When your running a business, you may be personally liable for any actual or alleged breaches of the Corporations Act and its not just large companies that are exposed -small and medium businesses owners and officers could be at risk as well.
Management liability Insurance covers the cost of defending directors, managers and employee’s against any claims that are a result of their actions or decisions.
If you are faced with unexpected liability costs, Management liability insurance can protect your business and personal assets, such as your home, from being sold to cover the cost of paying claims.
”Penalties awarded against companies and its directors or officers for work health and safety breaches have increased by 43% to $22,3 million in one year. Penalties now average $62,000 per company
(Safe Work Australia, key Work Health Safety Statistics 2014)
The likelihood of a claim that could be covered by a Management Liability policy has tripled in the last 5 years, with 50% of notifications resulting in a claim. ( Chubb 2016 private company risk survey )
The most common claims are employment practices like bullying, harassment and wrongful dismissal. ( Chubb 2016 private company risk survey )
Major claims by amount relate to crime – including employee fraud. ( Chubb 2016 private company risk survey )
Management Liability Insurance polices vary in benefits they provide. To give you idea, here’s the type of cover that your policy may include:
Covers payouts for claims of employment, breaches such as wrongful dismissal, bullying or discrimination.
Protects your proprietary limited company ‘s past, present and future directors. Officers and managers against a claims of wrongful acts, such as misrepresentation or breach of duty (subject to business size )
Protects your business against claims such as employee or third party fraud ( not all criminal activity is covered )
Covers costs that your business would incur if you need to defend and settle claims from outside parties alleging wrongful conduct, as well as investigation into the affairs of the company.
Covers the cost of defence, fines and penalties under some statutes (eg Work Health and Safety )
Covers your Legal Costs if your business ends up in court.
Exclusions and the excess you needs pay can vary greatly depending on your insurer. Generally policy wont cover :
There are exclusions which we can advise you on selection of insurer best suiting your requirements.
A former employee claims they were wrongfully dismissed from your business because they were unwell at the time their position was terminated.
They want to be reinstated to their role and remunerated for their loss of income while they were out of work. After numerous unsuccessful conciliation attempts, the matter is brought before a court and you have to pay damages to your former employee.
A Management Liability policy allows you to recover some or all of these cost so you can continue to run your business without having to sell your business or personal assests. Depending on your policy, you may be able to make a claim for your legal defence costs, as well as the amount paid to your former employee.
Sentinel Risk Managers is a member of the largest insurance broker network in Australasia, the Steadfast Group.
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