These days there are some pretty big risks involved in being a Company Director, Partner or Trustee, with onerous duties and responsibilities. If someone thinks you have not lived up to them, rightly or wrongly, there can be serious legal action, that’s why you should consider Management Liability Insurance.
No matter the business, its size or structure: Private Companies, Directors and Officers are exposed to the legal consequences of unintended errors arising from their actions: Shareholders who suspect mismanagement; Investors who feel they’ve been misled; Trade association investigations; Industry regulatory bodies or perhaps a liquidator if the company is thought to have traded while insolvent.
Potential penalties range from hefty fines through to disqualification and possible imprisonment. The need for an immediate and effective response to any threat is clear. Listed companies would not allow their decision makers to be exposed in any way.
The potential scope of Management Liability is shown by these scenarios based on actual claims:
Directors and Officers Liability: Provides protection for any claim alleging a wrongful act (for example misrepresentation, negligence, breach of duty) by a Director or Officer. The scope of this policy can include cover for potential breaches such as; Insolvent trading; personal liability, fines, banning orders, environmental prosecution, fire safety regulations, defence to public inquiry and intellectual property breach.
Claims Example: A Plaintiff had been engaged by a company to perform work for it. He filed a complaint against the individual directors saying they had utilised his services knowing that the company was nearing insolvency and unlikely to be able to meet the payments required for the work. The directors denied knowing this to be the case. The claim settled for a total settlement and defence costs exceeding $100,000.
Provides cover for breach of a statutory regulation like an Occupational Health & Safety regulation or the Food Safety Act. The scope of this policy can include cover for potential breaches such as; environmental prosecution, Occupational Health & Safety, breach of contract, unfair treatment of shareholders, identity fraud or accidental death.
Claims Example: Health and Safety – A company failed to take practical steps to ensure the safety of an Employee. The firm breached Occupational Health & Safety Regulation and the fine was over $100,000. This was covered under the Statutory Liability cover, as part of the Management Liability package provides cover for fines and breaches like these up to the selected cover limit.
Employment Practices: Cover for claims alleging an employment breach such as discrimination, harassment or wrongful dismissal. Examples of claims which would fall under this section of the policy are wrongful dismissal, harassment & discrimination of third parties, unfair dismissal, duress, misconduct, discrimination and constructive dismissal.
Claims Example: An Employee of a restaurant claimed she was bullied by the Head Chef, who constantly verbally berated and belittled her. The restaurant eventually settled for $56,000. Management Liability can provide full cover for Employee Practice Liability claims like these, up to the selected cover limit.
Other sections which can be included are Legal liability and Tax Audit cover can be included too.
Please be aware that any advice offered is General Advice only and has been prepared without taking into consideration your objectives, financial situation or needs. Before deciding to acquire a financial product please consider the Product Disclosure Statement and whether the product is appropriate for your individual objectives, financial situation and needs.