As a director or manager at an independently/ privately owned company you may be liable for any mismanagement or illegal practices that occur in a department you are in-charge of. Even if you are unaware of activities the negligent actions of one of your subordinates or junior employees can expose you to legal consequences.
What is Management Liability Insurance?
Management Liability Insurance can cover the management of a company in such cases. Defending allegations in court can be costly and time consuming, even if they’re completely unfounded and based on frivolous evidence and imaginary theories.
Why Professional Indemnity Insurance is not enough?
On a fundamental level, a Management Liability Insurance Policy in Australia is focused entirely on the ‘act of running a company or business.’ Unlike, PI (Professional Indemnity) Insurance, Management Liability Insurance has nothing to do with the activities of a company whether it’s owned privately or independently owned.
A PI policy deals with the claims filed by 3rd party companies, partners, supplier and vendors on account of a faulty or less-than-promised (as they would argue) service. The service provided can be as simple as a consultation. But, a PI policy will NOT protect your business or your personal assets in case there are claims that you as a manager or director at the company involved in illegal or unethical management practices and caused losses to other individuals or businesses. This is a completely different kind of exposure and that’s exactly the reason why businesses need Management Liability Insurance.
What can a management liability insurance policy cover?
- Legal costs involved in defending allegations in the court
- Various investigation costs involved in the process
- Compensation that you may have to pay to a third party or civil penalties imposed under the applicable laws
- Claims tend to get bigger as your company grows. If your revenue stream has already crossed the stability threshold, you need to consider buying management liability insurance.
- The word ‘management’ in these insurance policies does not refer to directors alone. Junior employees or managers at a company can also be exposed.
- The personal wealth of a director, executive or manager may also be exposed in case he or she is held personally liable by a court.
- The corporate environment and the various laws applicable in each state are constantly changing. Directors at small, medium and large companies are often unaware of their legal responsibilities.
- Being drawn into a controversy is never healthy for the reputation of a company or its directors and senior management. On top of that, the legal costs of defending a claim in court can be very expensive.
Anything from regulatory actions, to negligence on the part of an employee can lead to trouble. Get Management Liability Insurance and protect everyone including yourself against the risks and exposures involved in running a business!Google+