legally responsible for these.

Case Example

The driver at an earthmoving company alleged there was racial discrimination directed towards him within the workplace. The driver was awarded $44,000.

Explain Employee Theft & Third-Party Crime

• An ML policy will provide cover for the theft of money, securities or property that belong to the company, or that are in its care, custody or control.
• The policy will also cover the costs of investigating the matter and/or reproducing electronic data or computer systems damaged in the course of fraud.

Case Example

A confectionary company discovered their accountant had stolen more than $1 million over the course of 7 years to pay bills and buy property.

Explain Personal Asset Protection

• An ML policy can help protect D&O’s personal assets and equity in the event a claim is made against them personally and they need to defend legal action arising out of the management of the business.

Without a Management Liability policy in place, your clients could be at risk of an unforeseen financial liability that could cost them their entire business or disrupt their operations to the extent where it is very difficult to recover.  To discuss bespoke options and extensions please speak with one of our local underwriters here.

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