Why is Management Liability Insurance an important consideration?

As a director in your business, you have responsibilities, which can also put you in the hot seat if allegations or investigations of wrongdoing take place. A claim could be made against you from a variety of different sources. Could you afford to pay the legal costs to defend a claim and potentially large compensation awards? That’s where Management Liability cover comes in…

Management Liability Insurance is designed to cover the cost of legal action and any civil settlements from allegations of wrongdoing, directed at the company as a whole or its directors, officers and managers in decision making roles.

All types of business – Sole Traders, Partners, Company Directors, Managers Officers & Trustees and those in ‘positions of responsibility and carrying a duty of care’ are at risk of potentially damaging claims against them.

As a director of a limited company, you can still be held personally liable and therefore, your personal assets can be at risk. A standard commercial insurance policy does not include cover for Management Liability insurance.

Criminal and regulatory investigations

Being a Director or Officer (key manager) of a business necessitates a number of statutory duties and responsibilities. You may see claims for a number of things such as: –

  • Breaches of health & safety, negligence, errors and omissions
  • Police investigations e.g. Employee and third-party fraud & bribery
  • ICO and Environment Agency
  • HMRC financial or tax anomalies
  • Insolvency
  • Employment law, such as unfair dismissal, bullying or discrimination or contract disputes
  • Partnership disputes
  • Regulatory intervention from your professional body, Data protection, Foods Standard Agency, ASA or Care Quality Commission
  • Common Law issues including incidents like environmental pollution

Any of the above could instigate criminal and regulatory investigations, potentially leading to prosecution, prison sentences and being unable to work and run your business.

Claims are getting personal

It’s becoming a more and more litigious society with claims of wrongdoing on the rise. There has also been a shift in recent years from corporate responsibility towards personal responsibility, even when individuals have made decisions in the scope of their role within a company. This leaves more and more people exposed to claims of wrongful acts, and those with the highest risk are undoubtedly those occupying supervisory positions or leadership roles.

High costs

Should you be accused of wrongdoing or be under investigation, you may incur hefty defence costs, with legal proceedings costing hundreds of thousands, or even millions. If you or a senior member of staff become the target of a claim, legal proceedings might need to be funded from their or your own pocket. If you are found to be responsible, you will then have damages and awards and compensation costs to pay for.

Individual directors, partners, officers, managers and the Entity (a Ltd Company) can all be at risk from accusations, allegations or investigations of wrongdoing. This can cause not only financial hardship, but also create anxiety and stress. It could lead to personal bankruptcy and force you to sell your business.

What cover is provided by a Management Liability Insurance policy?

A management liability policy is a comprehensive form of insurance that exists to cover allegations of wrongdoing, directed at the company as a whole or its managers, directors and officers. The key aspect of Management Liability Insurance is the provision of specialist legal advice and access to legal helplines and advice suites. You won’t have to fund your own legal defence and potential damages and settlements. It will not however, fund any fines you may have to pay.

Management Liability Insurance policy consists of three main areas of cover:

  • Directors and Officers Liability
  • Company Legal Liability
  • Employment Practices Liability

Our cover will also provide a helpline free to policy holders and it can be used as a tool to assist in preventing employment challenges like disciplinary or grievance issues from turning into expensive and time-consuming claims.

Management liability insurance provides you with peace of mind that your businesses and management team are covered in the event of unexpected serious legal action caused by professional mistakes.

Call your local community broking team to discuss the most suitable policy for you.

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